'The Last Gasp of the Dinosaurs'

Publisher and flat-tax Republican Steve Forbes on 1930s-style economic policies, the news industry, and the future of the GOP

Matt Welch from the November 2009 issue

(Page 3 of 4)

So the system doesn’t work. And you don’t get the kind of productivity you get everywhere else. We use phones and emails for everything now. Do you do consultation with your physician or nurse by phone or email? Rarely. Or hospitals giving warranties, like you have everywhere else, where if they don’t scope your knee right, you go back and don’t have to pay for it again. Why wouldn’t that be their dime? Because it’s not real competition. They know you’re not writing the checks, so therefore they don’t have to please you; they just have to make sure they get a bureaucratic insurance company to approve it.

But we see from Lasik what happens when you get a real market. It costs a third less than it did 10 years ago. Cosmetic surgery hasn’t had inflation, like you have in the rest of health care, even though demand has increased sixfold in the last 15 years and even though there have been enormous technological innovations. Why? Because you pay for it.

reason: So what do you do? This is such a labyrinthine complexity that creates the sort of mixed market which you describe. Are there simple things that can be done to break the logjam?

Forbes: Yes. Equalize tax treatment. You’re going to give employers a tax deduction, why not individuals? And how about allowing you to shop across state lines for health insurance? Illegal now. If you live in California, want to buy a policy in Seattle, illegal. Interstate Commerce Clause, hello! You don’t need a government insurance company. Just get cross-state competition.

Allowing businesses to pull together. Why not remove barriers to that?

In terms of health savings accounts, if you want a higher deductible than X, you can’t get it. I forget what the number is now for a family plan; you can only go up so high. Remove those limits or substantially raise the caps on those.

If you want to set up a clinic or hospital, in a lot of states you have to get a certificate of need. Well, do you need a certificate of need to open up a grocery store if you want to go against Wal-Mart or Whole Foods? No. You just go and do it. See what happens. But because it’s all third-party paying, well, this is inefficient; it’s sort of a cartel system. Get rid of those kinds of things.

reason: Are you surprised by President Obama since he’s come into office? Anything about his comportment, his policy, the reaction to it?

Forbes: I was hoping he would defy my expectations and turn out to be what a lot of people thought—he’s smart, he’s moderate, he’ll do the right thing—instead of being what he has been so far, which is very much an ideologue. On the left, it’s all 1930s. You spend, you tax, you have government running things because we can do it more efficiently.

reason: I find it interesting that he still gives lip service—and gets away with giving lip service—to limited-government principles, saying things like, “Of course we don’t want the government running automobile companies.” And then in the same paragraph, he’ll say “but they need to consolidate their brands” and get very hyper-specific. He still says, “We don’t want to be in the banking sector; I’d rather be doing X, Y, and Z.” It’s as if he senses these things are unpopular out there.

Forbes: That’s why they have to do this by stealth, or semi-stealth. They know the American people are not in a mood for France North America or Germany North America. So they want to use the crisis to ram this stuff through before anybody realizes. Then you’re dependent and therefore, “Oh, they want to take this away from you”; it’s a fait accompli, it’s a coup. But thankfully the Founders devised a system where this stuff just bloody takes time. They didn’t confuse efficiency in the commercial sector with efficiency in government. We don’t want an efficient government in terms of making laws.

They feared passion. They saw what the wars of religion did to Europe and the bloodshed that engendered. They wanted a system where things could cool off before you did something.

reason: You have a new book out about historical figures and lessons that can be learned from them. What are some historical figures or moments of note that can apply to present-day circumstances?

Forbes: Take Alexander the Great. When Aristotle taught him as a young man, one of the things Aristotle tried to hammer home was you must learn to conquer yourself, i.e., control your passions. Alexander did not. He seemed to think that he was actually a living god, and he destroyed himself. He was immensely talented, but it all collapsed when he died. And that’s what I think may be happening with President Obama today. Putting aside what you think of his policies, he may end up getting very little.

For example, he didn’t realize with the stimulus package that Nancy Pelosi may have run up the limit on one of his credit cards. That $800 billion would have been very helpful from their point of view on trying to finance health care. But no, they spent that. It was overreach. No sense of what the real world is like.

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John Tagliaferro|10.28.09 @ 12:06PM|#

Can you get him to do something about that lisp?

MP|10.28.09 @ 12:08PM|#

My economic principles line up pretty closely with Steve Forbes. Too bad he's a warmonger.

|10.28.09 @ 1:00PM|#

If someone has a tropism to economic freedom you actually can often convince them not to be a militarily adventurist, using the same sorts of arguments they use for free markets.

Kroneborge|10.28.09 @ 2:54PM|#

My views on liberty often align with the libertarians, to bad they are a bunch of peaceniks, lol

|10.29.09 @ 12:46PM|#

I'm a hawk at heart but here's the problem.

Wars cost money and lives. Someone has to pay. It's just as problematic to confiscate money (and lives) from others for a war as it is to do so for any other reason.

|10.28.09 @ 12:17PM|#

Yay capitalism!

Oh and, uh, fuck the GOP. They are just going to get more and more neo-conservative, pushing away the moderates and not getting as many votes, because neo-con ideals are insane and immoral. But, to be fair, fuck the Democrats too. We need a libertarian president, but unfortunately the GOP will just look at whoever the candidate is and call him crazy, even if he is more intelligent than every other candidate.

|10.28.09 @ 6:17PM|#

WhAT!?! According to Glenn Beck and Hannity, Ayn Rand was a Republican. How DARE you say otherwise!

|10.28.09 @ 10:23PM|#

Oh shit! I went against Sean Hannity? Guess that makes me a terrorist!

|10.28.09 @ 12:25PM|#

"Matt Welch Interviews Steve Forbes"

Does this mean that Pat Paulsen is dead? Bummer.

|10.28.09 @ 12:29PM|#

Forbes was *for* the bank bailouts, and you didn't ask him about it? That's a real missed opportunity.

Matt Welch|10.28.09 @ 12:36PM|#

I agree.

|10.28.09 @ 12:39PM|#

I'm sorry, but Forbes backing Giuliani sticks in my craw. Forbes makes economic sense, except that funding shitloads of war and law enforcement sort of screws that up.

|10.28.09 @ 12:46PM|#

Agreed. Someone I know met Giuliani, said he was a complete asshole. It was his fundraiser, and I'm pretty sure he got close to no money.

|10.28.09 @ 12:53PM|#

I used to watch Giuliani on NY1 doing his mayoral press conferences, just to see him eat reporters alive. By being a huge asshole. Entertaining, in a NYC sort of way.

Another Phil|10.28.09 @ 2:07PM|#

NYC ferret ban. Enough said.

|10.28.09 @ 2:21PM|#

Re:John Galt

Agreed. Someone I know met Giuliani, said he was a complete asshole.

I did not need to have a friend tell me that - the guy IS an asshole. Any ex-US Attorney that made his career by railroading rich people (whose only crimes were making "too much money", legally) IS an asshole in my book.

|10.28.09 @ 5:57PM|#

Haha true. But yeah, he was having a fundraiser and next to no one would donate because he was such an ass.

|10.28.09 @ 12:43PM|#

Forbes is a crony capitalist bung hole. The flat tax is total fraud. He tried to sell it as tax simplification but there's nothing complicated about a progressive tax rate. All the gajjillion pages of tax code are about figuring how much income to tax you on. His plan did nothing to change that.

And in the last financial meltdown he came out in favor of saving the too big to fail institutions and repealing mark to market. Steve thinks that letting banks value their assets at whatever they want them to be worth fixes everything.

|10.28.09 @ 1:04PM|#

Compared to the likes of Obama and Bush, Forbes is a regular free market paragon.

And a flat tax is absolutely and always preferable to a progressive tax.

But yeah him being pro bailout was telling. I wonder if he would be now he's had time to think about it.

monolith|10.28.09 @ 1:25PM|#

It's pretty childish of me but i always think of just how much money he inherited.

How does he get away with not being questioned about his support for massive bank bailouts? How is that capitalism?

|10.28.09 @ 3:05PM|#

I voted for Forbes in one those primary thingees. He's flawed in any number of ways, but he's not an economic retard like the last few presidents.

|10.30.09 @ 4:19PM|#

The economic advantage of the flat tax is that high marginal tax rates leave people with incentives to work less and to work around the tax law. The political advantage is that you don't have people thinking they're getting programs for free because the new taxes will only be on "the richest 1%". The problem is that lower income people genuinely have more to lose from taxes, because they have a harder time saving and meeting their basic needs at the same time. That means that taxes on poor people make them more dependent on the government in the long run.

That said, the highest marginal tax now is on welfare recipients; getting a job often cuts benefits by as much or more as the salary, meaning that the marginal tax rate is over 100%

|1.21.10 @ 5:21PM|#

IMO, a flat tax is only preferable to a progressive tax or any other tax it replaces if it lowers the amount of revenue the govt receives. Forbes pitches the flat tax in part by saying that it benefits the govt by effectively raising _more_ taxes. His statist slip is showing.

I'd love to see a Ron Paul style flat income tax, i.e. at the 0% rate.

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|10.28.09 @ 2:19PM|#

I wouldn't have minded seeing a bit more questioning about his socially conservative stances.

Kroneborge|10.28.09 @ 3:12PM|#

Flat tax is more bull, without simplying the tax code. The Fair Tax is the way to go. Save the country 200 BILLION each year in tax compliance costs.

|10.29.09 @ 12:48PM|#

No Tax > Consumption Tax > Flat Production Tax > Progressive Production Tax

Any move away from progressive tax is positive.

John Roberts|10.28.09 @ 4:13PM|#

Forbes doesn't grasp what has happened to the global economy. Critiquing govermental responses, whether by the US or Iceland or China, without first discussing root causes is mindless. The root cause of the global recession is China. Specifically, China's policy of pegging the yuan to the dollar and relying on an export-driven growth model plus accumulation of foreign reserves. Read Martin Wolf's new book, "Fixing Global Finance," and Krugman's recent admission in the New York Times. Don't give me ideological drivel about free trade (I'm a libertarian, but as Forbes correctly points out regarding health care, some markets aren't free) benefitting the globe. Here's the truth: China is still a command economy, run by a dictatorship. And there is no way the developed world benefits by a system where multinationals can make capital investments and create factories or do their manufacturing in China, which lacks a century of development of environmental, labor, and workplace safety laws, and then ship the products back to our markets! We hit the tipping point in this game in February 2007. That was when declining middle class incomes hit rising middle class household debt burdens, and the bubble popped. It took until later that year to hit the stock market, and then rippled through the mortgage and credit markets in 2008 -- causing the government bailouts. Global trade is now down to its lowest level since the Great Depression. The old paradigm of free trade for everyone is dead. Kaput. But our policymakers don't get it yet. Read the backstory on my blog at www.FreeingTibet.com, go to Tibet Blog, and you'll find lots of links to thoughtful economic analysis on the topic.

oh no not this again|10.28.09 @ 4:18PM|#

How telling that reason would feature an interview with a faux market authoritarian...tsk tsk.

John Roberts|10.28.09 @ 4:21PM|#

I was working on a U.S. Senate race in 1994, when Giuliani tried to persuade my candidate, a Republican, to break from the ticket and endorse Mario Cuomo's reelection. This was in a private, off-the-schedule book meeting in Gracie Mansion. Instead we endorsed the challenger, George Pataki, who went on to win the gubernatorial race. But my candidate lost to Moynihan, a very strong incumbent. What was Giuliani's motive for crossing party lines to back Cuomo? I suspect some kind of deal had been made, and Giuliani had his eye on running for governor himself and just didn't want Pataki to win it. The guy's only principle seems to be self-advancement.

Gene Berkman|10.28.09 @ 6:07PM|#

I get the impression that Giuliani endorsed Mario Cuomo for re-election as a payback to Ray Harding, boss of The Liberal Party, who had been crucial to Giuliani's election as Mayor in heavily Democratic New York City.

Also, he might have seen Pataki as a rival for power in the Republican Party.

|10.28.09 @ 9:18PM|#

I WISH the Obama Admin. hired this guy as an economic adviser.Unfortunately he has a bunch of Goldman Sachs retreads that have bled us. We need more free market geniuses like Mr Forbes directing our policies and instead we get these radical socialistic Government take over of everything. I feel really bad for the next generation.

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|10.29.09 @ 9:59AM|#

Too many flat taxers are for a tax of 17%. That is way too high 10% would be more like it.

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