I.O.U.S.A. (63 page)

Q:
Is it important for the American people to recognize what this
debt means to our economy in the future?

Steve Forbes:
What ’ s important for the American people to realize is that the government has, with a sleight of hand, given us a lot of obligations that we don ’ t know we have. We know about the national debt — that ’ s a number. We know we have obligations on Social Security and in health care that are fi ve, seven, eight times what the national debt is, and there ’ s no way the current system can deal with it. It ’ s like you think you have a house, you may have bought a house, say, for $ 200,000. What they didn ’ t tell you is that you ’ ve got a million - dollar mortgage on that thing. That ’ s what the crisis is. So when people realize we ’ ve got a crisis, there are positive ways to deal with it and turn the tables on the big spenders and the politicians. That ’ s what we ’ ve got to do.

Q:
Do you sometimes feel like you ’ re a contrarian going against
the public? Do you feel that the public debate is starting to line
up with you?

Steve Forbes:
My role now is agitator, stirring the pot, trying to make things happen, and there are going to be times when you go against the grain. Ronald Reagan could not get elected president in 1968 when he fi rst ran, could not get elected in 1976, but he stuck to it, and in 1980, with the same basic principles, he got in and achieved great things. So rather than see yourself as a c18.indd 259

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260 The

Interviews

contrarian or whatever you want to call yourself, people should see themselves as seekers of the truth or as people who are trying to do things based on basic principles. And sometimes you may fi nd a hostile environment and sometimes you may fi nd you ’ ve got a lot of missionary work to do, but you have to do it. That ’ s what America ’ s all about.

Q:
As a proponent of the American people getting the truth, if
you could pick one truth that they should learn about money,
monetary policy, debt, gold, what would it be?

Steve Forbes:
I would want people to realize that the money that the politicians spend is your money. It comes out of your pocket one way or the other. They take your money and they pay the tab and you ’ re supposed to be grateful. Don ’ t get caught up in the exact number; just remember it ’ s your money. When politicians spend, they get it from you. And if they say they ’ re going to give you a free lunch, just remember, they ’ re using your credit card, your money. You ’ re eventually going to be getting the bill.

Q:
And once the American people have that knowledge and it has
become second nature to them, if you will, what would be the
right action for them to take?

Steve Forbes:
The American people, as a start, should say, “ Who are my representatives? Who is my state representative, state senator, congressperson, U.S. senator, governor? What are they doing and why are they doing it? ” Challenge leaders in primaries, even if they ’ re not doing the job right. Go online, write a letter to the editor, be active. It only takes a few minutes each month. By golly, that ’ s how you get results.

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Additional Resources

There are many great resources on the Web if you ’ re interested in learning more about the nation ’ s economy and securing your family ’ s place within it. Here are a few suggestions for where to begin

• Peter G. Peterson Foundation: www.pgpf.org

• Agora Financial, LLC: www.agorafi nancial.com

• The Concord Coalition: www.concordcoalition.org

• The CATO Institute: www.cato.org

• The Brookings Institution: www.brookings.edu

• American Enterprise Institute: www.aei.org

• Center on Budget and Policy Priorities: www.cbpp.org

• Center for Retirement Research: http://crr.bc.edu

• Choose to Save: www.choosetosave.org

• Feed the Pig: www.feedthepig.org

• Citizens Against Government Waste: www.cagw.org

• The Committee for Economic Development: www.ced.org

• US Budget Watch: www.usbudgetwatch.org

• Common Good: www.commongood.org

• The Heritage Foundation: www.heritage.org

• OMB Watch: www.ombwatch.org

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262

Additional

Resources

• One Horizon Foundation: www.onehorizon.org

• Peterson Institute for International Economics: www.iie.com

• Progressive Policy Institute: www.ppionline.org

• Public Agenda: www.publicagenda.org

• The Tax Policy Center: www.taxpolicycenter.org

• The Urban Institute: www.urban.org

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Index

American dream, 118–119

economy, U.S. economy (relationship),

loss, 154–155

201–203

American economy, defi nition/role, 137–138

global growth contribution, 64–66

Areddy, James, 197

government, size, 199–200

Austrian school of thought, 147–148

government bonds, dumping (impact),

187–188

Baby boomers, 30–31

importance, 203–204

Bixby, Bob (federal debt issue), 25–28

nuclear option, 72

Black Monday (1987), 54–57, 169

U.S. debt consumption, impact, 189–190

Bond market, Buffett usage, 186–187

U.S. exports, 68

Bonner, Bill, 43–44, 90, 111

U.S. treasuries, liquidation (threat), 70–71

Borrowing, problems, 149–150

“Citizens Guide to the Financial Condition of Bread and circuses, Roman control

the United States” (Peter G. Peterson

system, 116–117

Foundation), 86–89

Bretton Woods, 161–163

Clinton, Bill

breakdown, 147

budget reform, 102

lessons, 120–123

campaign promises, 101

Brookings Institution, 20–21

Concerned Youth of America (CYA), 34–36

Budget

Concord Coalition, 20–21, 35, 69, 139

balancing, diffi culty, 130

impact, 23–24

illustration, 29f

Volcker contribution, 166–167

problems, 84–85

Congressional Budget Offi ce (CBO), 32

stresses, 27–28

Conrad, Kent, 27–28

usage, reason, 148–149

Consumption, focus, 67

Budget defi cit, 23, 174

Contract with America, 38

defi nition, 32–33

Credit, addiction, 53

money, borrowing, 69

Current account defi cit, 59–60

solutions, 41–42

Budget Reform Act of 1974, 32

Debt

Buffett, Warren (Oracle of Omaha),

ceiling, increase, 16

60–64, 90, 175

collective madness, 114–115

business approach/philosophy, 183–185

foreign ownership, impact, 135–136

economics, fascination, 176

generational passage, 155–156

money/family/society, philosophy, 192

payments, determination, 113–114

Bush, George (41), budgetary involvement,

service, Forbes perspective, 252

208–209

threat, Forbes perspective, 250–251, 259

Bush, George (43), Laffer perspective, 234–235

Debt-to-GDP projection, 85f

Defi cit

Central bank, impact, 172–173

impact, Laffer perspective, 234

China

importance, 32–33, 128–129

change, 198–199

increase, 16, 150, 235–236

economic boom, 66–67, 181, 244

issues, 85–88

263

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264 Index

Defi cit (
Continued
)

Fiscal imbalances, problems, 136–137

nonimpact, Cheney interpretation, 80

Fiscal path, unsustainability, 22

projections, 30f

Fiscal policy, politics (diffi culty), 38–39

reduction, 180–181

Fiscal problems, 18–20

Rivlin explanation, 107

Fiscal Responsibility Act, 38

Ronald Reagan philosophy, impact, 80, 218

Fiscal Wake-Up Tour, 20–21, 27, 36, 82

spending, expectations, 129–130

Ames arrival, 40–41

worries, 33

media exclusion, 37

Delusions, 111–112

Flat tax, Forbes concept, 256–257

Demagoguery, increase, 184

Forbes, Steve, 245

Derivative contracts, nominal/face value,

Ford, Gerald (budgetary involvement), 207–208

122–123

Foreign currencies, Buffett purchase, 178–179

Freedom, delusion, 119

Economic Growth and Tax Relief Reconciliation Free market theory, 69–70

Act of 2001, 77

Economic issues, understanding, 61–62, 99–100

Gold

Buffett contention, 115–116

Greenspan support, 124

importance, 167–168, 175–176, 220–221

standard

reasons, 108

Buffett perspective, 179

Economics

Forbes perspective, 259

dismal science, 134–135

Gold standard, fi at currency (contrast), 123–124

Volcker interest, 161–162

Gold window, Nixon closure, 121

Economy, threats, 27–28

Government level, determination, 78–82

Employment rates, decrease, 77

Government spending/taxes, contrast, 168

Entitlements

Great Depression, impact, 246–247

habit, 145

Greenspan, Alan, 38, 52, 90, 169

programs

Forbes perspective, 253

problems, 255–256

Jon Stewart interview, 56–57

support, 105

Paul O’Neill relationship, 222–224

reform, 140–141

Ron Paul, relationship, 53–54, 152–153

Greenspeak, 55

Federal budget, defi cit level, 105–106

Gross domestic product (GDP), 19

Federal debt, 180

decrease, 60

history, 25–26

imports, relationship, 181–182

level, 83f, 86

personal savings, equivalence, 44

public debt, Roosevelt administration

taxes, percentage, 79

concept, 159

Federal fi nancial problem, worsening, 37–38

Hard money, 124

Federal government, size increase (Laffer

Heritage Foundation, 20–21, 38

impact), 232–234

Home prices

Federal government, spending, 87

decline, 45–46

fi nancing, 105–106

S&P Case-Shiller indexes, 46f

Federal Reserve, 46–48, 54–57

Housing bubble, savings (impact), 159–160

Federal Reserve Act, 46–47

Human nature, Forbes perspective, 257–258

importance, 125–126

Federal surplus, 104

Infl ation, 48–51

Fed window, closing, 49

appearance, 143

Fiat money, 46–47

consequence, 52–53

Finances, management (problems), 17–18

expectations, 50

Financial warfare, 72–73

explanation, 151

Financing gap, closing, 84

factors, 143–144, 171

Fiscal defi cit, worsening, 131–132

Federal Reserve, impact, 142–143

Fiscal discipline, reestablishment, 133–134

immorality, 151–152

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Index
265

occurrence, 144

administration economic rating, 141–142

spending, impact, 254–255

family life, 144

Interest rates, impact, 164

Political system, problems, 82–85, 237–238

International monetary system, attention, 122

Private debt (public debt), foreign ownership, 70f, 71f

Just-in-time politics, 135–136

Productive capacity, loss, 182–183

Purchasing power, 63

Laffer, Arthur, 225

crisis, inheritance, 229–233

Reaganomics, 25–26

economics, interest, 225

Recession, 103–104

Laffer curve (taxable income elasticity), 25–26, Reserve currency, status (threat), 131

76–77

Rivlin, Alice, 32–33, 89–90, 99

Leadership

CBO directorship, 100

defi cit, 75, 84–85

OMB deputy directorship, 100–101

Forbes perspective, 248–249, 257–258

Roberts, Paul Craig, 71–72

role, 185–186

Rubin, Robert, 38, 70, 91, 127

Longevity, increases, 33

Long-term fi scal defi cits, addressing, 132–133

Savings

absence, reasons, 170–171

Medicaid, problems, 255–256

culture, change, 249–250

Medical care spending, increase, 33

defi cit, 43

Medicare

importance, 172

costs, 84

monetary policy, disincentive, 158–159

initiation, 81

problems, 84–85, 169–170

problems, 79

support, 156

Middle-class tax cut, argument, 128

Savings rate

Mills, Wilbur, 141

low level, 55–56

Money, understanding, 260

negative level, 52–53

Money/capital assets, strategic tool, 191–192

reduction, 53

Money supply, 48–51

Shanghai Bureau, importance, 197–198

decline, 49

Silver tsunami, 28–31

Mr. Rushmore crowd, 89–91

Social Security

Mussolini, debt control, 117–118

problems, 79–80, 255–256

program, payouts, 29

National debt, Forbes perspective, 246

surpluses, problems, 139–140

National debt clock, 39–40, 234

Society benefi ts, distribution (disparities), National savings, defi cits (impact), 87

193–194

Nixon, Richard M.

Spending

dollar devaluation, 229–231

expansion, problems, 157–158, 174

impact, 120–123

reduction, 248–249

Squanderbonds/Squanderbucks, 61, 69

Oil embargo (1973), 142

Squanderville, Thriftville (contrast), 60–64