Steve Forbes - The Victory NH
Interview
Part II
We could think of no better way to kick off our
Business Leader Solution Series than with the
man who arguably brought the current series of
proposed free-market reforms to the forefront of the
national debate. Please join us once again in
welcoming Steve Forbes...
VNH:
Last time we focused on the flat tax, but I think a
lot of people have forgotten that when you ran for
President, you championed a number of free-market
reforms - the kind of business-oriented approaches
to public policy that began to bloom under President
Reagan. His thinking was influenced by publications
like
National
Review and
The Wall
Street Journal’s editorial page. Who were the
greatest influences on you?
Forbes:
I’d have to start with great figures like Milton
Freedman and Ronald Reagan, who demonstrated that
you can go into the public square with ideas and
eventually bring people around to them if you
stick to it. What
Bob Bartley and others did with
The Wall
Street Journal demonstrates that sensible editorials
can have an influence and can change the course of
history.
VNH:
In addition, of course, to
Flat Tax Revolution, what other books
on public policy would you recommend?
Forbes:
People should consider reading
Flat Tax (from which I got the idea)
– by
Alvin Rabushka and Robert Hall of the
Hoover Institution. And then there’s a
book called
The Way the World Works
- by Jude
Wanniski, who just recently passed away. In the
field of economics, the man was a genius – in other
areas he was off the wall. In this area he had it
right. And that book details, as well as any other
book does, how taxes have affected our history.
VNH:
I
think it’s fair to say, that of all the free-market
reforms that you brought to the forefront, the one
that is clearly on center stage these days is Social
Security reform. As with tax reform, it’s been
greeted with all kinds of distortions and
misrepresentations. What do you suggest we do to
make personal savings accounts a reality?
Forbes:
Well, I think what went wrong this past year, to be
blunt, was the failure of the White House, the
President, to come up with a specific proposal right
from the beginning. He knew the other side was
going to attack his proposal and understood that in
the course of debate it would change enormously. Had
there been something specific out there, right off
the bat, people would have seen what it was and what
it was not. If the Administration had come out with
a specific proposal, people would have realized that
if you’re above the age of 50 or 55, the new system
would not concern you. The money is there for you in
the current system. This is for people who are in
their 20s and 30s. People would have seen right away
that with the new approach, benefits would not be
slashed and no one was going to rip up
Grandma’s Social Security check. I think this was a
missed opportunity - to take away the chance of the
demagogues painting all sorts of lurid pictures
about what would happen.
|
"Those
folks are retiring today with benefits 50% to
200% higher than they would have had with Social
Security." |
And if we base the personal savings accounts on the
model of a, say,
Federal
Thrift Savings Plan (which works for
millions of people now), people would see that
they’re not going to be dumped into an Enron-like
situation. You’re not going to be able to invest
your money in gold mines in Thailand. There will be
a handful of diversified, well-regulated (for
safety) funds. This will not be mad-money time; you
could just go into government bonds or
federal-guaranteed CDs.
Frankly, I could never figure out why President
Bush, who comes from Texas, didn’t cite Galveston as
an example.
In Galveston, three counties pulled out
of the Social Security system more than 20 years ago
and put their money not in the stock market but in
interest-guaranteed insurance contracts - bank CD’s
and the like. And guess what? Those folks are
retiring today with benefits 50% to 200% higher than
they would have had with Social Security. So this is
a real-life example. This kind of plan works.
And again, people need to have a choice. If you want
to take your chances with the old system, go do so.
Jose Pinera, who brought this system to Chile in
the early 1980s said, “You’ve got to give people a
choice so they don’t feel something is going to be
taken away from them. And when they feel they have a
choice, they’re going to be much more open to change
or considering change.”
VNH:
Speaking of choice, another issue you campaigned on
was education reform. This is a big issue in New
Hampshire, and we have groups such as
The New
Hampshire Center for School Reform and
the
Josiah
Bartlett Center for Public Policy fighting to
open up our system. But, as you know, opposition
runs very deep. It has now been 50 years since
Milton Freedman introduced school vouchers – 50
years! What has to happen to break the Teacher’s
Union monopoly?
|
"'If
we’re not happy with what’s happening to our
child in a certain school, we want the
opportunity to try to find another school.' What
could be more American than that?"
|
Forbes:
I
think what has to happen is more of what we’re doing
now. That is, making clear to people that reform is
about accountability and choice; it’s not about
taking anything away from anyone. It’s about
allowing us as a free people to say, “If we’re not
happy with what’s happening to our child in a
certain school, we want the opportunity to try to
find another school.” What could be more American
than that?
What you see in states that have charter schools is
that those schools are being starved of the funding
they need to be successful. We have to ask ourselves
this question: We’ve had 20 years of ever-increasing
spending on public education, and we’re still not
getting the results we want; isn’t it time that we
gave some other approaches a chance?
Not every kid is the same. So one kid may thrive in
one kind of school, another kid may have to go to a
different kind of school to get on track. We’re not
all the same, just as we’re not all the same size.
We don’t all develop the same. As the father of five
daughters, I can tell you they are all very
different! (laughter)
VNH:
One of the things I remember most from your
campaigns were the
Medical Savings Accounts that you put in
place at
Forbes Magazine.
What was particularly appealing was that you weren’t
just talking about some abstract idea. This was
something that your company had used successfully.
How do Medical Savings Accounts work?
Forbes:
Each year you get
$2,000,
and that $2,000 comes before your deductible. So if
in the course of the year you don’t spend the
$2,000, you get to roll the remainder over. It
belongs to you. If you want to spend your $2,000 on
a big gold tooth from the dentist, go right ahead. I
don’t care, it’s yours. If you go above $2,000 in
your expenses, then the insurance deductible, based
on the size of your salary, must be met. Having a
“one deductible fits all” system is ridiculous. The
deductible for somebody earning $20,000 should be
different from somebody earning $500,000. But if you
go above the deductible in your expenses, then the
insurance kicks in.
|
"If
it doesn’t belong to you, you’re less likely to
take responsibility for it. As Newt Gingrich
likes to point out, “You don’t wash rented cars."
|
The key is, if you want a functioning health care
system, you have to let people control the
resources. Our experience has been that Forbes’
health care premium costs - even though we give a
lot of money upfront - have gone up less than those
of our peers, because our people have a stake in how
their money is spent. It’s very basic: If it doesn’t
belong to you, you’re less likely to take
responsibility for it. As Newt Gingrich likes to
point out, “You don’t wash rented cars.”
When people control the dollars, most people will
try to get value for those dollars. For example, in
the last 10 years, the cost of laser surgery for
eyes has gone down by two-thirds. In other words, it
costs you about a third of what it did 10 or 15
years ago. Why? Because in most cases, it’s not
covered by insurance. You have to pay for it. So
providers have an incentive to try to make this
procedure more affordable. With the current system
of “somebody else is paying for it,” the tendency is
to have a cost-plus mentality; therefore, expenses
rocket out of control. What we want is for people to
control their health care dollars so they can bring
the kind of pressure to bear that occurs in every
other part of the economy - the end result will be
that everyone gets more value for their money.
|
"
Now the cynics will say that people won’t take
care of themselves, won’t get necessary medical
treatments. But that’s like saying if you allow
people to buy their own food they’ll starve
themselves. No. Most people take care of
themselves." |
Now this may sound counter-intuitive, but we’ve
found it cheaper at our company to buy a
high-deductible insurance policy and give the person
who works here the bulk of that deductible, or even
more than a normal deductible would be. We give you
most of that deductible up front or during the
course of the year. By taking this approach, our
overall insurance costs less, even though we’re
giving each employee $2,000. And people, as with
everything else they buy, will be sure to get the
best value they can for that money. Now the cynics
will say that people won’t take care of themselves,
won’t get necessary medical treatments. But that’s
like saying if you allow people to buy their own
food they’ll starve themselves. No. Most people take
care of themselves.
VNH:
Another pocketbook issue is the rapid rise in gas
prices. You recently made a rather bold prediction
about oil prices. Tell us what you think will happen
and why.
Forbes:
I
think the real bubble today is not the one that’s
been discussed, at least until recently — the
so-called housing bubble. In a free market, when
housing costs get out of line, you know they will
eventually taper off. The real bubble is in the
price of oil. Part of the responsibility for this
occurring lies with the Federal Reserve. It printed
too much money. But I think what’s happened is that
speculators have taken over and run this thing up
far beyond what it should be. If you look at supply
and demand and at inflation, oil should be running
$35 to $40 a barrel. Three years ago, it was $20 to
$25 a barrel. Going up 50% to 75% is a big jump, and
to have the per-barrel price at $60 to $70 is
absolute pure froth and speculation. The President
should go beyond what he is already doing, allowing
companies to borrow from the Strategic Petroleum
Reserve to make up for the short falls from the
wells that were damaged by Hurricane Katrina. He
should be actively selling from the Strategic
Petroleum Reserve. That would flush out the
speculators. I think you’d see prices go down $15 to
$20 a barrel.
|
"He
should be actively selling from the Strategic
Petroleum Reserve. That would flush out the
speculators. I think you’d see prices go down
$15 to $20 a barrel." |
VNH:
There seems to be a renewed wave of protectionist
sentiment coming from certain quarters of our
society. With your experience in global markets,
what does America need to do to remain competitive?
|
"My
grandfather came over here as a legal immigrant
- penniless, as were most other immigrants. They
had drive and ambition and a desire to make
something of their lives. That’s the kind of
energy we want in this country. "
|
|
"So,
let’s just stop playing pretend. If we have a
need, let’s deal with it. But let’s find out who
should be here and who shouldn’t. We have the
technology do to that." |
|
"Trying
to create an environment that has some semblance
of representative government in the Middle East
is profoundly positive. Now, we can point to
mistakes that were made, the long-term planning
that was not done; but the basic thrust of the
mission, I think, is absolutely important and
critical. If America doesn’t
lead the fight on
terror, the world is going to lose. "
|
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