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Steve Forbes, Chairman of Forbes Media

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HARDtalk. The American economy is in trouble.

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Stubbornly high unemployment, sinking consumer confidence and

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faltering growth all point to the real possibility of a double-dip

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recession. Perhaps most alarming of all is the American public's loss

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of faith in the political class to come up with an effective response.

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My guest today is Steve Forbes, multi-millionaire publisher,

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conservative activist and former republican presidential candidate.

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Is all-out ideological war over economic policy really what America

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:00:42.:01:14.

Steve Forbes, Welcome to HARDtalk. Thank you. How deep a hole do you

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believe the US economy is in? think it will be doing better at in

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the second half of this year than it did in the first half. It is the

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equivalent of an automobile that was stalled ywo years ago. We are

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now doing 25mph. On an open highway, we should be doing 75mph. It is

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sub-standard performance but we will not stall again. I am

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surprised that your confident tone. I am looking at the economic

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analysis. Both Europe and the United States and dangerously close

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to recession. Why do you believe that is wrong? First of all, large

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companies in America have plenty of liquidity. Jobs are being added

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although not at the place we would like -- pace. It is not stalling.

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The pessimism right now comes from the banking crisis in Europe and

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the flailing markets around the world. Confidence is low but

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activity is still taking place. The system has the capacity for some

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growth. It is interesting that you refer to the sovereign debt crisis

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in Europe. The collective wisdom has been that the US is the world's

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leading economy. Are you suggesting that the fundamental problems in

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the Eurozone are having a real impact on American economic well-

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being? The debt crisis obviously keeps the banking system. Hardly a

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day goes by where there is not a remark of the European Bank getting

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in trouble. Banks are still loaded up on sovereign debt. That is why

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the Federal Reserve was questioning banks in this country, foreign

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banks, about their sources of financing. There is a feeling that

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if Europe gets another banking crisis, it will ricochet here.

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seem to see Dad the intersection of politics and economics in the US.

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Do you except that there is a fundamental problem in economic

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policy-making in your country? It is said there is an increasingly

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polarised, dysfunctional American political debate about the economy.

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I do not accept that. I think the American political system, although

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it is messy, is in process of bringing about fundamental change.

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We saw in the election and last November -- in the elections last

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November. One part of the Government is in the hands of

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Republicans so it is obvious it will be hard to get agreement. But

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spending is now being taken seriously. Cuts have been minimal

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but they are going in the right direction. At the state level, New

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York is run by a liberal governor ends a budget that would have been

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inconceivable a couple of years ago was turned in. The system is

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beginning to move forward on reform. When you have a Republican

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presidential candidate, will be almost treasonous for Ben Bernanke

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to act, surely you're talking about polarisation? You cannot use such

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vivid language on the national level. The criticism that Rick

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Parry makes of the Federal Reserve will come more to do fall and it is

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absolutely legitimate. -- Perry. It has trashed the US dollar. It has

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made possible the disaster in housing. Criticism and discussion

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about the Federal Reserve even if the language is too colourful is

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needed. What was he thinking? He must have

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thought they use in that language would appeal to a significant

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portion of Conservative voters. -- that using. No, he was speaking off

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the cuff. He said it in Texas and people did not take it too

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seriously. When you are on the national stage, you are appealing

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to a wide and diverse audience and you must think twice about the

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language you use. It is part of the process of getting used to a

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national stage. The other candidates will go through the same

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thing. They learn that it is a very different form to that which they

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have been accustomed to one of the state level. Let us think about

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actions and the ones that Republicans took during the heated

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discussion about raising the debt ceiling for the federal government

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to allow it to build up warned national debt on top of the 14

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trillion dollars it already has. -- more. Some Republicans seem to

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believe they would not countenance any further rise in the national

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debt. Is that wise? That is part of the dense you go through in these

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negotiations. No-one could seriously the idea of default --

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no-one put. You negotiate and use fire and brimstone and then come to

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an agreement. There was frustration on the part of Republicans. The

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goalposts kept moving. What they came up with under the

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circumstances of a divided government was actually pretty good.

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The deal was based on President Obama agreeing that future fiscal

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moves would be all about spending cuts, not tax rises. You say that

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was pretty good but when all of those Republican candidates were

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lined up and asked, most of them said they are still opposed it. I

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have returned to the point that the Republican Party seems to be on the

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extreme of the economic argument. No, not at all. They what dramatic

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spending cuts -- they want. They are putting up the pressure to get

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a mandate in the 2012 elections. The mandate will be to

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fundamentally restructure at the fiscal system in the United States.

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The deal was pretty good but in terms of what needs to be done it

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is a small step. As are growing number of Democrats recognise that.

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It is about signals. You are on the board of Freedom Works, a political

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lobbying organisation closely allied to the tea party movement.

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This is what John McCain said about the Te Party leaders objection. He

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said it was foolish and would see the re-election of Barbara bummer.

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I love Senator McCain but he is still a senator and not President

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of the United States. He ran two years ago and ten years ago. It was

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a pretty good deal under the circumstances. The tea party

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movement in the United States is so strong because there is no

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leadership board. It is active citizens. No-one organisation

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speaks for the thing. People got involved because they were worried

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about the ball out in government spending - it was something we had

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not seen since World War II. There was a feeling it was doing more

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harm than good. The pressure on politicians if not for the tea

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party would have caused a blow-out. The system is working out in a

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messy way. The political fall-out of all the

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arguing over the debt ceiling is perhaps best captured in a CBS poll

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from a couple of weeks ago. 72% of the American public disapproved of

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the Republicans haggling on the issue. The Republicans took the rap.

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Opinion was split on Barack Obama. In terms of disapproval on handling

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the economy, even his own party is starting to turn on him. He has not

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done anything about the blow-out in spending. He has not put reforms on

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the table. He is making speeches on specific proposals but has not put

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anything specific on the table and people are waking up to it.

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Americans care about jobs right now, more than cutting the deficit. Do

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you think that your message which is about a preoccupation with

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cutting the deficit and government spending, does that fit with the

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American demand for a bus to job growth? Blowing out government

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spending is manifestly not working. It did not work in Japan, in the UK

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or here. The proposals we have been discussing to get the economy

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moving include reducing spending and that is part of that. We are

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looking at reform of healthcare and the financial system instead of

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massive new regulations that are coming in. Small businesses are

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being crushed by all of the new rules coming from Washington. Those

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things are tied together. Remove the barriers and the economy will

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come back quickly. And to throw something Beckett you, Vettori

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coalition in the UK is making a huge mistake in not reducing their

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tax rates -- back at you. Taxes are too high. They should be reducing

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them. We have to do the same thing. I will not take it personally! I

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recall that you were Mr Flat Tax.. You wanted 17% across the board,

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everybody paying the same rate. You lost two presidential runs on the

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campaign trail arguing that. I do not think the American public will

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listen to your message on tax right now when what they want to see is a

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reduction in deficit but also a stimulus to the economy which is in

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deep trouble. Is this really the time to argue for lower taxes for

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I have spoken about lower taxes across the board. In the early

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1980s, Ronald Reagan reduced domestic spending, slowed that down,

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putting interest rate cuts across the board. The United States

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economy came roaring back. Since my campaigns, 25 countries have put in

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a flat tax and it has walked everywhere. The President's own

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deficit reduction Commission came out in favour of simple fine record.

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-- in favour of simplifying the system. You have got Democrat

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signing on as well as Republicans. Here is what war and of that said.

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He said that de mega rich have been helped by a politicians for too

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long. He said that those earning over �10 million should pay an

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additional tax. -- $10 million. He said the rich were by and large

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very decent and did not mind paying more in tax than so many of their

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fellow citizens were struggling. Can you quarrel with that? You can

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quarrel with several parts of that full stops if he feels he is not

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being enough tax, he can send and money as gifts to the US government

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if he feels he is not spending enough. Why have not seen him or

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any other Bulgaria's doing that jet. In terms of getting the economy

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moving, creating jobs, that does not work. -- him or any other

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billionaires doing that yet. The personal tax rate in this country

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is over 35 %. If you it -- and in state and local taxes, it is higher.

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People earning salaries of more than $250,000 the year do not feel

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rich. There are getting hit by tax on all sides. I think when but that

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is aware of the realities but his point is, for the mega rich, let's

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face it, you're one of them, I tried to find out how much you are

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worth, it is more than $400 million, were people like you, a lot of the

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money you pay is and capital gains tax of whatever you choose to call

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it. He said that in actual terms, he pays about 17 % on his income

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that is less than his secretary. That cannot be right. Capital gains

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is not given. There have been tens of billions of dollars off or

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losses in this market. If you punish capital gains and risk-

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taking, you get less job creation. In the 1970s, it was set at 45-50 %

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in a struggling economy. We created more jobs in western Europe -- than

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Western Europe and Japan that together often be cut it. You can

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argue history, and recent history, in different ways. Led to do look

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at George W Bush he cut tax rates. -- let us take a look. They reckon

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that cost both for one trillion dollars to the US budget, the fact

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that he delivered tax cuts, tax cuts which predominantly favoured

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the rich. You suggesting to me that the way he handled the economy was

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a success? In terms of his tax cuts, they were across the board. Almost

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half of income tax payers in this country do not pay federal income

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tax. The top 3% income earners in this country pay 97 % of the

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federal income tax. In terms of who is being, it is a high income

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people who are paying more than ever before. Where George Bush went

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wrong was his weak dollar policy. That was a disaster. In the 1970s,

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we learned that if a major country undermines its own economy, it not

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only holds its own economy but it has a devastating effect around the

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world. It sent up oil prices, gold prices, housing prices, we are

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feeling the heard of that today. Barack Obama has continued that

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policy. Ronald Reagan's strong dollar policy work, so did John F

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Kennedy's policy. You should not undermine your currency, if you do,

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you are going to get big, big problems. Where people may be

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sceptical is that they can remember George Bush back in 1998, 1999,

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2000, he said he was a small government man and would pay back

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government spending. The truth is, he did not. Why should we believe

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that this new generation, may be even more right wing Republicans

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that we see today, but they will be serious when they get into office.

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George W Bush did not deliver. saw what happened to George W Bush.

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His party lost power totally in 2008. This is when The Tea Party

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rose up and said that they had betrayed principles, made the rise

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of Barack Obama possible, we are going to punish you for doing that.

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That is why a lot of the big- spending Republicans got beaten in

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primaries to your face by Conservatives. -- got beat in the

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primaries to Conservatives. There was massive repudiation. I think

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that trend will continue in the elections next year. When you look

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at the nine or so candidates fighting for the Republican

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nomination, some of them have close links to The Tea Party, which you

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have close links to, I wonder who you believe will be the one to

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deliver the Government you want to see. Who are you backing? I am not

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backing anyone yet. There is a few possible candidates who might enter

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the race, I am looking over the field and will make a decision in

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the next few weeks. I want to see who the players are first. Paul

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Ryan, maybe even Sarah Palin heat you have described as a smart woman

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in the past. Do you want to see her in the race and would you back?

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does not matter what I want, I think she will get in the race. The

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Governor of my state, Kris Christie, he is an contention to get in the

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race. The point because, if you look at

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the polls, if you look at the fader ability of the Tea Party, that has

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gone down the toilet in the last couple of weeks. Very low approval

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ratings. Do you think being involved with The Tea Party will

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:23:07.:23:08.

help or hinder the next Republican Party candidate. You will not win

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the nomination unless you are in favour of awful lot of The Tea

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Party's policies. They have been trashed in the media but they are

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concerned citizens who got involved and have made life uncomfortable

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for the political establishment. They may reflect an ideological

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purity that you agree with when it comes to fiscal policy but, of what

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it that is right now, given the economy, plain and popular? It is

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:23:51.:23:52.

not. -- unpopular. They tried to recall people who went along with

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Governor Walker's reforms. The Republicans have maintained control,

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they took control of the state courts, to. This is why you are

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seeing the results that you are. People are getting involved in the

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political process. They are making a change. They don't always get

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what they want but you do come up with some reforms. They might not

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be pure but the country is moving in the right direction. Steve

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Forbes, we have to head towards the exit. We are running out of time.

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Hello there. I have few concerns about Tuesday's weather across

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northern and western parts but what a contrast we will see to start of

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Tuesday across the Midlands and southern England. It will be a very

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wet start to the day. Look at this beast, it has already produced a

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:25:19.:25:19.

lot of rain. Overnight, into Tuesday, the rain will push its way

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across and you can see the extent of it, very widely spread heavy

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:25:33.:25:40.

downpours. 50 metres in a very -- 50 mm in a short space of time.

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Localised flooding is distinctly possible. Lighter rain for the most

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part for the North. Disappointing for August. All lot of like showers

:25:49.:25:53.

around. There will be some sunshine around. Coming into the body of

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Wales and into the south-west, you can see that the further north and

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west you are, the more likely it is to stay dry. The weather is nowhere

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near as intense as it will be in the south-eastern quarter. Lighter

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rain will be left behind. The damage will have been done by this

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:26:21.:26:24.

stage. The rain will have pushed into the North Sea over night. It

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will still be quite wet out there. Quite heavy rain in its own right

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pushing towards the west side of Scotland and affecting Northern

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:26:41.:26:48.

Ireland. On Wednesday, this band will chug its way, and I do mean

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chug its way, into the heart of Scotland. It will never be a bother

:26:56.:27:01.

for East Anglia or the South East. Running towards the bank holiday

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weekend, not the sort of weather you will want to see. That is the

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