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Steve Forbes, Welcome to HARDtalk. Thank you. How deep a hole do you | :00:06. | :00:14. | |
believe the US economy is in? think it will be doing better in | :00:14. | :00:19. | |
the second half of this year than it did in the first half. It is the | :00:19. | :00:24. | |
equivalent of an automobile that was stalled two years ago. We are | :00:24. | :00:31. | |
now doing 25mph. On an open highway, we should be doing 75mph. It is | :00:31. | :00:37. | |
sub-standard performance but we will not stall again. I am | :00:37. | :00:45. | |
surprised at your confident tone. I am looking at the economic | :00:45. | :00:49. | |
analysis: Both Europe and the United States are dangerously close | :00:49. | :00:55. | |
to recession. Why do you believe that is wrong? First of all, large | :00:55. | :01:04. | |
companies in America have plenty of liquidity. Jobs are being added | :01:04. | :01:14. | |
:01:14. | :01:16. | ||
although not at the pace we would like. It is not stalling. The | :01:16. | :01:20. | |
pessimism right now comes from the banking crisis in Europe and the | :01:20. | :01:28. | |
flailing markets around the world. Confidence is low but activity is | :01:29. | :01:35. | |
still taking place. The system has the capacity for some growth. | :01:35. | :01:41. | |
interesting that you refer to the sovereign debt crisis in Europe. | :01:41. | :01:45. | |
The collective wisdom has been that the US is the world's leading | :01:45. | :01:52. | |
economy. Are you suggesting that the fundamental problems in the | :01:52. | :01:57. | |
Eurozone are having a real impact on American economic well-being? | :01:57. | :02:01. | |
The debt crisis obviously hits the banking system. Hardly a day goes | :02:01. | :02:07. | |
by where there is not a remark of a European bank getting in trouble. | :02:07. | :02:14. | |
Banks are still loaded up on sovereign debt. That is why the | :02:14. | :02:16. | |
Federal Reserve was questioning banks in this country, foreign | :02:16. | :02:25. | |
banks, about their sources of financing. There is a feeling that | :02:25. | :02:33. | |
if Europe gets another banking crisis, it will ricochet here. | :02:33. | :02:40. | |
seem to sit at the intersection of politics and economics in the US. | :02:40. | :02:43. | |
Do you accept that there is a fundamental problem in economic | :02:43. | :02:52. | |
policy-making in your country? It is said there is an increasingly | :02:52. | :02:58. | |
polarised, dysfunctional American political debate about the economy. | :02:58. | :03:02. | |
I do not accept that. I think the American political system, although | :03:02. | :03:08. | |
it is messy, is in process of bringing about fundamental change. | :03:08. | :03:15. | |
We saw in the elections last November. One part of the | :03:15. | :03:18. | |
Government is in the hands of Republicans so it is obvious it | :03:18. | :03:23. | |
will be hard to get agreement. But spending is now being taken | :03:23. | :03:29. | |
seriously. Cuts have been minimal but they are going in the right | :03:29. | :03:39. | |
:03:39. | :03:40. | ||
direction. At the state level, New York is run by a liberal governor | :03:40. | :03:44. | |
and a budget that would have been inconceivable a couple of years ago | :03:44. | :03:54. | |
:03:54. | :04:00. | ||
was turned in. The system is beginning to move forward on reform. | :04:00. | :04:03. | |
When you have a Republican presidential candidate, Governor | :04:03. | :04:06. | |
Rick Perry, saying it will be almost treasonous for Ben Bernanke | :04:06. | :04:16. | |
:04:16. | :04:26. | ||
to act, surely you're talking about polarisation? You cannot use such | :04:26. | :04:34. | |
vivid language on the national level. The criticism that Rick | :04:34. | :04:38. | |
Perry makes of the Federal Reserve will come more to the fore and it | :04:38. | :04:45. | |
is absolutely legitimate. It has trashed the US dollar. It has made | :04:45. | :04:55. | |
:04:55. | :04:57. | ||
possible the disaster in housing. Criticism and discussion about the | :04:57. | :05:07. | |
Federal Reserve even if the language is too colourtoo colourded. | :05:07. | :05:11. | |
What was he thinking? He must have thought that using that language | :05:11. | :05:19. | |
would appeal to a significant portion of Conservative voters. | :05:19. | :05:25. | |
he was speaking off the cuff. He said it in Texas and people did not | :05:25. | :05:32. | |
take it too seriously. When you are on the national stage, you are | :05:32. | :05:35. | |
appealing to a wide and diverse audience and you must think twice | :05:35. | :05:41. | |
about the language you use. It is part of the process of getting used | :05:41. | :05:45. | |
to a national stage. The other candidates will go through the same | :05:45. | :05:55. | |
:05:55. | :05:59. | ||
thing. They learn that it is a very different form to which they have | :05:59. | :06:05. | |
been accustomed to on the state level. Let us think about actions | :06:05. | :06:08. | |
and the ones that Republicans took during the heated discussion about | :06:08. | :06:11. | |
raising the debt ceiling for the federal government to allow it to | :06:11. | :06:15. | |
build up more national debt on top of the 14 trillion dollars it | :06:15. | :06:25. | |
:06:25. | :06:28. | ||
already has. Some Republicans seem to believe they would not | :06:28. | :06:38. | |
:06:38. | :06:39. | ||
countenance any further rise in the national debt. Is that wise? That | :06:39. | :06:45. | |
is part of the dance you go through in these negotiations. No-one took | :06:46. | :06:53. | |
seriously the idea of default. You negotiate and use fire and | :06:53. | :06:58. | |
brimstone and then come to an agreement. There was frustration on | :06:58. | :07:08. | |
:07:08. | :07:08. | ||
the part of Republicans. The goalposts kept moving. What they | :07:08. | :07:11. | |
came up with under the circumstances of a divided | :07:11. | :07:21. | |
:07:21. | :07:25. | ||
government was actually pretty good. The deal was based on President | :07:25. | :07:28. | |
Obama agreeing that future fiscal moves would be all about spending | :07:28. | :07:36. | |
cuts, not tax rises. You say that was pretty good but when all of | :07:36. | :07:39. | |
those Republican candidates were lined up and asked, most of them | :07:39. | :07:47. | |
said they are still opposed it. I have returned to the point that the | :07:47. | :07:51. | |
Republican Party seems to be on the extreme of the economic argument. | :07:51. | :08:01. | |
:08:01. | :08:06. | ||
No, not at all. They want dramatic spending cuts. They are putting up | :08:06. | :08:14. | |
the pressure to get a mandate in the 2012 elections. The mandate | :08:14. | :08:16. | |
will be to fundamentally restructure the fiscal system in | :08:16. | :08:23. | |
the United States. The deal was pretty good but in terms of what | :08:23. | :08:27. | |
needs to be done it is a small step. A growing number of Democrats | :08:27. | :08:37. | |
recognise that. It is about signals. You are on the board of Freedom | :08:37. | :08:39. | |
Works, a political lobbying organisation closely allied to the | :08:39. | :08:47. | |
Tea Party movement. This is what John McCain said about the Tea | :08:47. | :08:54. | |
Party leaders objection: He said it was foolish and would see the re- | :08:54. | :09:04. | |
:09:04. | :09:06. | ||
election of ection of ma. I love | :09:06. | :09:10. | |
senator and not President of the United States. He ran two years ago | :09:10. | :09:19. | |
and ten years ago. It was a pretty good deal under the circumstances. | :09:19. | :09:23. | |
The Tea Party movement in the United States is so strong because | :09:23. | :09:33. | |
:09:33. | :09:34. | ||
there is no leadership board. It is active citizens. No one | :09:34. | :09:41. | |
People got iople got icause they were worried about the about thein | :09:41. | :09:44. | |
government spending - it was something we had not seen since | :09:44. | :09:51. | |
World War II. There was a feeling it was doing more harm than good. | :09:51. | :09:56. | |
for the Tea Party would have caused a blow-out. The system is working | :09:56. | :10:06. | |
:10:06. | :10:06. | ||
out in a messy way. Thsy way. fall-out of all the arguing over | :10:06. | :10:10. | |
the debt ceiling is perhaps best captured in a CBS poll from a | :10:10. | :10:18. | |
couple of weeks ago. 72% of the American public disapproved of the | :10:18. | :10:26. | |
Republicans haggling on the issue. --handling. The Republicans took | :10:26. | :10:36. | |
:10:36. | :10:43. | ||
the rap. Opinion was split on Barack Obama. In terms of | :10:43. | :10:46. | |
disapproval on handling the economy, ev ev party is starting to | :10:46. | :10:51. | |
turn on him. He has not done anything about the blow-out in | :10:51. | :11:01. | |
spending. He has not put reforms on the table. He is making speeches on | :11:01. | :11:04. | |
specific proposals but has not put anything specific on the table and | :11:04. | :11:10. | |
people are waking up to it. Americans care about jobs right now, | :11:10. | :11:18. | |
more than cutting the deficit. Do you think that your message, which | :11:18. | :11:21. | |
is about a preoccupation with cutting the deficit and government | :11:21. | :11:24. | |
spending, does that fit with the American demand for positive job | :11:24. | :11:34. | |
:11:34. | :11:40. | ||
growth? Blowing out government spending is manifestly not working. | :11:40. | :11:49. | |
It did not work in Japan, in the UK or here. The proposals we have been | :11:49. | :11:52. | |
discussing to get the economy moving include reducing spending | :11:52. | :12:01. | |
and that is part of that. We are looking at reform of Obamacare and | :12:01. | :12:04. | |
the financial system instead of massive new regulations that are | :12:04. | :12:13. | |
coming in. Small businesses are being crushed by all of the new | :12:13. | :12:17. | |
rules coming from Washington. Those things are tied together. Remove | :12:17. | :12:27. | |
:12:27. | :12:28. | ||
the barriers and the economy will come back quickly. And to throw | :12:28. | :12:31. | |
something back at you, the Tory coalition in the UK is making a | :12:31. | :12:39. | |
huge mistake in not reducing their tax rates. Taxes are too high. They | :12:39. | :12:49. | |
:12:49. | :12:50. | ||
should be reducing them. We have to do dothing. I will not take | :12:50. | :13:00. | |
:13:00. | :13:03. | ||
it personally! I recall that you were Mr Flat Tax. You wanted to cut | :13:03. | :13:10. | |
everybody paying the same rate. You lost two presidential runs on the | :13:10. | :13:18. | |
campaign trail arguing that. I do not think the American public will | :13:18. | :13:22. | |
listen to your message on tax right now when what they want to see is a | :13:22. | :13:26. | |
reduction in deficit but also a stimulus to the economy which is in | :13:26. | :13:29. | |
deep trouble. Is this really the time to argue for lower taxes for | :13:29. | :13:39. | |
:13:39. | :13:52. | ||
In terms of stimulus spending, it does not work. In the early 1980s, | :13:52. | :13:54. | |
Ronald Reagan reduced domestic spending, slowed it down, putting | :13:54. | :13:59. | |
interest rate cuts across the board. The United States economy came | :13:59. | :14:05. | |
roaring back. Since my campaigns, 25 countries have put in a flat tax | :14:05. | :14:13. | |
and it has worked everywhere. The President's own deficit reduction | :14:13. | :14:23. | |
:14:23. | :14:32. | ||
commission came out in favour of simplifying the system. The idea of | :14:32. | :14:36. | |
simplicity and low tax rates is winning. You have got Democrats | :14:36. | :14:40. | |
signing on as well as Republicans. Here is what Warren Buffett said. | :14:40. | :14:43. | |
He said that the mega-rich have been helped by politicians for too | :14:43. | :14:46. | |
long. He said that those earning over 10 million should pay an | :14:46. | :14:54. | |
additional tax. He said the rich were by and large very decent and | :14:54. | :14:57. | |
would not mind paying more tax seeing as so many of their fellow | :14:57. | :15:01. | |
citizens were struggling. Can you quarrel with that? | :15:01. | :15:09. | |
You can quarrel with several parts of that. If he feels he is not | :15:09. | :15:13. | |
paying enough tax, he can send money as a gift to the US | :15:13. | :15:18. | |
government if he feels he is not spending enough. I can give him the | :15:18. | :15:22. | |
address. Why have I not seen him or any other billionaires doing that | :15:22. | :15:25. | |
yet. In terms of getting the economy moving, creating jobs, that | :15:25. | :15:35. | |
:15:35. | :15:42. | ||
does not work. It hurts the creation of capital. He also | :15:43. | :15:46. | |
confuses capital gains tax with personal tax. | :15:46. | :15:50. | |
The personal tax rate in this country is over 35 % and in state | :15:50. | :15:53. | |
and local taxes, it is higher. People earning salaries of more | :15:53. | :15:57. | |
than $250,000 a year do not feel rich. They are getting hit by tax | :15:57. | :16:00. | |
on all sides. I think Warren Buffett is aware of | :16:00. | :16:04. | |
the realities but his point is, for the mega rich, let's face it, | :16:04. | :16:08. | |
you're one of them, I tried to find out how much you are worth, it is | :16:08. | :16:12. | |
more than $400 million, people like you, a lot of the money you pay is | :16:12. | :16:21. | |
in capital gains tax or whatever you choose to call it. He said that | :16:21. | :16:25. | |
in actual terms, he pays about 17 % on his income - that is less than | :16:25. | :16:34. | |
his secretary. That cannot be right. Capital gains is not a given. There | :16:34. | :16:41. | |
have been tens of billions of dollars of losses in this market. | :16:41. | :16:44. | |
If you punish capital gains and risk-taking, you get less job | :16:44. | :16:54. | |
:16:54. | :17:02. | ||
creation. In the 1970s, it was set at 45-50 % in a struggling economy. | :17:02. | :17:05. | |
It started with Jimmy Carter, the reduction of rates.We created more | :17:05. | :17:11. | |
jobs than Western Europe and Japan that together after we cut it. | :17:11. | :17:14. | |
You can argue about history, recent history, in different ways. Let's | :17:14. | :17:19. | |
take a look at George W Bush. They reckon he cut about one trillion | :17:19. | :17:22. | |
dollars from the US budget, the fact that he delivered tax cuts, | :17:23. | :17:32. | |
:17:33. | :17:35. | ||
tax cuts which predominantly favoured the rich. -- he cost over | :17:35. | :17:38. | |
$1 trillion. You're suggesting to me that the way he handled the | :17:38. | :17:48. | |
:17:48. | :17:50. | ||
economy was a success? In terms of his tax cuts, they were | :17:50. | :17:53. | |
across the board. Almost half of income tax payers in this country | :17:53. | :18:02. | |
do not pay federal income tax. The top 3% income earners in this | :18:02. | :18:06. | |
country pay 97 % of the federal income tax. In terms of who is | :18:06. | :18:09. | |
paying, it is high income people who are paying more than ever | :18:09. | :18:13. | |
before. Where George Bush went wrong was his weak dollar policy. | :18:13. | :18:22. | |
That was a disaster. In the 1970s, we learned that if a major country | :18:22. | :18:26. | |
undermines its own economy, it not only holds its own economy but it | :18:26. | :18:30. | |
has a devastating effect around the world. It sent up oil prices, gold | :18:30. | :18:35. | |
prices, housing prices, we are feeling the hurt of that today. | :18:35. | :18:45. | |
:18:45. | :18:54. | ||
Barack Obama has continued that policy. Bill Clinton and Ronald | :18:54. | :18:57. | |
Reagan's strong dollar policy worked, as did John F Kennedy's | :18:57. | :19:00. | |
policy. You should not undermine your currency, if you do, you are | :19:00. | :19:03. | |
going to get big, big problems. Where people may be sceptical is | :19:03. | :19:07. | |
that they can remember George Bush back in 1998, 1999, 2000, he said | :19:07. | :19:17. | |
:19:17. | :19:19. | ||
he was a small government man and would pay back government spending. | :19:19. | :19:27. | |
-- pare back. The truth is, he did not. Why should we believe that | :19:27. | :19:30. | |
this new generation, maybe even more right wing Republicans that we | :19:30. | :19:34. | |
see today, that they will be serious when they get into office. | :19:34. | :19:38. | |
-- office? George W Bush did not deliver. | :19:38. | :19:42. | |
You saw what happened to George W Bush. His party lost power totally | :19:42. | :19:49. | |
in 2008. This is when The Tea Party rose up and said that they had | :19:49. | :19:52. | |
betrayed principles, made the rise of Barack Obama possible, we are | :19:52. | :20:02. | |
:20:02. | :20:16. | ||
going to punish you for doing that. That is why a lot of the big- | :20:16. | :20:18. | |
spending Republicans got beaten in and were replaced by Conservatives. | :20:18. | :20:22. | |
There was massive repudiation. I think that trend will continue in | :20:22. | :20:28. | |
the elections next year. When you look at the nine or so | :20:28. | :20:30. | |
candidates fighting for the Republican nomination, some of them | :20:30. | :20:34. | |
have close links to the Tea Party, which you have close links to, I | :20:34. | :20:38. | |
wonder who you believe will be the one to deliver the Government you | :20:38. | :20:48. | |
:20:48. | :20:48. | ||
want to see. Who are you backing? I am not backing anyone yet. There | :20:48. | :20:52. | |
are a few possible candidates who might enter the race, I am looking | :20:52. | :20:56. | |
over the field and will make a decision in the next few weeks. I | :20:56. | :21:03. | |
want to see who the players are first. | :21:03. | :21:07. | |
Paul Ryan, maybe even Sarah Palin who you have described as a smart | :21:07. | :21:11. | |
woman in the past. Do you want to see her in the race and would you | :21:11. | :21:14. | |
back her? It does not matter what I want, I | :21:14. | :21:24. | |
think she will get in the race. Paul Ryan is under pressure to do | :21:24. | :21:30. | |
so. The Governor of my state, Chris Christie, he is in contention to | :21:30. | :21:35. | |
get in the race. The point is because, if you look | :21:35. | :21:38. | |
at the polls, if you look at the favourability of the Tea Party, | :21:38. | :21:42. | |
that has gone down the toilet in the last couple of weeks. Very low | :21:42. | :21:49. | |
approval ratings. Do you think being involved with the Tea Party | :21:49. | :21:51. | |
will help or hinder the next Republican Party candidate. -- | :21:51. | :22:01. | |
:22:01. | :22:03. | ||
candidate? You will not win the Republican | :22:03. | :22:07. | |
nomination unless you are in favour of awful lot of The Tea Party's | :22:07. | :22:16. | |
policies. Reducing spending, simplifying the tax code. They have | :22:16. | :22:19. | |
been trashed in the media but they are concerned citizens who got | :22:19. | :22:22. | |
involved and have made life uncomfortable for the political | :22:22. | :22:32. | |
:22:32. | :22:35. | ||
establishment. They may reflect an ideological | :22:36. | :22:39. | |
purity that you agree with when it comes to fiscal policy but, what if | :22:40. | :22:42. | |
is right now is, given the economy, plain unpopular? | :22:42. | :22:50. | |
It is not. In Wisconsin, they tried to recall people who went along | :22:50. | :22:54. | |
with Governor Walker's reforms. The Republicans have maintained control. | :22:54. | :23:04. | |
:23:04. | :23:18. | ||
They took control of the state courts, too. When people go to the | :23:18. | :23:21. | |
polls, they know that can't continue this binge spending and | :23:21. | :23:24. | |
this is why you are seeing the results that you are. People are | :23:24. | :23:27. | |
getting involved in the political process. They are making a change. | :23:27. | :23:31. | |
They don't always get what they want but you do come up with some | :23:31. | :23:35. | |
reforms. They might not be pure but the country is moving in the right | :23:35. | :23:37. | |
direction. Steve Forbes, we have to head | :23:37. | :23:41. | |
towards the exit. We are running out of time. Thank you for being on | :23:41. | :23:51. | |
:23:51. | :23:53. | ||
out of time. Thank you for being on The week started off fairly cloudy | :23:53. | :23:57. | |
and cool across many parts of the British Isles and I suspect that | :23:57. | :24:07. | |
today is going to be similar. A lot of dry weather around. A weather | :24:07. | :24:12. | |
front is close to the north of Scotland. Some rain there, perhaps. | :24:12. | :24:16. | |
But further to the south and east, there is the chance of some | :24:16. | :24:23. | |
sunshine to begin the day. Treasure it as it will not last. A | :24:23. | :24:27. | |
scattering of showers in Northern Wales and Northern Ireland. | :24:27. | :24:32. | |
Elsewhere, essentially dry. As we come into the body of Scotland, | :24:32. | :24:36. | |
there is the greater chance of some rain here as a result of his old | :24:36. | :24:40. | |
weather Front Nat King here. There may also be some rain close by two | :24:40. | :24:50. | |
:24:50. | :24:52. | ||
Leven Brown and the north of England as well. -- to Edinburgh. | :24:53. | :24:56. | |
Similar prospects as was the case on Monday along the southern shores | :24:56. | :25:06. | |
:25:06. | :25:07. | ||
of England. As the day gets going, the cloud | :25:07. | :25:11. | |
will spread out a little bit more from the far south-west. All the | :25:11. | :25:17. | |
while, the risk of some showers coming into the north and west of | :25:17. | :25:22. | |
Wales. Not too bad in the central belt of Scotland. Temperatures as | :25:22. | :25:29. | |
high as 18 or 19 degrees at best. Tonight, as some of that cloud be | :25:29. | :25:32. | |
used to dissipate, those temperatures may fall back into | :25:32. | :25:37. | |
single figures in some locations. Across the far south-east, you may | :25:37. | :25:42. | |
hold on to 11 or 12 degrees. Elsewhere, a cool night for this | :25:42. | :25:47. | |
time of year. This area of high pressure that has been driving the | :25:47. | :25:51. | |
weather remains over the cause of Tuesday and on into the middle part | :25:51. | :25:56. | |
of the week as well. The chance of a few showers coming down the | :25:56. | :26:00. |