Steve Forbes HARDtalk


Steve Forbes

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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 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 two 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 at your confident tone. I am looking at the economic

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analysis: Both Europe and the United States are 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 pace we would like. It is not stalling. The

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

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flailing markets around the world. Confidence is low but activity is

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still taking place. The system has the capacity for some growth.

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interesting that you refer to the sovereign debt crisis in Europe.

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The collective wisdom has been that the US is the world's leading

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economy. Are you suggesting that the fundamental problems in the

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Eurozone are having a real impact on American economic well-being?

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The debt crisis obviously hits the banking system. Hardly a day goes

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by where there is not a remark of a European bank getting in trouble.

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

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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 sit at the intersection of politics and economics in the US.

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Do you accept 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 elections last November. One part of the

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Government is in the hands of Republicans so it is obvious it

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will be hard to get agreement. But spending is now being taken

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seriously. Cuts have been minimal but they are going in the right

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direction. At the state level, New York is run by a liberal governor

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and a budget that would have been inconceivable a couple of years ago

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was turned in. The system is beginning to move forward on reform.

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When you have a Republican presidential candidate, Governor

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Rick Perry, saying it 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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Perry makes of the Federal Reserve will come more to the fore and it

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is absolutely legitimate. It has trashed the US dollar. It has made

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possible the disaster in housing. Criticism and discussion about the

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Federal Reserve even if the language is too colourtoo colourded.

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What was he thinking? He must have thought that using that language

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would appeal to a significant portion of Conservative voters.

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he was speaking off the cuff. He said it in Texas and people did not

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take it too seriously. When you are on the national stage, you are

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appealing to a wide and diverse audience and you must think twice

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

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to a 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 which they have

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been accustomed to on the state level. Let us think about actions

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and the ones that Republicans took during the heated discussion about

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raising the debt ceiling for the federal government to allow it to

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build up more national debt on top of the 14 trillion dollars it

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already has. Some Republicans seem to believe they would not

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countenance any further rise in the national debt. Is that wise? That

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is part of the dance you go through in these negotiations. No-one took

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seriously the idea of default. You negotiate and use fire and

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brimstone and then come to an agreement. There was frustration on

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the part of Republicans. The goalposts kept moving. What they

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came up with under the circumstances of a divided

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government was actually pretty good. The deal was based on President

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Obama agreeing that future fiscal moves would be all about spending

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cuts, not tax rises. You say that was pretty good but when all of

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those Republican candidates were lined up and asked, most of them

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said they are still opposed it. I have returned to the point that the

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Republican Party seems to be on the extreme of the economic argument.

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No, not at all. They want dramatic spending cuts. They are putting up

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the pressure to get a mandate in the 2012 elections. The mandate

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will be to fundamentally restructure the fiscal system in

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the United States. The deal was pretty good but in terms of what

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needs to be done it is a small step. A growing number of Democrats

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recognise that. It is about signals. You are on the board of Freedom

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Works, a political lobbying organisation closely allied to the

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Tea Party movement. This is what John McCain said about the Tea

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Party leaders objection: He said it was foolish and would see the re-

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election of ection of ma. I love

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senator and not President of the United States. He ran two years ago

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and ten years ago. It was a pretty good deal under the circumstances.

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The Tea Party movement in the United States is so strong because

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there is no leadership board. It is active citizens. No one

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People got iople got icause they were worried about the about thein

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government spending - it was something we had not seen since

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World War II. There was a feeling it was doing more harm than good.

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for the Tea Party would have caused a blow-out. The system is working

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out in a messy way. Thsy way. fall-out of all the arguing over

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the debt ceiling is perhaps best captured in a CBS poll from a

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

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Republicans haggling on the issue. --handling. The Republicans took

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the rap. Opinion was split on Barack Obama. In terms of

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disapproval on handling the economy, ev ev party is starting to

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turn on him. He has not done anything about the blow-out in

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spending. He has not put reforms on the table. He is making speeches on

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specific proposals but has not put anything specific on the table and

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people are waking up to it. Americans care about jobs right now,

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more than cutting the deficit. Do you think that your message, which

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is about a preoccupation with cutting the deficit and government

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spending, does that fit with the American demand for positive job

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growth? Blowing out government spending is manifestly not working.

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It did not work in Japan, in the UK or here. The proposals we have been

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discussing to get the economy moving include reducing spending

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and that is part of that. We are looking at reform of Obamacare and

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the financial system instead of massive new regulations that are

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coming in. Small businesses are being crushed by all of the new

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rules coming from Washington. Those things are tied together. Remove

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the barriers and the economy will come back quickly. And to throw

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something back at you, the Tory coalition in the UK is making a

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huge mistake in not reducing their tax rates. Taxes are too high. They

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should be reducing them. We have to do dothing. I will not take

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it personally! I recall that you were Mr Flat Tax. You wanted to cut

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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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In terms of stimulus spending, it does not work. In the early 1980s,

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Ronald Reagan reduced domestic spending, slowed it down, putting

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interest rate cuts across the board. The United States economy came

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roaring back. Since my campaigns, 25 countries have put in a flat tax

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and it has worked everywhere. The President's own deficit reduction

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commission came out in favour of simplifying the system. The idea of

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simplicity and low tax rates is winning. You have got Democrats

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signing on as well as Republicans. Here is what Warren Buffett said.

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He said that the mega-rich have been helped by 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. He said the rich were by and large very decent and

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would not mind paying more tax seeing as so many of their fellow

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citizens were struggling. Can you quarrel with that?

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You can quarrel with several parts of that. If he feels he is not

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paying enough tax, he can send money as a gift to the US

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government if he feels he is not spending enough. I can give him the

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address. Why have I not seen him or any other billionaires doing that

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yet. In terms of getting the economy moving, creating jobs, that

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does not work. It hurts the creation of capital. He also

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confuses capital gains tax with personal tax.

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The personal tax rate in this country is over 35 % and in state

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and local taxes, it is higher. People earning salaries of more

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than $250,000 a year do not feel rich. They are getting hit by tax

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on all sides. I think Warren Buffett is aware of

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the realities but his point is, for the mega rich, let's face it,

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

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more than $400 million, people like you, a lot of the money you pay is

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in capital gains tax or whatever you choose to call it. He said that

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in actual terms, he pays about 17 % on his income - that is less than

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his secretary. That cannot be right. Capital gains is not a given. There

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have been tens of billions of dollars of losses in this market.

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If you punish capital gains and risk-taking, you get less job

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creation. In the 1970s, it was set at 45-50 % in a struggling economy.

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It started with Jimmy Carter, the reduction of rates.We created more

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jobs than Western Europe and Japan that together after we cut it.

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You can argue about history, recent history, in different ways. Let's

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take a look at George W Bush. They reckon he cut about one trillion

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dollars from the US budget, the fact that he delivered tax cuts,

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tax cuts which predominantly favoured the rich. -- he cost over

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$1 trillion. You're suggesting to me that the way he handled the

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economy was a success? In terms of his tax cuts, they were

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across the board. Almost half of income tax payers in this country

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do not pay federal income tax. The top 3% income earners in this

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country pay 97 % of the federal income tax. In terms of who is

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paying, it is high income people who are paying more than ever

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before. Where George Bush went wrong was his weak dollar policy.

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That was a disaster. In the 1970s, we learned that if a major country

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undermines its own economy, it not only holds its own economy but it

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has a devastating effect around the world. It sent up oil prices, gold

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prices, housing prices, we are feeling the hurt of that today.

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Barack Obama has continued that policy. Bill Clinton and Ronald

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Reagan's strong dollar policy worked, as did John F Kennedy's

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policy. You should not undermine your currency, if you do, you are

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going to get big, big problems. Where people may be sceptical is

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that they can remember George Bush back in 1998, 1999, 2000, he said

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he was a small government man and would pay back government spending.

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-- pare back. The truth is, he did not. Why should we believe that

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this new generation, maybe even more right wing Republicans that we

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

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-- office? George W Bush did not deliver.

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You saw what happened to George W Bush. His party lost power totally

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in 2008. This is when The Tea Party rose up and said that they had

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betrayed principles, made the rise of Barack Obama possible, we are

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going to punish you for doing that. That is why a lot of the big-

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spending Republicans got beaten in and were replaced by Conservatives.

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There was massive repudiation. I think that trend will continue in

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the elections next year. When you look at the nine or so

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candidates fighting for the Republican nomination, some of them

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have close links to the Tea Party, which you have close links to, I

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wonder who you believe will be the one to deliver the Government you

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want to see. Who are you backing? I am not backing anyone yet. There

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are a few possible candidates who might enter the race, I am looking

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over the field and will make a decision in the next few weeks. I

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want to see who the players are first.

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Paul Ryan, maybe even Sarah Palin who you have described as a smart

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

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back her? It does not matter what I want, I

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think she will get in the race. Paul Ryan is under pressure to do

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so. The Governor of my state, Chris Christie, he is in contention to

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get in the race. The point is because, if you look

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at the polls, if you look at the favourability of the Tea Party,

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

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approval ratings. Do you think being involved with the Tea Party

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will help or hinder the next Republican Party candidate. --

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candidate? You will not win the Republican

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nomination unless you are in favour of awful lot of The Tea Party's

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policies. Reducing spending, simplifying the tax code. They have

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been trashed in the media but they are concerned citizens who got

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involved and have made life uncomfortable for the political

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establishment. They may reflect an ideological

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

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is right now is, given the economy, plain unpopular?

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It is not. In Wisconsin, they tried to recall people who went along

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

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They took control of the state courts, too. When people go to the

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polls, they know that can't continue this binge spending and

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this is why you are seeing the results that you are. People are

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getting involved in the political process. They are making a change.

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They don't always get what they want but you do come up with some

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reforms. They might not be pure but the country is moving in the right

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direction. Steve Forbes, we have to head

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towards the exit. We are running out of time. Thank you for being on

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out of time. Thank you for being on The week started off fairly cloudy

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and cool across many parts of the British Isles and I suspect that

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today is going to be similar. A lot of dry weather around. A weather

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front is close to the north of Scotland. Some rain there, perhaps.

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But further to the south and east, there is the chance of some

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sunshine to begin the day. Treasure it as it will not last. A

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scattering of showers in Northern Wales and Northern Ireland.

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Elsewhere, essentially dry. As we come into the body of Scotland,

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there is the greater chance of some rain here as a result of his old

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weather Front Nat King here. There may also be some rain close by two

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Leven Brown and the north of England as well. -- to Edinburgh.

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Similar prospects as was the case on Monday along the southern shores

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of England. As the day gets going, the cloud

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will spread out a little bit more from the far south-west. All the

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while, the risk of some showers coming into the north and west of

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Wales. Not too bad in the central belt of Scotland. Temperatures as

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high as 18 or 19 degrees at best. Tonight, as some of that cloud be

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used to dissipate, those temperatures may fall back into

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single figures in some locations. Across the far south-east, you may

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hold on to 11 or 12 degrees. Elsewhere, a cool night for this

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time of year. This area of high pressure that has been driving the

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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

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