Magazine executive Steve Forbes gives Rotary talk

Thursday, January 5, 2012

Michael Cleveland photo Businessman Steve Forbes leaves the Milford Community House on Dec. 28 after speaking to the Milford Rotary Club about the economy and his endorsement of Texas Gov. Rick Perry for the Republican nomination for president. Holding the door for Forbes is Rotarian Ryan Hansen.

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MILFORD – The U.S. needs to restore its spirit of entrepreneurship that saw the creation of small companies that are giants today, a multimillionaire businessman told the Milford Rotary Club last week.

Steve Forbes, in town to endorse Texas Gov. Rick Perry for the Republican presidential nomination, spoke during the Rotary’s regular luncheon meeting and, aside from speaking highly of Perry, talked about what should be done to restore the American economy.

Forbes said the economic environment was crucial, a remark he made in response to a question from Rotarian Steve Desmarais, who said he was concerned that too many people expect government to fix their problems.

Forbes said it was like having a “new ethos” of sitting back and waiting for the government to fix things but quickly added, “Fortunately, that’s not true of our country yet.”

“If you create the right (business) environment, tens of millions of people will get the job done,” Forbes said. “If you remember the ’70s, look what was rising up in that decade: You had FedEx, Southwest Airlines, Microsoft, Apple. All were small companies, now giants today.

“We can do that again if we get that kind of ’80s atmosphere back again.”

Forbes, who sought the Republican nomination for president in 1996 and 2000, is editor-in-chief of Forbes magazine and president and chief executive of Forbes Inc., which publishes the magazine.

Forbes said what is going on in the U.S. economy now is “highly unusual in our history.”

“Normally, after a severe downturn, you get at least initially a quick comeback,” he told the Rotarians. “Then the question becomes, can you sustain it?”

He called what some have referred to as a new normal “actually a new abnormal.”

“And the question is, why aren’t we doing better, why aren’t we moving ahead, at least for a while?” he asked rhetorically.

His answer was in what he called “severe headwinds” holding back the economy.

“We did well in the fourth quarter” of 2011, he said. “We’re going to do a little less well for the first part of next year (2012). So while it’s better than it was for the first part of 2011, just like an automobile on the open highway, instead of going 10 mph, we’re going to get it up to 30 or 35 when we should be easily doing 65 or 70.”

One of those key headwinds, he said, is monetary policy, a subject he suggested Rotarians bring up if they are ever caught in the middle seat on an airplane, because it would be sure to drive away nearby passengers. In other words, it’s boring but important.

“Think of it as what you drive: You have a magnificent vehicle, but if you don’t have sufficient fuel, you’re going to stall,” he said. “Too much fuel, you flood the engine. Right amount, you have a chance to move ahead.”

That’s true of monetary policy, Forbes said.

“If you don’t supply sufficient liquidity to meet the legitimate organic needs of the marketplace, you’re going to stall the economy,” he said. “You print too much money, you get the economic equivalent of flooding the engine. Right amount, you have a chance to move forward.”

The stimulus plans haven’t worked, Forbes said.

“Whenever you hear the word ‘stimulus,’ just clutch your wallet,” Forbes said. “Where does the money come from? It does not come from Mars. The money comes from you, either from borrowing, taxing or printing of money, which is another form of taxation.”

He criticized the Federal Reserve for “binge spending” and the government for “blowout on spending.”

“What they do is take resources from the economy, put it through the political sausage factory in Washington, take their cut and then spit it out for political purposes. That is not the way you stimulate the economy.”

The bottom line in terms of the economy, he said, is that it would not take much to get it going again vigorously.

“It’s not just about the right monetary policy, critical though that is, or the right tax policy, critical though those things are,” Forbes said. “It’s also about the spirit of things, the intangibles, America’s faith in the future, optimism, the right environment for innovation, creativity. That’s what needs to be restored.”