Is Steve Forbes Economics Founded on False Premises?

“The ladies loved Teve Torbes’ brilliant tax plan. That and the fact that he had a musky Victor Mature-like scent. No. Teve Torbes was definitely not a geek with a crooked smile. He was a babe magnet. Did I mention how much the ladies love me, I mean him?”

–Steve Forbes, Saturday Night Live from 1995

It’s no surprise to wake up to Steve Forbes as the special guest on Squawk Box.  We all know that Forbes has an agenda when it comes to tax cuts and today is a victory of sorts for someone who almost certainly won’t stop the tax cut debate until there are simply no taxes left.

Once upon a time a man named Teve Torbes ran two pathetically incompetent campaigns for President centered around a flat tax that drew little, if any interest from potential voters.  Meanwhile, somehow serious people take the man’s opinion somewhat seriously.

Today Steve Forbes just busted out two of the more seriously misinformed quotes about The Great Tax Cut Debate that underlie his logic with regard to policy today:

  • “The Bush Tax Cuts helped the economy from 2003-07 before the Fed went on a bender.”
  • “This is the worst recovery from a serious recession this country has seen.”

I feel like there’s not much to be said about these two statements as they are so patently false on their face … but let’s take a look at each of them anyway. Why? Well I think it’s important to have an idea as to the premises that underlie the nature of today’s discourse on not just the tax cuts, but on the causes of the Financial Crisis, the necessary policy response to the Crisis, and the status of the recovery today.

Whether one thinks the Financial Crisis stemmed from a lack of regulation, from the over-involvement of government in the housing sector, a credit bubble, a housing bubble, some greedy rich people or incompetent poor people, George W. Bush, China or the devil himself, everyone knows that the problem wasn’t that the “Fed went on a bender.”  Clearly the Fed may be critiqued for its failure to regulate financial entities under its umbrella leading up to the crisis, but IF ANYTHING, the Fed responded far too SLOWLY to the Financial Crisis in its infancy.

Does anyone remember Cramer’s “THE FED KNOWS NOTHING” rant from August of 2007 where he kicked, screamed and begged the Fed to do something, anything to help the collapsing financial sector.  Subprime began its collapse in 2006.  Bender in 2007 caused the problem Steve Forbes?  Are you kidding me?  Do you live in the same world that everyone else does?  Oh that’s right, Teve Torbes “does it for the ladies” and not for logically consistent policy construction.

Then we have the Yogi Berra-esque claim that this is the “worst recovery from a serious recession.”  It’s been dubbed a “serious recession” or “crisis” for a reason–it’s freakin’ serious!  Let’s say you’re skiing down a mountain and you go really far, I mean way far down, far past your ski lift back up (let’s say this mountain keeps going lower with no more ski lifts below).  You now first need to hike back to the ski lift before getting a ride back to the top of the mountain.  I mean sure Teve Torbes might have a helicopter waiting at the bottom, but at least the rest of us folks would first have to hike up to the ski lift before taking the easy ride back to the peak.  This is the “worst recovery” because we were just in the most “serious recession” that this country has seen since the Great Depression.  When you go deeper, lower, farther down you must go that much farther to get back up.  It’s plain and simple.

Why does all this matter?  Well the view put forward by Forbes is not a constructive lens through which to shape our discourse and design our policy response yet he’s given a serious seat at the table in structuring our debate.  We want our decisions to be built upon solidly constructed, logically consistent arguments backed up by the facts.  From Forbes we get dangerous fictions.

In the immortal words of SNL’s Bob Dole: “Ah, I’ve just got one thing to say to you, Teve Torbes – tuck off!

What’s your stance on taxes? What do you think of Steve Forbes’ ideas? Let us know in the comments below?

Now, check out what Fed Chairman Bernanke said about tax loopholes on 60 Minutes >>