Trump's trip through the Middle East.

0:00 Speaker 1 Sunday morning. Well with us today is Steve Forbes, one of the greatest economists of our country. And Steve, you know, so many things happened in the last week or so. The market has recovered tremendously. President Trump had a tremendous trip overseas. It’s Sunday morning. People are having their coffee and they’re saying, where are we can you can you

0:29 give us an updated where do you think we are?

0:33 Speaker 2 Where we are? The two critical junctions, the big one, of course, is the tax bill. The Ways and Means Committee, as we all know, has been grappling with that came out with a draft, but they still have a big fight over state and the local tax deductions, what they call salt and unfortunately, well, they’ve put a lot of

0:51 pieces in the bill they didn’t have yet. Have cut personal income tax rates, which would be the biggest boost for the economy. And also they cut an capital gains tax, which, as we know from experience, not only stimulates investment but also instantly raises revenue for the government. So I see it as incomplete. They talk about the fourth of July.

1:12 I wish it had been done by Memorial Day, a week from now. But the Congress works in its own leisurely way. But we got to get a good, powerful tax cut bill because we still have uncertainties out there about the tariffs. At President keeps saying he wants more tariffs here, less tariffs there. So until we get that

1:31 thing finally settled out, which won’t happen until July, we need a big, powerful, even bigger beautiful tax bill than I think either the White House or the Ways and Means Committee, the Republicans contemplate now think biggest, Well, the message should be to them, think Reagan.

1:48 Speaker 1 Yeah, absolutely, in the thing with the tariffs, build we you know, it’s one big negotiation. I mean, nobody really knows where we’re going to be, but everybody has a belief we’re going to be better off than we were before. Uh. Well, and I want to ask you, because you’re you’re the economist, how does it uh when if we drop a million

2:16 dollars in a trillion dollars in instead of having two trillion in in a deficit, if we only have one trillion or six hundred billion, how does that affect the numbers?

2:30 Speaker 2 Well, it depends on how the revenue is raised. If it’s from a booming economy. That’s great. And in terms of having a very raising significant revenues from tariffs, that’s going to be a cost and that’ll affect the economy.

2:45 So when you have a positive reduction in the deficit that is slowing down spending, cutting spending, and get economy really booming again, uh, then that means you have more resources for productive uses and the government isn’t hogging the credit markets. Right now, we’ve got a two trillion dollar deficit facing us this year. We’ve got several trillion more

3:06 of a debt that is coming due that you have to refinance. That’s putting a real strain in the market. So even though the stock market has done very well, you look at the bond market, the treasury market, those yields have been rising because everyone knows the markets are going to be flooded with even more bonds. So the

3:25 sooner we get all this stuff out of the way, get all these negotiations out of the way, so people know what the rules are. Hopefully they’re positive rules and we can move ahead, then we can really tackle what is going to be a real problem in financing the other gargantuan debts we’ve run up.

3:42 Speaker 1 Understood. What do you feel, what do you feel is going to happen in the next thirty sixty days. I’ve talked to US senators. Some of them tell me, oh, they’ll get it to reconsidiation done by them, said August.

4:01 Some of them said fourth of July. Congress people said, we’re going to be done by Memorial Day. What is your pulse in a situation?

4:13 Speaker 2 Well, sadly, a Memorial Day should have been the deadline. And that’s why I wish the Trump administration had gone first for the tax cuts to get this tailwind for us, rather than leading with the tariffs. And that way, I think we would have had a bill by Memorial Day a few days from now. But now I think it’s

4:34 going to be a strain to get to the fourth of July. And the problem is we still have Republicans, whether it’s our friends from some of our friends from New York, or some of these so called deficit hawks that sometimes behave as if they have bird brains rather than real brains. They say they’re going to cabash the

4:53 bill since we have such a small margin for whatever they want to do. Grand standing on you take salt. If they just John reduced the marginal tax rates, reduce the personal tax rates. That would have taken care of the salt problem. You’d take the twenty two or twenty four percent bracket, which covers a couple’s incomes up to

5:13 four hundred thousand dollars, and cut that rate of seven or ten points. That would have taken care of the salt problem, and it would have been incentive for people to earn more instead of trying to raise the cap from twenty thirty to forty, from ten thousand to third, whatever number that had come up with. So I wish

5:32 there’d been some more what you might call stimulative simulative creativity, that is creativity and cutting the tax rates to give maximum boosts to the economy. And on the corporate side, let’s get that rate down to fifteen percent. It looks like that may get tossed aside.

5:51 Speaker 1 And there were some Republican senators that wanted to raise taxes on more wealthy individuals, which is insane.

6:02 Speaker 2 And part of the problem with the bill they’re now mucking around with on the House side is they’re apparently going to take away some of the deductions or what you can take as a deduction, And because before the twenty seventeen tax bill, three percent. If you’re above a certain income level, three percent of your inductions were taken away,

6:22 which is the back doorway of increasing the top rate. So apparently they’ve been playing with some of those games for posing some of those games. So even though the rate stays nominally at thirty seven, it’s going to go up effectively because you’re not going to get some of the deductions are going to some of the deductions are

6:39 to get nicked chipped away. So I just wish they’d be just straightforward and realize the simpler and the bigger the cut of everyone will be happier.

6:52 Speaker 1 Understood. Anything else you want to tell the American people on Sunday.

6:56 Speaker 2 Morning, well, enjoy their coffee or tea, whatever it is they’re imbolving this morning. And the other thing to watch out for is our friends at the Federal Reserve who are practicing a financial version of rent control, you know, renting the money, and they should get away from that and let the market set that. You know, the that

7:16 pays interest rate on bank reserves now about four point four percent. Cut that in half and make it clear to the banks they’re allowed to lend again.

7:26 Speaker 1 Understood, and that’s very important if we’re going to move the economy that the capital is that the American people, of the American businesses have access to capital. I mean, the large fortune one hundred have always access to capital.

7:42 But we’re talking about the businesses that don’t have access in the financial markets. They need bank capital.

7:50 Speaker 2 So that’s right. And they have these private credit markets now, and who knows what’s going to happen with those. But capital, as we all well know, is like fuel for the car. If you don’t have fuel in the car, guess what, the car doesn’t move, no matter how beautiful and big it is. So let’s make sure the capital flows again.

8:14 And that’s where the Federal Reserve could easily reduce the rate on bank reserves.

8:18 Speaker 1 Well, Great Britain reduced it last week and Federal Reserve did not. So I’ve said that the Federal Reserve is playing games of political games, and the Federal Reserve is not supposed to do that.

8:33 Speaker 2 The Federal Reserve is playing games. They’ve done so in the past sometimes, but it’s just sad to see them doing it now when they should be putting the welfare of the economy first. But they played games during COVID.

8:45 They played games with the first Trump administration for a while until they’re called out on it. So stop the game playing and just make sure you have a stable value, of trustworthy value for the dollar and let the people be free. Stop trying to manipulate the economy through artificially raising the cost of money.

9:05 Speaker 1 Steps. Thank you for coming on this Sunday morning, and we value your opinion and let’s catch up again real soon.

9:12 Speaker 2 Look forward to it, John, Thank you, keep up the great work. Thank you,