Things to be optimistic about in dark dark lonesome twirling wintry 2009 now that we're two weeks in -- and one week shy of the new presidency? Andy Groves' recent suggestion in McKinsey for retrofitting existing GM cars with batteries as part of the new fuel agenda, and for bringing the battery industry back to the United States from its current locus in Asia. George Soros' theory of reflexivity, which is to economics what Einstein and Heisenberg are to physics, in which he posits that thought about the economy affects the reality of the economy, and what we think of value becomes actual value. Cutting edge geneticists' "dangerous idea" about to be published in John Brockman's latest HarperCollins anthology about whether women and men are wired differently for tolerance and empathy. The enduring generosity of Warren Buffett's core belief, shared by Bill and Melinda Gates and other 21st-century industrialists, to give your fortune back, with intelligence, in your lifetime. The tenacity and good will of those of us who seem to have misplaced our fortune in somebody else's life. And last but not least, the remarkable Steve Forbes, a man who bridges both money and media matters.
Caught up with Forbes this week, and he told me Americans now have an opportunity to make a large and meaningful personal commitment to prosperity and recovery, Republicans and Democrats together. Holding hands and singing "If you're happy and you know it, buy a bank?" Well no, I made that part up. But by all means fire up the Internet, the latest gift to democracy, and get ready to rumble. Forbes told me right out loud that the president-elect will, in his opinion, have his honeymoon, and our hopes, with a few provisos...
Third Screen: What is America doing right, right now? What will bring stability to the very emotional world of money?
Forbes: One positive for the incoming administration is its recent indication about reducing the tax burden on people. Facing a crisis the size of ours focuses the mind wonderfully, and I think Obama is going to take a practical approach. One of the most effective stimuli for the economy is reducing tax rates.
Third Screen: This was a tenet of the McCain/Republican platform. Why should it now become part of the new plan?
Forbes: On the business side, we have one of the highest rates in the developed world. Reducing the rate will be helpful, short and long term. People will keep more of what they earn. This should create rapid economic response. In the 1960s, when John F. Kennedy reduced personal and corporate tax rates, the economy moved up very smartly. So, I hope he does what Kennedy did, and then he can do more.
Third Screen: What next?
Steve Forbes: One important step would be changing an arcane market rule that forces banks and financial institutions to try to value assets as if they were suddenly about to dump them on the markets. It works for common stocks and publicly-held companies like GE, but to treat illiquid assets similarly in an impaired market, which affects banks' permanent capital, is reaching into Neverland. Auditors and regulators are forcing companies to mark down value when we have no idea what those assets are really worth. You get huge right-offs, but it's all based on book and not cash losses. We've never had this before, this environment.
Third Screen: Step Three?
Steve Forbes: I'd like to see Freddie Mac and Fannie Mae do something useful and have their debt explicitly guaranteed by the government now that the government owns them. I'd like to see the government go to banks and say Fannie and Freddie will buy mortgages from you at fixes rates -- 4 1/2 or 5 per cent. Can you imagine what would happen to people's spirits? I think it would make housing values bottom and recover.
Third Screen: What will be the first sign of recovery, however miniscule or wispy? And where do I buy the right binoculars to see it coming?
Steve Forbes: You have to get rid of this mark-to-market overhang on banks. That will remove the barriers to lending. And, lo and behold, you'll see it.
Third Screen: What else are you hopeful about?
Steve Forbes: I'm hopeful there will be an opportunity for the Yankees to win the pennant. But that aside, we are on the cusp of another wave of innovation. In numerous areas. Nano tech was ballyhooed for years, and now some of it is bearing fruit.
Third Screen: Your favorite illustrations?
Steve Forbes: There is a straw with super purifiers now in development. You can go to a stagnant pool of water, place your straw in it to sip through, and by the time the water reaches your lips it is absolutely pure and drinkable. When finally perfected, this will be huge, especially in areas of the world where you have mammoth problems with the lack of clean water. And then there's super cement. A company called Icrete is developing a new cement that is ten times more versatile and effective. Great stuff for architects, infrastructure, and on the energy front. Once we get this thing stabilized with lending, new things can begin to capture our imagination again.
Third Screen: How do we get trust back in the marketplace?
Steve Forbes: People are in a state of shock about investments and 401ks and major financial institutions and the seeming inability of government to effectively deal with the thing. Call your representatives and tell them to stop fooling around with the dollar and treating it like a plaything and stabilize the value so business can have confidence that what's real today will be real tomorrow. This country needs to get back on track and move ahead. We are now much more versatile, flexible, and open to change.
Third Screen: Are Republicans just mad or will they join in the work of the new administration wholeheartedly? Will they tear down or build up as Obama takes steps?
Steve Forbes: The American people want the new president to succeed. I think he will have time. People will give him time. He'll have his honeymoon.
Third Screen: Do you anticipate his learning, as other leadership has, from some of the doctrines you participated in creating? The massive Mandate for Leadership used in parts by both Reagan and Clinton? The Project for the New Century that was lively in the 90s? Perhaps a few good ideas from Forbes magazine's "Sneak Peeks" at 2009? Or is our leadership as susceptible to the low-grade hysteria of television news as the average viewer?
Steve Forbes: A lot of reporters today have never seen anything like this before. They didn't live through the seventies. You do get a certain amount of hype and hysteria which people must tune out somewhat, but reporters should remind themselves of the old saying "The world will end only once." For that story, no meteor has been sighted.
Third Screen: But hope has been sighted? Even near at hand?
Steve Forbes: We need to simplify the tax code. There is a deep belief among people that we should do that. The current code is corrupted and needlessly complex. In health care, we need to allow people to have more control over their health care dollars. I would suggest allowing people to control their health and social security dollars with proper safeguards. Annuitize it, and let people do what they want with the benefit the annuity throws off, unlike currently, where the money is either already spent on current beneficiaries or in effect spent on other things.
Third Screen: What is the most optimistic thing your father told you about hard times?
Steve Forbes: If you get a setback, put it behind you and move ahead. Don't let it poison you. Always look to how to do things better, even differently. Don't sit still or you will topple over.
Third Screen: And what is the most dangerous idea you will pass along?
Forbes: Nothing dangerous about it. I want prosperity. Prosperity for all.