Oil prices will slide to $30 or $35 a barrel within the next year, and a flat income tax will replace the 9 million-word tax code within the foreseeable future, Steve Forbes predicted Monday.
The Forbes Inc. president, one of the country’s most respected — and most accurate, according to industry watchers — economic journalists, regaled corporate VIPs from around the country with his often controversial take on the current state and future of the U.S. economy.
Forbes spoke at the James Hotel in downtown Scottsdale during the Forbes Scottsdale Corporate Golf Invitational event.
He said a big chunk of crude oil’s $55 a barrel price tag, which is causing gas prices to soar and Americans to change their spending habits, is speculative and not part of the real value of the product.
Forbes also took issue with Federal Reserve Board Chairman Alan Greenspan’s concerns about the rising trade deficit.
"If I was dictator of the world, I’d ban trade numbers," he said. "Don’t worry about the trade deficit."
Greenspan is dubbed a genius because people don’t understand what he’s talking about, Forbes said, but in reality inflation combined with rising interest rates is a much bigger barrier to growing the economy than the trade deficit.
"Raising interest rates won’t do the job. The Feds need to sop up all the excess money (in the marketplace)," he said.
The real economic indicator is the price of gold, Forbes said. If gold is less than $300 per ounce, the economy stalls. If gold prices soar past $400 per ounce, "it floods the (economic) engine," he said.
"The Federal Reserve is flooding the engine," he said.
Forbes also said the U.S. legal system is out of control.
"If you eat too many cheeseburgers, it’s McDonald’s fault, not yours," he said.
Liability lawsuits and the Sarbanes-Oxley Act aimed at holding company officers accountable in the wake of Enron, Worldcom and other corporate scandals are killing corporate growth by suppressing innovation, he said.
"It inhibits risk-taking," Forbes said. "It’s one thing to punish wrongdoing. The danger is that line between real wrongdoing and honest business mistakes. If you punish risk-taking, you’ve taken away the biggest prop to improving our standard of living. Growth comes from new products and services."
Forbes wrapped up his talk with his contention that President Bush’s problem in selling his plan to make over Social Security is that he didn’t really put a specific proposal on the table, causing "unfounded vague fears."
And, as expected, Forbes reiterated his contention that, "The tax system is beyond repair."
Forbes’ proposal for a flat income tax — spouse and child exemptions, but all other loopholes closed — was the basis of his run for the Republican presidential nomination in 1996 — a candidacy that Arizonans supported in the primary.
Considered revolutionary then, Forbes is watching more mainstream Republicans tentatively hoisting one foot onto the flat-tax bandwagon. "It eventually will come to pass," Forbes said. "And we’ll make some progress on it this year."
He hopes his new book, "Flat Tax Revolution: How a Postcard Can Abolish the IRS," scheduled for a June release, will be the catalyst.
Forbes is controversial but often right. He has four times won the Crystal Owl Award, given by USX Corp. to the financial journalist with the most accurate forecasts for the year.