Steve Forbes calls the country's current economic state the "new abnormal'
Steve Forbes is chairman and editor-in-chief of Forbes Media. (Courtesy: TRUCKLOAD CARRIERS ASSOCIATION)
The Trucker Staff
The following is the transcript of the complete interview with Steve Forbes conducted May 6, 2013, by Truckload Authority Publisher Micah Jackson and Editor Lyndon Finney. Mr. Forbes was the keynote speaker at the Truckload Carriers Association convention last March. The questions are in bold; Mr. Forbes responses are in light face type.
Some in the Obama administration are calling it the new economy, the new normal, you described it was the new abnormal. For our readers, would you describe the conditions that make up as you’ve defined it the new abnormal economy?
What we saw unfolding is that this is the worst recovery from a sharp contraction in American history. There are several big obstacles standing in the way. One, of course, is the uncertainty about the dollar and uncertain lines of credit to businesses, particularly smaller businesses. You have the uncertainly about Obamacare, which is a huge overhang on the economy. You have also other regulations coming which are anti-energy from the Environmental Protection Agency and other agencies, so you have a regulatory headwind. And you have a tax code that is still too convoluted and rates that are still too high. So you put it together—excess spending, and they don’t tell you that the resources come from we the people though taxation and borrowing and printing of money which is another form of taxation. You put those headwinds together—the dollar, taxation, spending, regulation and you have the equivalent of a baseball player hitting .250 when he should be hitting .350. Fortunately, those things won’t last. I think starting next year as the sheer unworkability of the Affordable Healthcare Act becomes clear I think you are going to start seeing major changes and so this is going to be a new abnormal.
With Obamacare, what impact on the economy do you see the act having? There seems to be a lot of uncertainty about its impact.
I think the uncertainty is huge. There is uncertainty about cost. There is uncertainty about the workability of the exchanges. Prices are going up, certainly in the individual market. Some people will get lower prices but millions of businesses and individuals are going to find their prices are going to go way up. The largest health carrier in Maryland announced that prices were going up an average of 25 percent. The reasons for that are among other things is that young people are supposedly going to subsidize older people in getting healthcare. And I guarantee you a young person faced between laying out $5,000-$10,000 for a health insurance policy versus a $90 fine—you know whether that’s going to go.
And you believe even with all these uncertainties, things will begin to turn around in 2014, or will Obamacare derailed everything?
I don’t think Obamacare is going to derail everything, it’s just going to keep us at this sluggish pace where we’ll do better than last year but it is still going to be sub par and you are going to see Congress—and the president will resist it at first---you are going to see Congress start to make changes on this thing as people realize what it is doing to healthcare. Obamacare in the next couple of years is just going to crash.
As you describe the new abnormal, a large portion of our readership are CEO, presidents of trucking companies and all type of companies within the transportation industry. Give us four to five keys to business success navigation for CEOs and president in the new abnormal economy.
I think many of them have learned it painfully already. One lesson is one we’ve always had and that is cash flow. Watch that like a hawk because that always trips you up particularly in an environment such as this. Another one is getting through this touch environment doing two things at once, but always laying the foundation for growth in the future. Successful leaders always have to ask themselves where would you like to be five years from now and what must you do to put yourself in that position. And to do that while making sure the ship doesn’t capsize in the meantime is no easy feat. But you can begin to see areas of opportunity in this economy particularly as we begin to get used to the fact that we are going to have cheap natural gas forever, enough though states such as New York are trying to block it and the Obama administration behind closed doors would like to slow it down. In the real world it’s going to take off and that’s going to mean in future, particularly when we get a stable dollar again—and I think we will in the next three or four years—a huge cut in energy prices, which will be a great boon for everybody.
So you see energy prices coming down in another three or four years?
Absolutely. A part of the higher costs comes from uncertainty about the dollar. We saw this in the 1970s. The oil went from $3 a barrel to almost $40 a barrel. Then Reagan stabilizes the dollar in the early 1980s and kills the terrible inflation we had in the 1970s and oil comes crashing to as low as $10 a barrel and and averaged between the mid 1980s and early part of the last decade, oil averaged a little more than $20-$21 a barrel. And once the feds started to fool around with the dollar again it started to zoom up. You may recall it reached a high of $147 a barrel in 2008 and today it’s hovering between $80 and $90. Once the dollar is stable, I think you will get $20-$30 off. $50 a barrel oil…absolutely.
One of the biggest issues in the industry now is LNG and CNG production and the infrastructure throughout the country. We’re seeing companies such as Shell partnering with major truck stop chains building an infrastructure to deliver LNG and CNG. How quickly to do you think LNG and CNG will become readily available throughout the country?
I think you’ve described the process that’s under way. The only question is how much sand into the gears is the Obama administration going to throw in terms of regulations to get the gas. And whatever happens there, I don’t think that’s going to last very long. I don’t think the EPA can really block this. Then you’ll see a conversion in the years ahead with cheap natural gas, just like you saw with the aircraft to the cheaper fuel. The old 727 aircraft was a great airplane but guzzled fuel like a thirsty person in the desert and they have aircraft that is much more fuel efficient. I think you’ll see the same conversion over time.
Why is the Obama administration wanting to throw sand in the gears?
Because they are hostile to oil, gas and coal. They believe in windmills, they believe in solar panels and so they believe anything they can do to block things in terms of carbon fuels, they will do. So at the same time we make it very difficult to do offshore drilling in the U.S., our export/import bank, what they call the exit bank, guarantees loans to PetroGas, a Brazilian oil company to drill offshore as long as they drill offshore in Brazil. They have to spend money buying parts in the U.S., but why in the world are we helping the Brazilians and blocking our own people?
Shifting gears real quickly, you have a piece out today about the dangers of fed imposing uniform risk assessments on our banks. There are a lot of small businesses in the trucking industry, a lot of small trucking companies that would be considered small business. These dangers of uniform risk assessments, how does that translate into the limited access to credit and what are the dangers to small business as a result?
One of the things that has happened with the federal reserve’s policy of zero interest rates it reminds one of the phrase in the old Soviet Union “healthcare is free, but you can’t get any.” Credit is free, but try to get some. So what you have at least until recently is very uncertain lines of credit which hurts the expansion. I think that’s going to start to change, but what you have is the beginning of non-bank sources of financing, finance companies, venture capitalists starting to make loans in this market seeing an opportunity there. So short term I think things will start to improve, but until we get a stable dollars it’s going to be a dicey environment getting that free credit so to speak.
For CEOs and presidents out there who need access to more credit to grow their business and invest in their business, what are the best ways from your vantage point to access that credit?
There are going to have to do the modern equivalent of pounding the pavement and that is reach out to numerous financial institutions. Precisely because it’s uncertain, you may hit upon a bank that wants to push loans and is willing to take the heat from the regulators. But you are going to have to work to find that. It’s not going to be uniform. One of the things the Fed is doing with this uniform ways of judging credit is it makes it difficult for banks to do something different from other banks. So it’s like the hamburger that tastes the same everywhere even though you have a different brand on the door. And what that does if you get a crisis like we had five years ago with subprime mortgages with these kind of regulations, all banks are going to get the same kind of virus whereas if don’t have this formula of what a bank should do some banks will get in trouble, but others will escape through it quite easily.
One of the nooses around our neck is the growing national debt. From the perspective of the everyday American and the everyday truck driver and family, explain to our reader why a growing national debt is bad for them—not just our country, but for them and their own economic status.
What it means is that the government is absorbing resources that can no longer be used by the private sector. So keep in mind that when the government talks about stimulus spending what that means is where do they get the resources? They get the resources from you through taxing, through borrowing or through printing of money, which is another form of taxation. So that means there are less resources for the private sector. And the government will always get it share, large companies will do okay, but smaller business will just have a difficult time. It’s like growing food…the government is seeding it even if it doesn’t need it and doesn’t leave much left for everybody else.
The nation’s infrastructure is crumbling and there is a lack of infrastructure. This year, almost every state legislature has been discussing transportation funding and the trucking association is in favor of funding through fuel tax increases. What is the climate of the country with respect to fuel tax increases, and if that is not the way to do it, what is the way?
Fuel tax increases in this environment is very, very tough. As you know gasoline prices, even though they have come down recently, are still 60-70 percent higher than they were five years ago. So people are very skittish about that. The push should be making sure that the taxes that are collected now go for surface transportation. They should not go for project like mass transit. The so-called trust fund has been raided so much there’s hardly anything left in it for stuff that it was never intended to do. The money should be dedicated instead of raided. Another thing states should do is look at more aggressively is going for more public-private partnerships. What that is is tapping private capital. Why just depend on the public sector, which is under pressure and is going to be under pressure for the short term future. There is a lot of private capital out there and there’s opportunity to tap resources for these things that wouldn’t have been done in the past.
Your thoughts on immigration reform. I know you have been in favor of immigration reform. Where are we on immigration reform and where should we look going forward.
I think for the Republicans, the sooner they get this issue dealt with the better. The key thing is to have guest worker programs whether for entry level jobs or for high tech jobs. We have a crying need in both areas. We had immigration reform in 1986. The program was we didn’t have guest worker programs so we have the problem again and so we millions of illegals in this country. Most of them come in because until the recession there were jobs in construction, hotels, agriculture and the agriculture industry has been hurt by an uncertain supply of labor. We had guest worker programs in the 1940s and 1950s. So if we have one that geared to the needs of the marketplace to the need of the economy, we can get a bill now and that will work in the future. They talk about making sure the border isn’t porous, but one of the things we have to do a better job is that a lot of people come in not crossing the border in the south but on tourist visas on airplanes. So we have to do that better to follow up if you overstay your visa. The other thing is that we have to reform the rules so if you play by the rules you don’t find yourself in limbo 15-20 years trying to get a green card or citizenship. If you play by the rules, you find yourself in a maze and a nightmare. So we need to make it streamline for people willing to play by the rules instead of looking to deal with those who come here illegally. We sure have the technology to do that. But clearly a lot of work still has to be done as we saw in Boston. Why we don’t have lists that can be workable and why we can’t spell names right and things like that. That’s 101.
The 2014 election. Given what you’ve told us today are we going to see a further shift in power to the right in Washington?
The answer is yes and I think you’ll start to see pieces in the primary next year as incumbents who are not perceived as firm enough in terms of holding the line on spending and doing something sensible on taxes and regulations will be pursing new lines of work.
If you could pull a few CEOs and president aside and tell them what the most absolute things they should watch in their business, whether it be their balance sheets, whatever it might be, what would you say to them right now.
You have to stay on top of that balance sheet or it will devour you, but also be figuring out what are the little things you can do in the running of your business that will have a customer say I prefer you. You are offering me services that competitors don’t, so I will go with you. What’s your value added. What are the little twists that has the customer saying I want to come back to you.