From: AdmrlLocke@aol.com Sent: Thursday, August 19, 1999 8:07 PM To: undisclosed-recipients: ; Subject: GrammNet: Lawrence Kudlow on Forbes GrammNet Issue 8/19/99.3 Dear Friend, I see the word of Forbes' victory in Iowa--and what it really means--has spread despite efforts of the liberal media and establishment Republicans to suppress it. Here some more unvarnished truth from one of America's eminent public policy economists. Sincerely, David B. Levenstam, CPA, MT, MA Forbes in 2000! GrammNet is an independent newsletter, not affiliated with Senator Gramm. To subscribe to GrammNet, email me at AdmrlLocke@aol.com, with a message to the effect that you'd like to subscribe. GrammNet back issues available at http://www.geocities.com/CapitolHill/3390/ Steve Forbes web page (Forbes 2000) at http://www.forbes2000.com ----------------------------------- Why Iowa Loves Forbes' Economic Plans by Lawrence Kudlow Chief Economist CNBC.com CNBC.com chief economist Lawrence Kudlow examines Steve Forbes' surprisingly strong showing in the Iowa straw vote. (Hint: It's Forbes' economic platform.) Investor-friendly supply-side economics is alive and well in Iowa, a heartland state where ideas still matter. Though the national media stubbornly refuse to report it, issues such as expanded economic freedom and traditional moral values were the reasons for presidential candidate Steve Forbes' unexpectedly strong second-place finish in the Iowa Republican straw vote conducted last weekend. While George W. Bush's people were busily spinning money, not message, as Forbes' key weapon, it was really Forbes' free-market ideas that attracted farmers, seniors, Internet users, shareholders, homeowners, computer-minded young people and other New Economy participants. Beneath the media radar screen, Forbes is quietly putting together an Investor Class coalition that marks him as the first national figure with a true grasp of 21st Century politics. Asset-owners are the new driving force. What's more, the magazine publisher and former Reagan appointee has bolstered his pro-growth policy script with a strong on-the-ground organization that effectively challenged Gov. Bush's juggernaut. This is a turnaround from his 1996 effort, when Forbes' late entry to the presidential nominating race prevented him from developing an effective grassroots political operation. For Gov. Bush, Iowa Hawkeyes beer cups were both half full and half empty. Yes, he won the straw vote. However, after leading his Republican competitors by 40 or more percentage points in all the national polls, he defeated Forbes by a surprisingly thin 31-percent to 21-percent margin. "Bush hit a single," pollster John Zogby told me. "Expectations were much higher." Forbes' free-market ideas attracted farmers, seniors, Internet users, shareholders, homeowners, computer-minded young people and other New Economy participants. Indeed they were. Despite a tidal wave of free publicity about Bush's anointed inevitability, 69 percent of the Iowa straws were cast for someone other than Bush. Traditionally, the early Iowa contest provides few clues about the ultimate GOP presidential nominee. Still, it is clear that Gov. Bush's vagueness on key issues such as taxes, retirement and health care reform, budget caps, global warming and abortion have not yet unified the GOP around his candidacy. Not so for Forbes. In businesslike fashion, the CEO of Forbes, Inc. communicated a clear pro-growth policy agenda during the campaign run-up to the straw vote. He backs a 17-percent, single-rate flat tax that would rejuvenate economic incentives, tax income only once at the source and take some power away from the Internal Revenue System. This plan would abolish the tax on capital gains, estates and other investments, and would permit unlimited contributions to individual retirement accounts. Forbes favors privately owned investor savings accounts to change Social Security, medical savings accounts to improve healthcare coverage and education savings accounts to promote school choice and affordability. He favors removal of government tax and regulatory obstacles for technology, including a permanent moratorium on Internet taxes. He also believes that budget spending caps must be enforced. The magazine publisher supports expanded free trade to promote consumer choice and business exports, including farm exports to help the agriculture community to climb out of distress. He decries the tax hike and currency devaluation policies of the International Monetary Fund that have shrunk foreign economies and reduced their trading value. He believes that all of Latin America should be dollarized. In his boldest Iowa move, Forbes criticized Federal Reserve interest rate hikes that have contributed to severe farm commodity deflation. A strong believer in a commodity price rule and a stable dollar, Forbes attracted a surprisingly strong farmers' vote (pulling them away from Pat Buchanan) by criticizing Fed-induced deflation. Forbes opposes monetary policies that are aimed at limiting economic growth or employment. Instead, he believes that gold and the dollar should steer the Fed's course toward a steady purchasing power of money. And these early-warning indicators do not signal any inflation threats. Judging by the latest inflation reports, Forbes has proved himself to be an accurate economic forecaster. Year-to-date, core consumer prices have increased only 1.7 percent annually, while producer prices have increased only 1.5 percent. There's virtually no inflation. I believe it is no coincidence that the Dow Jones stock market index moved back over 11,000 following Forbes' strong Iowa finish. The GOP has not run a true free-market issues campaign since the Reagan revolution of 1980. The emergence of Forbes as a top-tier candidate, however, insures that supply-side policies will resurface to shape Republican thinking. Sound money to conquer inflation and lower marginal tax-rates to boost economic growth were the key Reagan building blocks that unleashed our current long wave of bull market prosperity. The early success of the Forbes campaign suggests that these policy themes are alive and well. Along with the Archer tax-cut plan in Congress, Forbes' strong, message-driven Iowa performance improves the political climate for expanded economic potential and wealth-creation in the new century. Ironically, the C-Span coverage of George W. Bush's post-election rally showed a country and western band singing "Life is good, we're gonna keep it that way." Amen to that. Over a hundred million investors will dance to this tune. Steve Forbes certainly knows it. George W., are you listening? CNBC.com Chief Economist Lawrence Kudlow also serves as chief economist of Schroder & Company, Inc.