I'm sitting at the Dental Trade Alliance annual meeting in Indian Wells, Calif. This morning, Steve Forbes, president and CEO of Forbes and editor-in-chief of Forbes magazine, is the speaker this morning. With the elections having taken place last night, it's an interesting morning and Forbes is expected to bring an interesting perspective to not only the elections, but also the current state of the dental industry.
As he speaks, I'll be blogging some of his whirlwind comments below.
Concerning the elections, it was a huge setback for the White House. The message has been received, I believe. What impact does this have on the economy? We won't have a double-dip recession. Personal incomes are inching up again. Business are doing enough spending to stay competitive. The economy will move forward, not at a blistering pace, but slowly.
Looking around the world, India takes great pride that they can get things done, despite the economy. The entrepreneurs there are world-class and amazing. There's a thriving industry of people who will take your lunchbox and deliver it to you at work. India is moving ahead and becoming more and more Westernized.
In Europe, they're starting to move ahead. Germany did not go into a major stimulus program and their unemployment is the lowest it's been in 18 months. The Greek situation is very precarious. What's amazing in Europe is the number of countries putting their financial houses in order. Ireland has taken stern measures and didn't wait to hit the wall financially. They've resisted pressure for high taxes on business and when the global economy gets back on its feet, Ireland will be in a very good position.
Countries around the world have responded to the global economy crisis by slashing taxes and the salaries of leaders. Britain is cutting budgets 20-25 percent over the next three years, including a half-million jobs out of the government sector. Countries couldn't keep doing what they were doing.
Many countries have made a mistake by raising taxes, and that makes recovery that much harder to do. You have to set the foundation for the economy to snap back. This gets back to the U.S. We're on a slow growth pace of around 3 percent. Never in American history have we had such a slow recovery. In the 70s, we had three tough recessions and we were able to snap back. Why are we so slow this time? First, and this doesn't get much play, but it's about monetary policy. It's a boring subject, but very important. The Fed Reserve has a portfolio of more than $2 trillion. One of the sources of revenue for the U.S. government is the interest from the Federal Reserve.
It takes the right amount of fuel to move the car ahead. Too much and you flood the engine. Too little and it doesn't run. Same thing with the economy. The Fed Reserve has been on a bender printing too much money. When they do that, bad things happen. A weak dollar means a weak recovery. Real money comes from people doing transactions with each other. Otherwise, you get distortions in the economy. Imagine what would happen if Washington did to clocks what it did to the dollar. You'd get 43 minutes one hour and 80 the next.
Why aren't business investing more? There's an unstable currency. Investors are wanting to look overseas where things are more stable.
Don't listen to what the Fed is saying. Just look at the price of gold. It's been a great barometer for 4,000 years. It has jumped significantly in recent years, and that tells you a lot about the value of the dollar.
Comparing the Euro to the dollar is like comparing a 92-pound weakling to a 98-pound weakling. Neither one are going to be lifting weights in the Olympics.
The dollar has to be stabilized. Watch what happens on that front.
Taxes just don't raise revenue for government, but they're also a price and a burden. If you lower the price, you get more. If you raise it, you get less. Raising taxes is the responsible thing to do, Washington says, but it will hurt the economy. It's not the way to dig America out of a h***.
Binge spending ... I don't understand why people don't see that money doesn't come from Mars. It has to get money to spend it. Printing new money takes resources from one part of the government into the other and it doesn't work to stimulate the economy. It's very disruptive to a government.
States know they're in trouble. We have Greece-like situations in this country in California and Illinois. States are starting to cut spending and putting caps on property taxes. You'll see more of that. Eventually, you'll see the same thing happen in Washington, D.C.
Health care ... this isn't the way to go. We're living longer and people want more health care. Why is that a crisis? If people want more cars, Detroit would be happy. The reason is how we finance health care. Parts of privatized, and the overall system is a hybrid. If you go to a doctor and ask what it costs in advance, he or she looks funny at you. They're thinking you're either uninsured or a lunatic. What if you went to a restaurant and ordered a wine and didn't care what it costs because someone else was paying for it?
How about nationwide shopping for health insurance? I can buy health insurance in Wisconsin for a third of the cost I could in New Jersey, but it's illegal. I can buy a car in another state but not health care? Let's get some real competition. What if the gecko peddled health insurance and not just car insurance?
Plastic surgery has expanded six-fold in recent years. Why? People are shopping on their own and asking for prices. They know what they're buying ahead of time,
We have to peel the healthcare bill back and start over. It's like food. If people have trouble getting food, we don't have the government take over the farms. We allow farmers to grow it, companies to process it, truckers to bring it to us, and restaurants to serve it to us. If you can't afford food, there are pantries and food stamps. Why can't we do the same thing with healthcare? Get the best of private enterprise to work with the public. This is the biggest growth industry out there. The middle class is growing and Thailand and Singapore are building state of the art facilities to draw people there for hip replacements at a fraction of what they'd spend in the U.S. Medical tourism will grow. If we'd open up the U.S. like this, can you imagine the people who would come to our country for healthcare?
The new government will focus on taxes and spending. What do they do about the 2003 tax provisions that will expire within the next 60 days. Republicans want them to remain intact with a two-year extension and focus on some of the more pressing issues. It's important to go into the new year with a tax code in place so people will know how much they'll be spending.
You'll hear more about the changing of the fundamental tax codes. There are more than 10 million words in the current tax codes. No one knows what's in there. I wish we could drive a stake through its heart, bury it, and start over. I'd love to replace it with a flat tax of 17 percent. The economy would rebound in a stunning way. People say that's unrealistic. I say, "Why not?"
I think we'll get through the tax issues, but the real battle line goes to health care. The President will draw the line in the sand and say no change. The Congress will disagree. There will be a lot of political battles, but this must be done. The poster boy for change is the 1099 form. Every transaction you do above $600 has to be filed. If you buy a computer at Best Buy, you have to file one and Best Buy has to file one. That's a crusher. The government is hoping to put in a value-added tax like in Europe.
Entitlements ... our financial situation looks hopeless. How do we get out of trillions of dollars in debt? Balance sheets. Take everything you own and add them up the subtract out your liabilities, American households are still plus-$55 trillion. That's extraordinary. Doing something sensible with taxes will go a long ways.
If there's an environment where people see hope, the stock market and housing market will rebound. We'll have a housing boom when a "normal market" returns. Housing values are depressed today, but that will change in 2-3 years. This is the time to invest in housing or the stock market.
Social security ... the way it was done for Baby Boomers is wrong and a disaster. Pay as you go doesn't work for pensions. There's enough wealth in this nation to pay it, however. Social security had a surplus for years (more than $1 trillion), but the money was spent. Where is that money going to come from? The government will replace it, but at a cost. The younger generation will have the proper way to do it with more assets going into a specific account. The new system will bring a new psychology to a new generation.
In summary, Economies are starting to mend around the world. In this country, states are beginning to wake up. Watch for the dollar and what happens with the tax debates. Open up the healthcare system and get the best of both worlds (public and private). The economy is about creating abundance out of scarcity. Look at what Henry Ford did for the car. Look what the cell phone industry has done for handhelds. There are 4 billion of them around the world. Scarcity into abundance is what free market is all about.
Look at what companies emerged from the turbulent 1970s, including Apple, Southwest Airlines, and Federal Express. The same kind of entrepreneur spirit is alive today and will be there when we rebound from this recession.