5 Minutes With...Steve Forbes

As president and chief executive officer at Forbes, Inc., and editor-in-chief of Forbes magazine, Steve Forbes’s business is to know about business. As a former Republican candidate for the presidential nomination (in 1996 and 2000), he remains an influential voice in the Republican Party and in various political advocacy and reform organizations.

All of which makes him a great person to ask for insights on what government should be doing for small business— and what small business owners should be doing in the meantime. Recently, NY Report editor Lee Lusardi Connor spoke with Forbes and found that, though no fan of current government policies, he is surprisingly optimistic about the future.

NYER: What should government be doing to help small businesses?

Steve Forbes: Well, let’s start with the federal government, since it creates the economic conditions. The first priority is stabilizing the US dollar.

Now, there’s no more boring subject than monetary policy, which is why it doesn’t get sufficient attention. But when you have the government trashing the dollar, all that does is hurt investment, which has a disproportionate impact on small businesses. It encourages banks to speculate on commodities and currencies, or put their money toward government bonds or large corporations. You get small businesses, which are job generators, paying very high interest rates.

So let’s get that right: We need a strong and stable dollar. The federal government also needs to deal with the uncertainty in the business climate. Businesses, whether large or small, don’t know what costs and liabilities are coming up in terms of health care regulations.

There’s also the prospect of a big tax increase looming at the end of the year with the expiration of the 2003 tax cuts. The federal government should not raise taxes. I want a cut, but I’ll settle for a freeze. Make the dollar worth holding again.

NYER: What should government do for small business at the state and local level?

SF: States have to get their own finances in order so that small businesses don’t face the prospect of higher taxes. I’m delighted with what Governor Chris Christie is doing in New Jersey, and I think it’s going to be a template for other states.

You’ve got to face up to the fact that raising taxes and using accounting gimmicks is not going to work for state budgets. You’ve got to make structural changes and reduce the taxes that are driving people and businesses out of the state. New York state needs to get Christie-ized.

At the local level, government has to find ways to expedite all the permits small business need to get, whether they’re putting up a structure or conforming to environmental regulations. Speed is essential. That doesn’t mean sloppiness, but you have to get back to business owners on these things, because time is money.

NYER: Do you think the business climate will improve significantly in the next few years?

SF: Yes, I do have hopes of that. We will see changes happen after the November elections and again in 2012. You’re already seeing the political reaction fomenting regarding what’s happening in Washington DC, and on the state level. You even see the reaction in Europe. Britain has a new coalition government that’s proposing massive cuts in spending that would have been inconceivable a year ago.

Everybody says “Greece,” which means “get your act together.” You see states like Illinois and California in desperate straits; you see the clownishness that’s unfolding in New York state. There will be more focus on states like Indiana, which recently got a triple A bond rating, and where Governor Mitch Daniels has been focusing on reining in spending for the past five years.

I also think there will be real pressure for massive tax simplification as a way of jumpstarting the economy. This administration doesn’t get it; but if it doesn’t, another one will.

NYER: What can businesses do to thrive in this economic climate?

SF: It’s a combination of survival mode and also trying to do things where you can to lay a foundation for future prosperity.

The first is to get through this crisis, and I believe that is best done through a relentless focus on cash flow—particularly since the flow of credit is so uncertain. Sales can be good, but if they drop or you hit seasonal factors, it’s byebye. Make sure you have a good bookkeeper and accountants.

At the same time, you have to try to imagine where you would want your business to be three to five years down the road, if the economy were normal again.

NYER: What reasons do business owners have to be hopeful?

SF: We are entering a period of enormous innovation, and what we’re going through now is a painful detour. But we are going to get back on the road to growth.

There are lots of exciting things coming along in terms of technology. Think back to the ’70s, that miserable decade with high inflation and an unemployment rate even higher than we have now.

Look what was incubating then: Apple, Microsoft, Oracle, SouthWest Airlines, FedEx, Fidelity, and Schwab— a whole slew of things were starting to get out of the nursery. And I’m confident the same thing is happening today.