Forbes on the Move Jude Wanniski January 31, 1996

Ten days before the 1980 New Hampshire primary, Ronald Reagan trailed George Bush by 15 percentage points, having lost his initial lead in the Iowa caucuses two weeks earlier. He then won by 27 points. It is in the last ten days that the majority of the voters inform themselves sufficiently to make up their minds. The polls that now show Steve Forbes even with Bob Dole will translate, I believe, into an easy win for him in New Hampshire. This is because the random sampling takes in the half of the people who have informed themselves and the half who have yet to do so. As New Hampshire citizens have been informing themselves to date, they have been leaving Dole in droves and attaching themselves to Forbes. The organization Republicans who are backing Dole cannot understand why this is happening, especially as they read polls that show Steve’s negative ratings on the rise and random samplings that show people concerned with the loss of their mortgage interest deduction in Steve’s pure flat tax. The rising negatives can be attributed to those voters who have not yet informed themselves and are giving casual over-the-shoulder reflections of the attacks on Steve and the flat tax. How will they inform themselves in the last ten days? Unless there is new information coming to them, they will do so primarily by asking the advice of people who already have informed themselves. If Dole does poorly in the Iowa caucuses on February 12, as now seems certain, his free-fall in New Hampshire will accelerate. The fact that there is no primary contest in the Democratic Party frees independent voters for the GOP contest, where they will go heavily for Steve, with Pat Buchanan benefitting as well.

For all practical purposes, Bob Dole’s run is over. His intrinsic pessimism about life in general is now on full display on the campaign trail. This dark side was pounded into him as a poor boy growing up in dustbowl Kansas and compounded by his wounds in WWII. It is a pessimism that has worked well in the Congress, but will not work in an audition for the most important job on earth. His attack on the flat tax because it favors the rich, like Steve Forbes is the immediate source of his meltdown. The class warfare argument is exactly the one developed during the last half century by liberal Democrats. He is betting the farm on the mortgage interest deduction and has managed to persuade Jack Kemp to stay neutral through the Iowa caucuses, although Kemp clearly felt free today to blast Dole’s anti-flat-tax tv spots, telling CNN he should scrap them.

The savviest political insiders understand his campaign is imploding, beyond salvage, and Dole himself is conveying the body language of a defeat he has felt twice before. The competition will proceed, but we should now consider that it may be Steve Forbes against Pat Buchanan, two journalists slugging it out for the chance to take on President Clinton. In the Alaska straw poll this weekend, Buchanan topped Steve by 33% to 31%, as the right-to-life movement -- which had been dividing between Buchanan and Sen. Phil Gramm, pulled the plug on Gramm and swung all their forces behind Pat. In the odd way presidential races are handicapped by the real pros, Steve is now considered the frontrunner who will go all the way to the finals. Only one competitor can stay with him. It will be the candidate of the cultural conservatives -- now obviously Pat Buchanan.

It makes sense. Pat and Steve are the only two populists in the field, the only two who are addressing the fears and concerns of ordinary people. Pat would treat these concerns with a strategic retreat into nationalism, trying to repair real wages behind a higher protective tariff. It’s a legitimate option. Whatever you might say about Pat Buchanan, he is a guidepost, not a weathervane. The social conservatives, the cultural determinists, will hang in behind him to make sure the Republican Convention in San Diego writes their concerns into the party platform. Steve, on the other hand, meets the fears and concerns of ordinary people with his message of growth, hope and opportunity, a more attractive option. Political reporters calling me from the field in Iowa and New Hampshire are astonished by Steve’s magnetism. Yes, he has the flat tax and he has optimism and he is well informed on every topic under the sun, but what really pulls it all together is the ability of the masses to see the goodness of the man.

What do I mean? On Sunday after the Superbowl, I watched Steve on C-SPAN’s “Road to the White House,” speaking in Mason City, Iowa -- the “River City” of Meredith Wilson’s “Music Man.”  After he spoke to an appreciative standing-room only audience, he walked into the milling crowd to shake hands. Four teenage boys lined up for his autograph and he stopped to comply. The C-SPAN camera seemed to linger for a full ten minutes, which is how long it took him to sign four autographs for four kids not old enough to vote. At first I was irritated with C-SPAN for chewing up ten minutes of my time, until I realized we were seeing Steve write personal messages to each of the four boys. I could see him thinking: If I just sign my name, they will drop it on a table and forget about it, and it will be thrown away. If I write a personal message of encouragement about life, in some small way it may actually change the way they live. It’s what Lincoln would do. It is this incredibly thoughtful, sweet Steve Forbes that I have known for 20 years who is radiating from him on the stump, gradually coming through to the voters who see him interviewed on television -- his body language as much as his spoken words.

The fact that he may be the best-informed man in the world does not hurt. Reporters who try to stump him with intricate questions on foreign policy issues, as Ted Koppel did on "Nightline" last week, only look foolish when he offers elegant, intricate answers to which they have no follow-up. The economic message remains central, though. The people are figuring out what he is saying: In the last 30 years, prices have risen twice as fast as wages. This means it now takes two breadwinners to earn what it took one to earn, and the stress is showing up in dysfunctional family life. The answer is to have wages rise twice as fast as prices. Prices are restrained by nailing down the dollar’s value to a gold peg. Wages are driven up by inviting rapid capital formation, via a pure flat tax of 17% on ordinary income, taxed once at its source, with zero tax on capital gains. The combination would produce the fastest real growth of the 20th century.

The established elites, who like things as they are, with labor in surplus and capital in short supply, are trying to persuade the voters that the pure flat tax is bad for them, because it will eliminate the mortgage interest and charitable deductions. The voters know better. They are beginning to realize that in Steve Forbes they are seeing the political messiah whom they briefly thought they might have had in Ross Perot. In an economy that quickly grows to $12 trillion a year from $6 trillion at present, there will be abundant resources available to drive up living standards and pay down the national debt. The entire population will be able to upgrade its housing stock. Except for Bill Gates, who can’t improve on what he has. His surplus wealth will be forced into either financing other people’s enterprises and homes, or into the kind of massive charitable contributions that wealthy entrepreneurs made in the days before the progressive income tax.

When can you begin discounting all these fantastic possibilities into the values of stocks and bonds? It’s already happening. Steve is setting the national political agenda and is beginning to set the international political agenda. Before he’s finished, most of the world will have a gold standard to hold back prices and a flat tax to drive up real wages. In this kind of hothouse atmosphere, the DJIA would easily double again by the end of this millennium. The release of potential in the emerging markets would see the doubling of asset values year after year. Isn’t our democracy wonderful?