Steve Forbes: Economists are human beings

Key Concepts

• Trump Boom: The economic growth experienced during and attributed to the Trump presidency.
• Capex (Capital Expenditure): Business investment in fixed assets like property, plant, and equipment.
• Immediate 100% Depreciation Expensing: Allowing businesses to deduct the full cost of certain assets in the year they are purchased.
• Deregulation: Reducing government regulations on businesses.
• Supply-Side Economics: Economic policies focused on increasing production (supply) to stimulate growth.
• ISICOR: (Implied - Institute for Supply Chain and Operations Research) – Mentioned in relation to positive economic tailwinds.
• Federal Reserve Models: The economic models used by the Federal Reserve to make policy decisions.
• CBO (Congressional Budget Office): A federal agency that provides budget and economic information to Congress.

Manufacturing and Business Investment Surge

The discussion begins with a focus on the resurgence of manufacturing in the United States. Manufacturing is currently experiencing significant growth, up 6/10 of a percent and 3.5% over the last three months. This is accompanied by a boom in business equipment investment (capex), with increases of 9/10% in January, 9/10% in December, and 5/10% in November – representing nearly 10% annual rate growth. Specifically, orders for non-defense capital goods, excluding aircraft, are booming at approximately 7.5% over the past three months, with both orders and shipments increasing. A key driver of this investment is the policy of immediate 100% depreciation expensing, which is described as a job creator, wage creator, and productivity creator. The expectation is that this trend will continue, particularly with the integration of Artificial Intelligence (AI), which is already impacting productivity and is expected to accelerate.

Reversing Obama-Era Trends & Trump’s Policies

Liz Peak points out that former President Barack Obama had previously dismissed the possibility of bringing manufacturing back to the US. She argues that President Trump achieved this through the implementation of tariffs and economic incentives for manufacturers. She notes that manufacturing was in decline throughout the Biden presidency. While acknowledging some industries, like autos, are not performing as strongly, she cites ISICOR’s assessment of a significant tailwind for the economy extending into 2026. Steve Forbes suggests the US could potentially see 5-6% growth this year, and 15% growth over the next two years.

Challenging Economic Consensus & Models

President Trump, via a quote from Truth Social, asserts that he has “proven 22 Nobel Prize scientists wrong on the economy.” He dismisses the consensus views of economists, the CBO, and the Federal Reserve, arguing they fail to account for the success of his policies – lower taxes, deregulation, and increased domestic energy production (“drill, baby, drill”). Forbes elaborates on this point, referencing the Kennedy tax cuts and the investment tax credit of the early 1960s as examples of successful policies that are often overlooked by current economic models. He contends that these models are fundamentally flawed and contribute to inaccurate predictions. He highlights the political biases of economists, characterizing them as largely “left” and “anti-Trump.”

The Importance of a Stable Dollar & European Growth

Forbes emphasizes the critical importance of stabilizing the dollar, identifying this as a key challenge for incoming Federal Reserve Chair Kevin Walsh. He also believes a Supreme Court ruling on tariffs will bring stability, as tariffs provide a fixed economic condition. He draws a parallel to the Reagan era, suggesting the US can demonstrate to Europe how to achieve economic growth, mirroring the positive impact Reagan had in the 1980s. He expresses concern about Europe’s lagging growth rates and believes US success could inspire similar reforms there, as well as in Japan. Rubio’s recent speech in Munich, emphasizing mutual interdependence, is cited as a positive sign that Europe is receptive to this message.

Deregulation & Model Limitations

The discussion highlights the significant impact of deregulation on economic growth. Forbes points out a crucial omission in economic models: they do not account for the positive effects of deregulation. He recalls a previous discussion where it was noted that no model input exists for deregulation. He references Steve Myron, a former Federal Reserve Governor and Trump appointee, who authored a paper on the positive impacts of deregulation on the supply side, but this research is not incorporated into the Fed’s or CBO’s models. The lack of consideration for deregulation is attributed to its complexity and the difficulty of quantifying its effects.

Concerns Regarding New York City Property Taxes

The conversation briefly shifts to concerns about a proposed property tax increase in New York City. The concern is that this increase, coupled with existing high property taxes, personal income taxes, and rent controls, will be detrimental to the city’s economy, potentially leading to a decline similar to that experienced in the 1970s. The speaker predicts the tax increase will drive away homeowners and landlords.

Conclusion

The core takeaway is a strong assertion of a “Trump boom” driven by policies focused on incentivizing business investment through tax cuts, deregulation, and strategic tariffs. The discussion challenges conventional economic wisdom and the validity of existing economic models, arguing they fail to adequately account for the impact of these policies. A stable dollar and the potential for the US to serve as an economic model for Europe and Japan are also highlighted as crucial factors for sustained global growth. The conversation underscores the importance of considering supply-side economics and recognizing the often-overlooked benefits of deregulation.