When Bear Stearns Chairman Alan "Ace" Greenberg threw a fund-raising dinner for GOP Presidential candidate Steve Forbes at the Waldorf-Astoria Hotel last December, the guest list read like a who's who of supply-side economics. No surprise there: Forbes is running as the keeper of the Reaganite flame of tax cuts, sound money, and optimism. More shocking was the fact that the supply side's warring clans set aside their feuds to gather on Forbes's behalf. "Wanniski and Laffer in the same room--that's something I haven't seen in years," says Cato Institute economist Stephen Moore. "They can't stand each other, but they're rallying behind Forbes."
What's pulling supply siders together is a shared hope of seeing a disciple in the White House. For 20 years, as a reporter and editor-in-chief of his family-owned magazine, Forbes diligently studied tax-cutting gospel and libertarian social creed with such apostles as writer Jude T. Wanniski and economist Arthur B. Laffer. Although his 17% flat-tax proposal lost steam in Iowa, Forbes hopes to place at the top of the GOP pack in tax-phobic New Hampshire's Feb. 20 primary.
A LOT OF INK. So far, Forbes has been running on the intellectual capital he has accumulated. But as his Presidential campaign matures, the consultants and economists who tutored him are forming an economic brain trust to broaden his agenda beyond the flat tax, a return to the gold standard, and disdain for balancing the budget.
Of all Forbes's advisers, Wanniski has gotten the most ink. A former editorial writer for The Wall Street Journal, Wanniski now runs Polyconomics Inc., a Morristown (N.J.) company that monitors political and economic trends for money managers. "Steve has a cast of characters he looks to for primary, fundamental advice on public policy, and I'm one of those characters," he says. Wanniski pushed Forbes to enter the race after former supply-side hero Jack Kemp announced in early 1995 that he would pass up a Presidential bid.
Most supply siders, dismissive of traditional economics, prefer to describe themselves as "political economists." Wanniski, who has no formal economic training, even claims that Lyndon H. LaRouche Jr., the four-time Presidential candidate who was convicted of mail fraud in 1988, is a member of the supply-side camp. LaRouche--who charged that Queen Elizabeth II heads a worldwide drug-trafficking network and that Henry Kissinger was a Soviet agent--is "a gold-standard guy," Wanniski explains. His firm has hired several of LaRouche's followers because "they're not trained in demand-model economics." Little wonder that some Forbes aides try to disown Wanniski: "Jude is full of ideas, and about one in five is worth listening to," sniffs one adviser.
Another member of the Forbes brain trust, though less visible, is Lawrence Kudlow, a Reagan Administration budget official and Forbes chum. Kudlow and Forbes fashioned the tax-cut platform that carried Republican Christine Todd Whitman to an upset victory in the 1993 New Jersey gubernatorial race. Kudlow, who later lost his job as chief economist at Bear Stearns Cos., forged a close bond with Forbes last summer, when the publisher gave him emotional support during his treatment for cocaine addiction.
Kudlow now works for Laffer's La Jolla (Calif.) consulting firm. He cautioned Forbes last spring about the media scrutiny and pressure that a campaign would bring to bear on his family and business interests. While Forbes was deliberating, he and Kudlow visited GOP Presidential candidate Senator Phil Gramm (R.-Tex.) in his Senate office to see if the Texan would carry the flat-tax banner. Friends of Forbes say that Gramm's lengthy monologue, which gave only a curt nod to Forbes's concerns, convinced the publisher that he would have to run if he wanted supply-side ideas to be aired. In January, Gramm belatedly came out with his own 16% flat-tax plan and bashed Forbes's proposal to eliminate mortgage-interest and charitable-gift deductions.
Forbes aides point to three other steady sources of ideas. Laffer, the California economist whose "Laffer Curve" helped persuade Reagan in the early 1980s that slashing tax rates would actually lift tax revenues, advises Forbes on taxes and the dollar. The campaign turns to Alan Reynolds, chief economist at the Hudson Institute, to field questions on taxes. Reynolds served as research director for the GOP's tax-reform commission, chaired by Kemp, which called for a generic version of Forbes's 17% plan. Flat-tax guru Alvin Rabushka of the Hoover Institution is another idea maven.
The job of coordinating Forbes's policy stances falls to Grace-Marie Arnett, who joined the campaign on Feb. 8 after a stint as staff director of the Kemp Commission. Arnett is a health-care consultant who shares Forbes's enthusiasm for medical savings accounts, employer-sponsored funds that let workers keep any money they don't spend on basic medical bills. (Forbes set up MSAs for his own employees in 1992.)
THE YACHT CLUB? The candidate's own writings, laid out over the years in his Fact & Comment column in Forbes, clearly put him in the camp of fringe supply siders who believe that deficits don't matter. That could be a public-relations problem if a strong showing in New Hampshire lifts the multimillionaire's candidacy out of the novelty stage. Supply siders "are not members in good standing of the economic fraternity," chuckles a Clinton Administration economist.
GOP rivals are eager to seize on Forbes's unusual crew of brain-trusters to paint him as an economic extremist willing to sell out the middle class. Senate Majority Leader Bob Dole (R-Kan.), the GOP front-runner, raises fears about Forbes's scheme to partially privatize Social Security, while neopopulist commentator Patrick J. Buchanan accuses Forbes of drafting his flat tax "for the boys down at the yacht basin."
True, blue-sky economic optimism and faith in the healing power of tax cuts have taken a beating since the Gipper rode into the sunset. But Steve Forbes, with his open checkbook and gang of fellow true believers, is betting that the supply-side sequel has box-office appeal in 1996.