Steve Forbes in St. Pete: Why startups are on the rise and what’s ahead for Trump

The White House is unprepared for investigations the Trump administration will face from a Democrat-controlled House of Representatives, publishing executive Steve Forbes said at a speech in St. Petersburg.

“The president is going to be faced with death by 1,000 cuts,” Forbes, chairman and editor-in-chief of Forbes Media, said at the 2018 Florida Association for Corporate Growth Capital Connection.

Forbes, himself a Republican presidential candidate in 2000, gave a broad overview of politics and of the economy, including the growth of startups,  at the Wednesday event.

He recounted how former President George W. Bush tripled the size of his White House staff of lawyers after Bush was re-elected in 2005 and realized he was facing a barrage of investigations.

“The Trump administration is way understaffed. They are not ready for the onslaught to come, and they will pay a price for it, starting with tax returns,” Forbes said. “The great white whale for House members is Trump’s tax returns and unlike Ahab they are going to find a way to get the white whale.”

Facing those probes, Forbes predicted Trump would cut a deal with Democrats, likely on infrastructure.

“They’ll try to do a public-private partnership, which is the way to go. Done right, it can be very effective. But it’s going to be more public than private by the time it gets through the House,” Forbes said. “What you are going to see is the very real possibility that the president may go for higher income tax rates on top income earners as the quid pro quo of getting his infrastructure bill through. You may even get higher corporate tax rates before this thing is done, so watch out.”

Overall, the economy is in good shape, and startups are on the rise, a good signal, Forbes said.

“One of the great strengths of this country traditionally has been the ability to create new big companies. New big ones start small and grow,” Forbes said.

Historically, there have been 50 to 75 new multi-billion companies created every generation in the United States, giving the economy the ability to grow. It’s a much different pattern than in Europe and Asia, where the same players dominate, he said.

“This ability to create new companies started to fade, because startups in this country, new business creation, fell in the last 15 to 20 years to really low levels. Now in recent months, through the first part of 2018, it suddenly surged to a record level of startups. So things are turning in the right way,” Forbes said.

While the economy is strong, the stock market has been volatile. That’s because the markets are trying to price in uncertainty, and a big unknown is trade issues, including a potential increase in tariffs on goods from China. Removing the uncertainty caused by a trade dispute would send the markets up 20 percent, Forbes said.

“Tariff is another word for a sales tax,” Forbes said. “I think there are better, more effective ways of dealing with trade abuses.”

Other things he’s keeping an eye on are the Federal Reserve — “The Fed should not manipulate interest rates” — and healthcare, an industry where pricing should be more transparent.

The bottom line, Forbes said, is expect more political turbulence: “It’s going to be nasty, but let’s hope it doesn’t go over the line.”