QUESTION: What do you think of President Bush's tax policy? How much credit do you give it for the improvement in the economy?

FORBES: The tax bill that was passed about a year ago is the critical reason why the economy is doing as well as it is. The economy started to really pick up last summer. What the tax bill did was to cut tax rates. The thing about rate cuts is that they change incentives and you get some real, lasting impact. They did it on capital gains. They did it on dividends. That helps with capital creation. Personal rates were cut. Then they had incentives for small businesses to invest, and since most new jobs are created by small businesses, that was a smart thing to do.

QUESTION: Do you think we'll ever have a flat tax?

FORBES: Actually I do. I think by the end of the decade we'll have some sort of tax simplification. Other countries are doing it. The Russians did it three years ago successfully. Several smaller European countries have done it.

QUESTION: Simplification in the form of a flat tax?

FORBES: Yes. Iraq has a flat tax now. They don't have an economy yet, but if and when they get one, that's one good thing the CPAs did over there. The Baltic states, Latvia and Estonia, have done it; Slovaks have done it. Ukrainians have done it. The Chinese are looking at it. It's moving.

Here's what I think will happen: Assume for a moment the Republicans win the elections. If they don't move on it, then I think an entrepreneurial Democrat in 2008 will pick it up because the Democrats will realize the Republicans always beat them over the head on the tax issue. So how do you steal the issue from the GOP? No one's going to believe they're really going to cut taxes - Democrats can't seem to bring themselves to do that - so you steal the tax simplification issue and then you've stolen a huge issue because everyone hates the tax code. There's no moral justification for what you see there.

It wouldn't surprise me if Sen. (Hilary) Clinton did something like that. One way or the other, something will happen.

QUESTION: Who do you think will win the election?

FORBES: I think the president will pull it out. People will feel this summer and this fall that the momentum in the economy is very real. The economists who think it's going to slow are all wet. Barring some major disaster, this economy has got real legs. You see it in business investment moving up. Personal incomes are moving up. You saw it in the manufacturing report; that was very positive. Inventories are low and they're starting to be replenished. The juice is there for a real recovery. That will be one thing that will help him. The other thing is I think they're learning from their mistakes in Iraq, and so far Mr. Kerry has not come across as providing a credible alternative on the war on terror.

Nobody likes what happened in Iraq, but so far Sen. Kerry has not come across as somebody who has vision or a sense of direction or backbone. He's not Dwight Eisenhower. Kerry is all over, and that's part of the problem. He still behaves like a senator. A couple weeks ago he said he wouldn't rule out appointing a prolife justice if it wouldn't change the balance. Give me a break. What kind of whiffle-waffle is that?

People aren't looking for that in a commander-in-chief, which is why in the last 150 years only three members of Congress have gone directly from the House or the Senate to the White House. It's a very different mentality, habits, thoughts, ways of doing things on the legislative side, on the national level, versus the presidential.

QUESTION: How much difference does it make to the economy who wins the election?

On the economic side, other than deploring whatever is in the day's headlines, which changes each day, he has no credible "I will do it differently and here's how and why." The deficit: He deplores it. The rich people: He deplores them, except his wife. As far as coming up with something credible, which is going to make a substantive difference in the economy, he hasn't, so people assume Democrats will have their old habits and markets will take cognizance of that.

QUESTION: How did running for president change your life?

FORBES: Aside from depleting my bank account? You get to know the country in a way you never do as a business person or as a tourist. I think you get a feel for the fabric of the country you never would just watching the junk on TV or some of the coarser sides of the culture. It was no surprise to me, the reaction after 9/11. You felt it out there long before 9/11. I came out of it in some ways much more optimistic about the state of the people.

QUESTION: Did it change anything about the way you live your own life now? You went back to the same job.

FORBES: I think it's more inside. I'm not going to run again for the Oval Office. I tried it and it didn't work out. I'm more of political agitator now than a candidate. I help candidates. I am still pushing issues like tax reform, just from a different place.

QUESTION: Do you ever regret not being a participant in this year's election?

FORBES: It was fun to watch others do the running, especially in the wintertime in Iowa.

QUESTION: You've expressed some concern about the potential for an economic crisis in China. Do you think we're going to see that?

FORBES: China felt even more rapidly than we did the mistakes made by the Federal Reserve. They (the Fed) have given us a mild dose of inflation, not like we had in the '70s. It's like a cold. It's not going to kill you, but it's nice to get rid of it. You see it at the gas pumps, you saw it in steel prices and you saw it in other commodity prices. The markets anticipate that the Fed will someday react, probably in baby steps instead of something substantive. Alan Greenspan is constitutionally incapable of doing anything, except in baby steps, unless he gets truly panicked. Since China's currency is tied to the dollar, the Chinese felt it faster than we did. Their economy is not as developed as ours. They are trying to find ways to tamp down their economy. I think they'll avoid a hard landing, but like landing a plane in bad weather, you always have risks.

What we don't want there is sort of a Chinese version of what happened in Indonesia five or six years ago, where you had a total currency collapse and a huge crisis.

QUESTION: Do you think the high gas prices will have a political impact in November?

FORBES: I think oil prices will be coming down, not fast enough to suit people, but I don't think it's going to derail the recovery. It would only affect the election if the rest of the economy is perceived as doing poorly.

QUESTION: How are you investing your money?

FORBES: Most of my assets are tied up in the magazine company. What I have on the side is not going to make or break me. As far as investment advice, other than reading Forbes and visiting our Web site: There are two cliches. In a bear market you go "down the slope of hope," always expecting things have got to turn around. When you give up hope is the time to get in. In a bull market, the phrase there is "climbing walls of worry." We're in one of those periods.

Everyone knows all the bad news that's out there, all the problems that are out there, and so does the market. It's precisely when you feel bad that you should go in the market. Now is the time, probably, that you ought to go in. Just don't bet the ranch on it. The thing that kills people is that they get whipsawed. When it goes down, they get out. When it goes up, they get in.

The hardest thing in investing is discipline. You should just put a certain amount each month in several mutual funds, in your 401k or IRA, and ride through the bad times.

QUESTION: What do you do to relax?

FORBES: I like bicycling. My nephew and I just did a day and a half in Vermont over the weekend. It's very hilly in Vermont. We did over 50 miles.

QUESTION: What kind of bicycle do you have?

FORBES: I usually go with the tours and you rent one from them. Over Christmas-New Year's, I went with one of my daughters to New Zealand, the south island, and did about 300 miles there. At home I rarely have the chance to ride, although I do exercise. My own bike is the kind of thing you'd pass on to your 5-year-old grandchild.