Applause erupted at a mutual fund forum in Toronto today when keynote speaker Steve Forbes suggested Canada could be a “beacon to the world” if only taxes were slashed.

“You would have a long term boom, capital flowing in, brains being unleashed in a way never seen before,” said the president and CEO of Forbes Inc. “You have all the ingredients to be a true global leader, just remove those burdens.”

Forbes, who is also editor-in-chief of Forbes magazine, provided the final address at today’s Manulife mutual fund event at the Carlu in Toronto.

The multi-billion dollar tax cuts the Tories announced in October of last year are not even close to the cuts Forbes is talking about. It’s high marginal tax rates that need slashing, he says. “Imagine what would happen to this economy if [the marginal tax rate] went down to 25% or 30%,” Forbes said.

Forbes is optimistic about the U.S. economy and said the regeneration process has already begun, citing a rise in mortgage refinancing applications as part of the proof.

“Bottom line: there isn’t going to be a recession in the U.S.,” he said. “As a matter of fact, with what the Fed has done, it’s almost guaranteed in the second and third quarter the economy is going to grow at above expectation.”

Forbes is no admirer of the the U.S. Federal Reserve, however. Comparing the central bank to a bartender pouring drinks for already drunk patrons, Forbes said the Fed’s moves have put the U.S. economy back in a period of inflation. This, he says, will be more of a problem six to 12 months from now, as immobile liquidity is unleashed, commodity prices move up and the carry trade returns.

His advice to advisors? Point out to clients that dollar averaging will bail them out if they invest each month even in bad markets. “The problem is you sell when you shouldn’t, and buy when you shouldn’t.”

Forbes does worry about increased trade protectionism in the U.S., and says it will be a particular concern if America elects a Democratic president with protectionist tendencies.

The recent tax refund announced by the Bush administration is totally ineffective, he added. One-time rebates “don’t change long-term behaviour. It’s not going to pull an economy out of a slump.”

Overall, Forbes is sanguine about the economic future not only in the U.S., but globally.

The panic, he says, is often worse than the illness itself. “We’ll see this thing through,” he said. “There are going to be heads rolling and plenty of blood on the street, but it’s not the end of the world.”