Whoa! Let's Think a Bit More About Herman Cain
I have just read two excellent articles (both from National Review) about Herman Cain's economic ideas, in particular the "Nine, Nine, Nine" plan. They have given me pause and a good deal to think about, and I think that they will do the same for you.
The first is by Kevin D. Williamson in today's National Review Online entitled "Nein, Nein, Nein."
The second, by Ramesh Ponnuru, is referred to in Williamson's essay and is not specifically about Cain but related to his proposals.
The essence of Mr. Williamson's argument is that:
9-9-9 is not Herman Cain’s real fiscal plan. He proposes 9-9-9 as an intermediate step en route to his preferred solution, the so-called Fair Tax, about which I have some serious reservations . . . .
that it is not revenue neutral and will produce significantly less money for the government than the current system (thus increasing the budget deficit) and, anyway, that the economic situation required to produce adequate revenue is impossibly optimistic; that he fails to address in any detail the desperate need to reduce spending; that the proposal to reduce corporate tax rates to nine per cent. will create perverse incentives; and, finally, that the national sales tax will diminish workers' available incomes and provide a fertile field for tax evasion in the form of black markets (thus requiring an excise inspectorate fully equal to the reviled IRS. );
Mr. Ponnuru's analysis of the FairTax idea predates Cain's appearance on the scene (it was published in March, of last year) and seems to me to be a pretty devastating critique of the whole FairTax idea. It is too long for me adequately to summarize here.
In short, I have come to wonder whether Mr. Cain's strong suit (his business background and success and his experience as a member of a Federal Reserve District Board) might turn out to be his weakest point. His presence is commanding and what I know of him personally I like. He communicates in straight, simple language and relates to "regular" people (of whom I am one) better than any of the other candidates. But his fiscal ideas, as they are being promoted, seem as out of touch with reality as the incumbent's.
So, my personal conclusion is, as I said above: Whoa, let's think a bit more about this.
I should like to know what other Ricochevians think of the defects and virtues of his plans.
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Comments :
Apr '11
Re: Whoa! Let's Think a Bit More About Herman Cain
I'm very happy and relieved to know that his 999 plan is just an intermediate step toward the fair tax - which I wholly support! The thought of opting out of taxation makes me drool with anticipation.
When I first heard of the consumption tax in place of the income tax (about 20 years ago), I was not convinced. But every year of experience behind me, convinces me more and more that it is the only way to save our country. Income tax is evil. Period. Exclamation.
Oct '10
Re: Whoa! Let's Think a Bit More About Herman Cain
i'm afraid just like perry and bachmann, cain will rise, then flop after more scrutiny.
romney will be the last man standing.
Feb '11
Re: Whoa! Let's Think a Bit More About Herman Cain
John Marzan: i'm afraid just like perry and bachmann, cain will rise, then flop after more scrutiny.
romney will be the last man standing. · Sep 29 at 10:27pm
To be a man is to know who you are and what you stand for. Mitt Romney may be the candidate of the GOP, but will he really be a man? When I do as M1919A4 asks in the post header, i.e., think more about Cain, I get more and more hopeful. That's not: "I think he can win," simply that he makes me feel hopeful. Romney fills me with grim despair. I couldn't take him in '96 and he has not improved with age.
Edited on Sep 30, 2011 at 1:34amMay '10
Re: Whoa! Let's Think a Bit More About Herman Cain
With the Fair Tax, I've never been able to get beyond the necessity for the repeal of the 16th amendment. Who wants both an income tax and a sales tax at the federal level? What toys would be added to the imps' (read, Congress's) toy box!
Pomuru's point that federal reporting of income would still be required because of the social security system is noteworthy.
Thank you for the post, M1919A4, good food for thought today. It's time to examine that "Nine, Nine, Nine" plan further.
An edit note: Though the displayed link is correct, I think your actual link to Pomuru's article is short a couple of characters. :)
Edited on Sep 30, 2011 at 5:44amOct '10
Re: Whoa! Let's Think a Bit More About Herman Cain
http://campaign2012.washingtonexaminer.com/article/york-cains-9-9-9-plan-sounds-good-can-it-work
Byron York on Herman Cain’s ’9-9-9′ plan:
“9-9-9 would add a national sales tax on top of current income and business taxes, and would thus give Congress another tax to raise. Why couldn’t 9-9-9 become 12-12-12? Or 15-15-15?”
Aug '11
Re: Whoa! Let's Think a Bit More About Herman Cain
I read both linked articles, and while I don't think they are "devastating" to Cain, it did make me very skeptical of the fair-tax. The talk radio crowd loves the fair tax. I'm not making fun of them or anything, but they love "fair-tax." I don't think fair-tax makes me want to vote for Mr Cain.
Unfortunately, I'm not very good at tax policy stuff. My understanding though is that consumption taxes tend to "work better" in that they aren't easily dodged. The fair tax, like all sales taxes, is regressive. So that's going to be a hard selling point as well.
I tend to think closing loopholes and just lowering and flattening the tax rates (in terms of their progressivity) would be a tremendous improvement, make the income tax less dodged (part of the rationale of the fair-tax) and would work better for our political culture.
Sep '10
Re: Whoa! Let's Think a Bit More About Herman Cain
.
that it is not revenue neutral and will produce significantly less money for the government than the current system (thus increasing the budget deficit)
What is being said here is that Cain; would produce a huge tax cut. Are you sure you are against that? Less revenue can mean larger deficits; it can also mean that they will necessitate cuts in the size and scope of government. I view the current size of government as the real problem and favor curtailing the amount of wealth handed over to government bureaucrats. The primary question that needs to be addressed is which the best way to raise the necessary revenue. There are three choices consumption taxes, income/production taxes or a combination. Cain has spoken on the subject several times over the years and clearly favors taxing consumption which I think most conservatives would, at least in theory, primarily because it spurs the formation of capital and to a large degree provides more individual freedom. If one concludes that consumption taxes are best then the problem becomes how to the design the most efficient system. People who favor a straight sales tax do so because it is easy to explain.
Apr '11
Re: Whoa! Let's Think a Bit More About Herman Cain
Kevin Williamson, while admitting to possessing English major math abilities, makes a remarkable error in evaluating the revenue should Cain's plan be implemented. He simply takes the revenue streams as they exist now and applies the proposed tax rates to them. Hello? He writes for National Review and he is completely unaware of one of the most basic cornerstones of supply side economics?
Mr Williamson, lowering tax rates will increase economic activity, thereby increasing the amount of taxable activity. Simply claiming that a lower tax rate will lower revenue is a discredited talking point of the left.
Sep '10
Re: Whoa! Let's Think a Bit More About Herman Cain
I don’t take much of what is written in National Review that seriously. Williamsons article is little more than a hatchet job. Ponnuru critique of the “fair Tax” is superficial but accurate. He makes clear he favors consumption taxes for raising revenue, but then offers nothing. There are several consumption tax plans that avoid many of the pit falls of the “fair tax”. You think he might reference one or two of them. I think Cain is a good man and wouldn’t mind seeing him succeed, but I think his proposals leave a lot to be desired as most of the other candidates do. Oddly Huntsman has produced the best plan if you want to make your decision based on plans, he is your guy. The real question is what they would do if they got elected. I don’t trust Romney or Huntsman either one would turn out to be another Bush. No thank you.
Jul '10
Re: Whoa! Let's Think a Bit More About Herman Cain
redshift: Kevin Williamson, while admitting to possessing English major math abilities, makes a remarkable error in evaluating the revenue should Cain's plan be implemented. He simply takes the revenue streams as they exist now and applies the proposed tax rates to them. Hello? He writes for National Review and he is completely unaware of one of the most basic cornerstones of supply side economics?
Mr Williamson, lowering tax rates will increase economic activity, thereby increasing the amount of taxable activity. Simply claiming that a lower tax rate will lower revenue is a discredited talking point of the left. ·
He's not doing that at all. He's presenting static revenue figures, yes. Those would indicate a half-trillion dollar revenue decrease. But Williamson doesn't rule out potential growth, rather he's dismissive of the likelihood that the U.S. economy would grow enough to make up the difference.
So then, what kind of growth would be necessary to replace that shortfall?
Well, even if avoidance/fraud/corruption etc., decreased substantially we'd need maybe 2 trillion in GDP growth to make up that half-trillion in federal receipts. That's about 14% growth. Sounds pollyannaish to me.
Mar '11
Re: Whoa! Let's Think a Bit More About Herman Cain
Briar Ann: With the Fair Tax, I've never been able to get beyond the necessity for the repeal of the 16th amendment. Who wants both an income tax and a sales tax at the federal level? What toys would be added to the imps' (read, Congress's) toy box!
Pomuru's point that federal reporting of income would still be required because of the social security system is noteworthy.
The Fair Tax bill before Congress explicitly says it will not be enacted without a repeal of the 16th amendment.
Social Security is folded into the revenue stream created by the Fair Tax. There is no separate FICA tax. Social Security reform would be much easier to accomplish once it's decoupled from the wage system. Washington doesn't want to touch Social Security because that money is added to general revenue and spent on stuff the government has no business spending money on.
Once the Fair Tax is enacted, all that money parked offshore would come home tax free. Also, the U.S. would become a tax haven for foreign companies setting up business here.
Unfortunately, enacting it must be a grassroots effort.
Edited on Sep 30, 2011 at 11:01amJun '10
Re: Whoa! Let's Think a Bit More About Herman Cain
Williamson thinks the plan sucks because it wouldn't meet 2010 spending?
Really?
Then he blasts Cain for not addressing spending cuts?
Really?
My favorite comment sums up my incredulity at this hit piece fairly well:
"Herman Cain has a degree in mathematics and a Master's degree in computer science. You have an English-major understanding of math. Herman Cain developed fire control systems for ships and fighter planes for the Navy. You have an English-major understanding of math. Herman Cain worked as a computer systems analyst for Coca-Cola. You have an English-major understanding of math. Herman Cain turned a low performing division of 450 Burger King restaurants to its best performing region within 3 years. You have an English-major understanding of math. Herman Cain took a pizza company that was on the edge of bankruptcy and returned it to profitability in 14 months. You have an English-major level understanding of math. Herman Cain was chairman of the board of the Federal Reserve Bank of Kansas City. You have an English-major understanding of math. And you have the arrogance to say that you would hesitate of hire Mr. Cain after meeting him once."
Dec '10
Re: Whoa! Let's Think a Bit More About Herman Cain
I've just reread the Williamson piece, and I think many are missing the point. When Cain revitalized Godfather's and Burger King he didn't do so by reducing their revenue. He did so by making what revenue they did have work better to generate more revenue. The 999 plan would be good in many ways but it would initially reduce government revenue. Or, as he put it, "my English-major math suggests that a 9 percent tax on all of the above produces about $1.7 trillion in revenue, meaning that 2010’s $1.7 trillion deficit would have been more like a $2.2 trillion deficit — from calamity to catastrophe." What the plan fails to do is reform the outlays of government where any real changes must occur. His conclusion remains valid, "Cain’s 9-9-9 program and the Fair Tax might very well constitute improvements on the status quo, but neither is a substitute for comprehensive entitlement reform and deep cuts in discretionary spending, the sine qua non of serious fiscal-reform efforts." Tax reform is necessary but not sufficient to fix our problems.
Mar '11
Re: Whoa! Let's Think a Bit More About Herman Cain
Agreed, Casey. Very good.
The beauty of the Fair Tax, or consumption tax to replace all other taxes, is that a huge reduction in spending would necessarily follow because paying taxes becomes painful again. Painless tax withholding out of every paycheck allows the growth of government without much push-back. A tax refund is like a gift! But if every taxpayer wrote a check to the government every week to pay for all the taxes that come from his pay, their would be a revolution in our attitudes toward government spending. A consumption tax in place of income and payroll taxes would do the same thing. Politicians could run on reducing the tax from 20% to 15% and the taxpayers would be much less sympathetic to the sob stories from the parasitic government unions and the subsidized. Direct, unhidden taxation would solve much of America's problems and make our future much brighter.
May '11
Re: Whoa! Let's Think a Bit More About Herman Cain
The advisor who drew up the 999 plan insists that it will generate 2008 levels of revenue. I am sure there will be more extensive analysis but I find the proposal to be very attractive and I suspect it will be popular with a majority of the populace but not with the politicians. That makes it even more attractive to me.
Apr '11
Re: Whoa! Let's Think a Bit More About Herman Cain
If I could dispose of anything, it would be the idea that tax cuts reduce revenues. It's been shown frequently that revenues increase after tax cuts every time. What's taken out of the mix is spending rates. Both during the Reagan and George W. Bush administrations, tax cuts increased revenues, but spending rates increased dramatically with resulting deficits. The little sleight-of-hand there wants you to assume that revenues would have been more than adequate to cover spending.
As for Cain's plan, I suspect changing and simplifying the tax code would create an upswing of development and business that would increase revenues. However, regulation and spending needs to be drastically reduced at this point, and the Progressive mindset is stuck in the idea that every dollar spent by the government is absolutely needed.
Aug '10
Re: Whoa! Let's Think a Bit More About Herman Cain
If Cain were able to pass his 9-9-9 plan - which would be next to impossible - there would be nothing to stop the next president and congress from making it a 20-20-20 plan.
I like Herman Cain (top 2 for VP slot, IMHO) but his plan is nothing but a sound bite to help him in debates and on the campaign trail. it has no connection with reality. I suspect Herman knew that when he came up with the plan but figured he had nothing to lose.
Jun '10
Re: Whoa! Let's Think a Bit More About Herman Cain
Brett Decker, the editorial page editor at The Washington Times, wrote a piece yesterday encapsulating the frustration felt by so many of us. A sample:
"In Republican offices in Washington and in state capitals across the nation, party functionaries are talking down one of the most attractive new personalities to emerge in national politics in years. This self-destructive behavior has less to do with electoral pragmatism than it does establishment control of the political process."
Mar '11
Re: Whoa! Let's Think a Bit More About Herman Cain
Good discussion. Having discussed the benefits of the Fair Tax, I must say I would never be for introducing any consumption tax without repealing the 19th Amendment. Under the 9-9-9 plan income tax rates would start low but Congress would quickly jack the rates back up to finance their power grabs. Witness Europe and the VAT. Or our states that have both income and sales taxes.
Edited on Sep 30, 2011 at 12:03pmDec '10
Re: Whoa! Let's Think a Bit More About Herman Cain
I'm sure you meant the 16th amendment, but the comedy value of this typo should be preserved.