Monday, October 17, 2011

Herman Cain and 9-9-9 have my attention!

The drawn out process of nominating a presidential candidate can be tiresome and wear on the nerves of voters. However, the last three presidential elections have been so close and had such high stakes (in terms of key policies), that voters are following candidates with a greater degree of interest.

The race for the GOP nomination in 2012 appears likely to continue that trend. Republicans seek to channel the frustration of voters against President Barack Obama and opinion polls show the president's approval rating sliding steadily during his term (although such a trend has been the case in virtually every American presidency). Hopeful conservatives had thought Mitt Romney or Rick Perry would possibly be the man to carry the Republican banner in 2012.

The GOP debates thus far have seen Perry flop and Romney stagnate.

Enter Herman Cain. Initially dismissed by virtually everyone (including me), Cain has built momentum thanks to a great résumé, wit, and his catchy 9-9-9 plan.

Typically, political outsiders like Cain have difficulty gaining traction in their campaign, suffering from lack of government experience and having little 'name recognition'. Considering the current economic troubles in the United States, this 'problem' is worth overlooking to many Americans.

Cain has an intriguing story. His father worked three jobs to support the family and helped Herman attend college. He holds degrees in mathematics and computer science and has a demeanor the average American can identify with. Cain also has significant experience in the administration of private business, most recently turning around a Godfather's Pizza chain that was nearly bankrupt. He succeeds wherever he goes.

So why the sudden surge in popularity? My belief is simple: Cain is offering what Americans have always wanted -- a sample of what he intends to do as president. Cain has touted his 9-9-9 plan as a fair, more productive tax scheme that will benefit all Americans. How does the plan work?

All businesses would pay a federal tax rate of 9% on "... Gross income less all purchases from other U.S. located businesses, all capital investment, and net exports.
'Empowerment Zones' will offer deductions for the payroll of those employed in the zone."1

I like this idea. The tax rate on business would be beneficial and more importantly, encourages companies to purchase American made products. Without specific data on individual businesses pertaining to their expenditures, I cannot specifically quote how much revenue this would create for the federal government.

Additionally, all individuals would pay a 9% federal income tax. Who wouldn't want such a low rate? Cain's plan also permits deductions for donations to charity groups.

The third prong in Cain's plan calls for a national sales tax of (you guessed it) ... 9%. This aspect of the plan might be the most appealing. Anyone who makes a purchase won't be able to avoid paying a tax. Everyone will have to 'render unto Caesar'. And citizens will have the ability to reduce their own taxes by making fewer purchases.

Other positive attributes about the plan? Former Reagan Treasury official Gary Robbins, claims "... the 9-9-9 Plan will expand GDP by $2 trillion, create 6 million new jobs, increase business investment by one third, and increase wages by 10%."2

Taken at face value, 9-9-9 sounds like a winner, especially since Cain claims Americans will pay less in taxes (providing more disposable income to inject into the market) and the government will generate enough revenue to cover debts.
I really want to 'drink the kool-aid' on the 9-9-9 plan, but I have questions and concerns.
• What exactly is an 'Empowerment Zone'?
• Can 9-9-9 truly generate the tax dollars needed to run the United States?
• Are Cain's estimates accurate for effects on individuals?
• Is a flat tax truly fair? The 9% figure is less of a burden on wealthy as opposed to the poor, who desperately need every dollar. Flat taxes look fair, but could have the effect of a regressive tax structure.
The non-partisan group, Politifact, recently published their findings on 9-9-9 and their analysis cast doubt on the effectiveness of Cain's plan.3

Also, Bloomberg News ran numbers on what type of revenue 9-9-9 would have generated had it been in place in 2010. It projected the plan to produce just under $2 trillion, which would have been under the actual $2.2 trillion actually collected by the federal government. The national sales tax also presumes people and businesses will continue spending at current levels under the existing tax code.4

A number of other critics have also claimed Cain's plan would add to the national debt and harm lower and middle class Americans while rewarding the wealthy.

I cannot discount Cain's plan entirely, though. Cain does have significant knowledge of numbers, finance, and a successful tenure as a businessman. Moreover, every politician who presents a plan is subjected to scrutiny and skepticism. More information is needed to make a thorough analysis, and I hope Cain will produce.

Regardless, Herman Cain and 9-9-9 are now on my radar. And as for his other policies? That discussion will have to wait for another day.

Endnotes

1999 Herman Cain for President
2Ibid.
3Sharockman, Aaron. "Checking Herman Cain's math on 9-9-9," Politifact.com, October 14, 2011
4Sloan, Steven and Rubin, Richard. "Cain Reveals 9-9-9 Math With Projection of No Revenue Loss," Bloomberg News, October 12, 2011.

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