The 9-9-9 Reader: Four steps to enlightenment on Herman Cain’s economic plan

Herman Cain, it may be your moment - as Decoder wrote yesterday, Cain is leading the entire GOP field in the latest Wall Street Journal/NBC poll.

Want to understand what all the fuss is about when it comes to Cain’s “999” tax plan? Here you go.

1. The Plan itself. What may surprise many is that the “999 plan” - a 9 percent personal income tax, 9 percent national sales tax and a 9 percent business tax - is actually only phase two of Cain’s overall tax vision. In phase one, Cain would cut individual and corporate tax rates to a maximum of 25 percent. Then, in phase two, he would implement the “999” rates. Phase three is the implementation of a “fair tax.” That tax would amount to a single national sales tax (typically formulated at 30 percent) in lieu of all other taxes. Why not just go straight to the fair tax? Cain writes, somewhat nebulously:

Amidst a backdrop of the economic boom created by the Phase 1 Enhanced Plan, I will begin the process of educating the American people on the benefits of continuing the next step to the Fair Tax.

2. What do economists think about this plan? There are plenty of economists with plenty of opinions, but The Christian Science Monitor’s Ron Scherer caught up with a boatload of them. In general, they aren’t very bullish:

“Every CEO says the reason they’re not hiring is because they’re not seeing demand,” says Rachelle Bernstein, a vice president and tax counsel at the National Retail Federation, a lobbying group, in Washington. “An additional tax on consumer spending will negatively impact that already weak demand.”

Some economists worry the plan would result in national tax cheating since retailers might offer items for sale at two different prices: one with tax and one without tax for people paying with cash. “The incentive to cheat is huge,” says Nigel Gault, chief US economist for IHS Global Insight in Lexington, Mass.

Mr. Gault says this is the reason why most countries have enacted a Value Added Tax (VAT) that gets tacked on during the different phases of producing a product. As each tax gets added on, there is an incentive to pass it on.

Since Cain would eliminate the business deduction for labor but not investment, the plan would most likely cause distortions that might add to the unemployment rate, says [John] Silvia [chief economist at Wells Fargo Securities in Charlotte, NC]. “This would favor heavy industries that use lots of capital and penalize companies where labor is significant and capital is small,” says Silvia. The entire service sector would be disadvantaged, he adds….

But probably the largest economic impact would be shifting the tax burden. “It’s a huge tax reduction on the very top and a huge tax increase for moderate and low income people,” says Michael Graetz, a professor at Columbia University who has testified before Congress on taxes.

The Washington Post’s Fact Checker Glenn Kessler looked into “999” as well, eventually giving Cain “Three Pinocchios” for saying most Americans would see their taxes decline under his plan.

Just like it would be wrong to claim pizza is a low-calorie meal, Cain’s description of the plan’s impact on working Americans is highly misleading.

3. Who helped him gin this thing up, anyway?

A good question. The only economic policy adviser Cain has named is a guy named Rich Lowrie (here’s his LinkedIn profile) whose economic credentials are, shall we say, limited. For one, he doesn’t have an economics degree, although Cain called him an economist during the debate Tuesday night. Second, his professional experience extends to helping run a Wells Fargo wealth management division outside of Cleveland, Ohio, and sitting on the boards of various conservative economic groups. Cain has refused to offer up the names of any other advisers.

4. What are Republicans saying about the plan?

Reaction on the right could be described as generally positive but with a host of caveats. As one might imagine, the best part of the plan, in the eyes of conservatives, is lower tax rates. The main objections include the fact that by adding a new 9 percent national sales tax, Cain’s plan gives the federal government a new revenue stream which, some argue, would inevitably lead to more government and/or more taxes.

An analysis by Tea Party group FreedomWorks put it thus:

Mr. Cain’s 999 plan is on the right track with its goal of a lower, flatter, simpler, fairer, more transparent tax system. Nine percent would be a wonderful top rate for the income tax, compared to today’s 35% top rate. And let’s face it, abolishing the payroll tax and the death tax would simply be awesome. 

But adding a national retail sales tax on top of the federal income tax (even a flat tax) is a bad idea, because it creates the infrastructure for a federal-level, European-style [value-added tax, or VAT].

And if Cain’s 9% personal flat tax failed to remain flat (as happened with Ronald Reagan’s promising but ultimately failed 1986 tax reform), we would end up with the worst of both worlds: a confiscatory income tax and a job-crushing VAT.

But while there may be some qualms over the plan, there’s much greater enthusiasm for the plan’s messenger. One blogger at conservative web forum RedState notes that Cain’s ability to sell his plan to the American public, whatever its flaws, is a positive thing in and of itself.

Yes, that it is appealing doesn’t make it workable or a good idea. But it does make it an appealing idea. Which is a helluva lot better than the alternatives we have so far. You’re not going to find crowds at Romney rallies chanting “59 Points!” or even understanding what the hell is in his 160-page economic plan. (Although, a Romney rally where the crowd did chant his entire economic plan would be akin to a Buddhist funeral ceremony… hours and hours of chanting….) Perry’s economic plan is easy to understand, and has a built-in slogan… oh wait… he hasn’t released one yet. Nevermind then…

There’s a deeper point to be made here. Cain often says on the stump that his job as President will be to educate and inform the American people, because “If people understand it, they will demand it.”

Photo: Republican presidential candidate, businessman Herman Cain is greeted by lawmakers at the statehouse in Concord, N.H., Wednesday, Oct. 12, 2011. (AP Photo/Jim Cole)

Haagen-Dazs Black Walnut (as Herman Cain calls himself) now leading the field

He’s been called the GOP flavor of the week (in response to which he tells reporters to call him “Haagen-Dazs Black Walnut” because “it tastes good all the time”).

But Herman Cain’s meteoric rise shows no sign of slowing down. According to the latest NBC-Wall Street Journal poll, Cain now leads the Republican field with 27 percent support, followed by Mitt Romney at 23 percent, and Rick Perry at 16 percent.

The poll found Cain was viewed positively by 52 percent of Republican voters and negatively by an incredibly low 6 percent. Among Tea Party supporters, his positive/negative rating was 69 percent to 5 percent. In follow-up interviews, voters said they liked Cain’s direct manner and the fact that he’s not a politician.

Cain’s ultra-low negative ratings almost certainly reflect the fact that most voters still don’t know much about him. His rise has happened so quickly (back in August, he was at just 5 percent support) that the klieg lights haven’t really been on him. As a point of comparison: Michele Bachmann’s negative rating among Republican voters stood at 8 percent back in April; today, it’s at 27.

So are the days of Cain skating by without scrutiny coming to an end?

Well, maybe. At Tuesday night’s debate, it seemed like nearly every candidate lobbed a grenade at Cain’s 9-9-9 economic plan at one point or another. (Most biting attack of the night: Rick Santorum, asking the audience, “how many people here want to pay a sales tax in New Hampshire? There you go, Herman. That’s how many votes you’ll get in New Hampshire.”)

On the other hand, Decoder has been amazed at how much Cain is still getting away with. At that same debate, Cain credited his economic plan to unnamed “secret” advisors, and said that he had already lined up potential appointees to the Federal Reserve, whom he also couldn’t name. Um - seriously? Does anyone think that if Romney or Perry had said anything remotely like that that the press (or other candidates) would have let it slide?

While Perry has been dogged for days for his refusal to publicly condemn remarks by pastor Robert Jeffress calling Mormonism a cult (made while introducing Perry at the Values Voters Summit), and for a plaque on a family hunting camp that had a painted-over racial slur, Cain has essentially gone unchallenged over a whole host of controversial statements on the very same issues of race and religion.

These include:

Why is Cain not coming under serious fire for any of this? One theory: His opponents - and the media - still don’t take him all that seriously, because no one really thinks he will win the GOP nomination. If he continues to lead in polls going forward, this may change, but even now, Cain’s schedule has him on a book tour and barely touching down in early primary states.

Romney in particular has a motive for keeping Cain around - since Cain, as a Tea Party favorite, clearly takes more votes away from Perry than Romney.

And even for Perry, attacking Cain is risky. Going directly after a highly popular black Republican could drive up Perry’s negatives (and of course, Perry’s already having to deal with racial sensitivity issues). And ironically, despite the current poll numbers, it could come across as Perry punching down (or looking desperate), since Perry still has the more realistic path to the nomination.

Does Rick Perry really want to be president?

Watching Rick Perry’s debate performance last night, Decoder (along with many observers in the press) was struck by how itching-to-get-out-of-there uncomfortable he looked. It was like watching someone’s half-hearted attempt to engage in polite conversation at a dinner party he was only attending as a favor to his wife. 

Which has led us today to this fundamental question: Does Rick Perry really want to be president? Or, more specifically, might the Texas governor regret his decision to jump into the race?

Tellingly, when New Jersey Gov. Chris Christie offered up his reasons for passing on a White House run, he said he’d tried to imagine himself in a hotel room in Des Moines “and it’s 5:30 in the morning and it’s 15 below, and it’s time for me to get up and go shake hands at the meatpacking plant.” 

His point? To subject yourself to the true grind of a presidential campaign - with the loss of privacy, the discipline of having to be always on message, the tedium of giving the same speech over and over, and the out-and-out hard work required behind the scenes - you have to really, really want it.

And almost by definition, a candidate who jumps in only after some arm twisting by supporters - as Perry did and Christie did not - probably doesn’t want it that bad.

Ironically, despite the fact that Mitt Romney’s opponents consistently try to mock the fact that he’s been running for president for at least 6 years, it’s that very combination of outsized ambition and superhuman focus - that wanting-to-be-president-more-than-anything-else - that, while less than poetic, has ultimately proven to be Romney’s strongest asset. On some subconscious level, the seeds of Romney’s run were probably planted way back when his father failed to secure the GOP nomination in 1968. Certainly since 2003, when his strategists began plotting out a path to the White House, the former Massachusetts governor’s focus has been single. And it shows.

Which leads us to another question: If really, really wanting to be president is a necessary component of a successful run, is it perhaps an even more necessary component of a successful presidency?

It’s worth remembering that Barack Obama’s decision to get into the race in 2007 in some ways resembled Rick Perry’s more than Mitt Romney’s - he was answering the call and responding to the moment, rather than systematically carrying out a lifelong plan. 

Back in August, after the debt ceiling debacle, the New York Times’ Maureen Dowd penned a withering column calling for Obama to be “more alpha,” and questioning how much he really enjoyed the job of president. She wrote: “If Clinton wanted to be president 25 hours a day and W. wanted to be president four hours a day, Obama wants to be president for about 14 hours a day. And that’s fine, as long as you don’t look like you’re phoning it in when the country is dialing 911.”

But at a time of economic crisis, we wonder if the country may in fact demand a 25-hour-a-day president. At the least, a candidate who looks like he’s phoning it in at the debates and on the trail almost certainly isn’t going to cut it.

(AP Photo/Jim Cole)

Did you miss the GOP debate last night? Here’s a morning speed-read

Good morning, America! If you missed the GOP presidential debate last night about the economy (well put on by the Washington Post and Bloomberg), here are five pieces from our liveblog coverage with Shortformblog that will tell you all you need to know.

1. By and large, the tone of this debate was far different than the others (JVBrewer, too!). The candidates were seated around a large wooden table, giving the entire thing a more intimate feel.

The moderators did a great job of speeding the questions along, and while Ron Paul and Rick Santorum were hardly well served, the entire evening did feel serious and engaged where some of the other debates felt shlocky and crusted over with social media doodads.

2. Most memorable line of the evening: Herman Cain responding to criticism of his “999 plan.” Or was it Jon Huntsman saying the “999 plan” made him think of a pizza deal? Or was it Jon Huntsman’s daughters laying a Twitter smackdown on Mitt Romney over China?

3. There was a ton of talk about the Federal Reserve. Newt Gingrich kicked it all off with a long diatribe about how Ben Bernanke, former Democratic Senator Chris Dodd and Democratic Congressman Barney Frank (Mass.) are all criminals.

Herman Cain also ripped Bernanke then later said he admired Alan Greenspan, which drew immediate rebuke from Ron Paul ("Alan Greenspan was a disaster") and likely cost Cain with some of the professional, Wall St. Republican set.

4. Everybody is going bananas over “999.” Herman Cain’s tax plan calling for a 9% federal income tax, a 9% sales tax and a 9% corporate income tax was at the center of the debate. There are a number of moving parts here, but if you only take away one thing about it from last night let it be that everybody is going to be taking shots at 999 in the weeks ahead.

The power of Cain’s plan is its simplicity, as the Washington Post writes this morning. But if the devil is in the details, to paraphrase Michele Bachmann’s strange criticism, the next few weeks will be about the details. (The CS Monitor already looked into the details, by the way.)

5. Who won and who lost? In Decoder’s view, Romney, Cain, and to a lesser extent Santorum all comported themselves well and gained from the debate while Perry, who many thought needed to distinguish himself, looked divinely uncomfortable. Shortformblog noted the primary process has gotten to the point “where the winners and losers are the ones who aren’t necessarily flashy, but well-polished and well-studied. Romney made it look easy; he’s well-polished and well-studied.”

Find all of DC Decoder’s liveblog coverage here and Shortformblog’s here.

The best from around the web:

Romney builds case for inevitability, POLITICO. This story has the quote Decoder noted earlier, reproduced below for your entertainment.

"I just try to get up every day and do my job, and debates are not my strong suit,” the Texas governor told reporters following a post-debate party at a Dartmouth fraternity house."

Mitt Romney prospers in Republican debate, by Dan Balz, a highly-respected political writer for the Washington Post.

Republicans stretch truth in debate salvos, by Bloomberg.

Rick Perry loses Dartmouth debate, wins Beta house by The Weekly Standard. Apparently, Perry’s best performance of the night was well off camera.

You can find the liveblog of the debate from Andrew Sullivan, he of Newsweek/Daily Beast (and formerly of the Atlantic), here.

"“I just try to get up every day and do my job, and debates are not my strong suit,” the Texas governor told reporters following a post-debate party at a Dartmouth fraternity house."

Rick Perry, quoted by Jonathan Martin of POLITICO in their excellent wrap of the debate last night. (Any word on whether he saved a pretzel for the gas jets?)

Your winners and losers from the GOP’s Economy Debate tonight

Ladies and gentlemen, so terminates your Bloomberg-Washington Post debate for the Republican presidential candidates. So who comported themselves well? And who came up short?

The Winners:

Mitt Romney.  At this point, it’s almost becoming embarrassing. Romney has just wiped the floor with his opponents at these debates, and tonight may have been his strongest performance yet. He seemed presidential, confident, and like the grownup in the room who’s ready to take over now. He hammered home his strongest selling point - that he “knows how to create jobs” - and came across as someone who can handle complex issues, dinging Cain and Perry as having overly “simple” approaches.  

Herman Cain. Cain did, as expected, come under attack tonight - in particular, the bombs launched at his 9-9-9 plan may have sown some new doubts among GOP primary voters about the wisdom  of creating a national sales tax. He also had some weird moments, referring to secret advisors and unnamed Federal Reserve appointees-to-be. But Cain projected his trademark confidence and optimism throughout and threw out the kinds of one-liners “I was po’ before I was poor” that have made him a favorite on the stump. On the whole, he seemed to have escaped largely unscathed.  

Rick Santorum.  He didn’t get much speaking time (as he noted). But we thought Santorum had some strong moments, criticizing Cain’s tax plan, and drawing attention to his fluid understanding of policy and his knowledge of how Washington works. He emphasized his steel-town roots, and said he would make it a priority to bring back manufacturing, with a bill he said he could pass “tomorrow.”  If Cain starts to falter as the Tea Party favorite, Santorum could be the next to gain.

The Losers:

Rick Perry.  Perry needed, by all accounts, a strong performance tonight, and it just wasn’t there at all. He seemed, frankly, like he didn’t want to be there - bored when others were talking, uncomfortable and somehow in over his head when it was his turn to talk. He repeatedly seemed to suggest that his jobs plan would consist almost entirely of repealing regulations on energy producers (read: oil companies). Perry desperately needs to jumpstart his campaign and, if anything, tonight’s performance seems likely only to compound his problems.

Jon Huntsman.  Please no more awkward jokes.  It’s making us uncomfortable.

Oh yeah, and those other guys/gals:

Ron Paul. Largely invisible tonight. Other than slamming Cain’s admiration for former Federal Reserve Chairman Alan Greenspan, nothing memorable.

Michele Bachmann. Did anyone hear something new out of the Minnesota Congresswoman tonight? Us either.

Newt Gingrich. See “Bachmann, Michele” above.

But as New Yorker reporter Ryan Lizza tweeted above, what’s to come is likely to be very, very interesting.

"Alan Greenspan was a disaster"

That’s Alan Greenspan’s mugshot in TIME Magazine’s list of 25 people to blame for the financial crisis. That’s also the person who Herman Cain said he approved of as a Fed Chairman.

Ron Paul dropped the title of this post in the next comment - “Alan Greenspan was a disaster.”

Why is this important? Isn’t this some sort of intellectual point, which the American people really don’t understand - I mean, the head of the Federal Reserve? Really? Isn’t that something Ron Paul cares about and nobody else?

If Herman Cain is going to cash in with the professional Republican moneymen (who are currently flocking to Mitt Romney), he may have to give up who he is thinking about as the head of the Fed. As a former Fed governor, one would expect him to know to stay away from Greenspan, whose legacy took a massive, massive hit in the aftermath of the financial crisis.

As noted political commentator Larry Sabato put it:

CS Monitor interviwed Herman Cain advisor Rich Lowrie for our recent piece. And guess what? He's NOT an economist

Herman Cain’s ‘999 plan’: long overdue tax reform or job killer?

Here’s Lowrie:

“This is an attempt to shift the tax burden away from production and towards consumption, to balance the load,” says Rich Lowrie, Cain’s Cleveland-based senior economic advisor. “This taxes everything once but nothing twice.”

Mr. Lowrie, who is not an economist, says by “ripping out a whole bunch of taxes” prices of goods will fall, US exports will be more competitive and business will thrive. He claims the plan will create 6 million new jobs as business becomes more competitive.

“In the price of things is the embedded cost of all taxes,” he says. “We will be exporting goods without the taxes built into them and hitting imports with the sales tax. It will level the playing field.”

And here’s the nut graf, describing what many independent economists think about “999”:

Independent economists who have studied Cain’s 9-9-9 plan say the plan would take the nation into uncharted waters. The US has never had a national sales tax except for gasoline. It’s not clear what would happen to state and local services. States and municipalities would be carrying a new burden since they would have to pay the tax too. And, economists say the plan would favor those with high incomes.

Jon Huntsman’s daughters lower the boom on Mitt Romney. Oh no they didn’t…

Jon Huntsman’s daughters lower the boom on Mitt Romney. Oh no they didn’t…

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