The Weekly Standard
October 31, 2011
by Irwin Stelzer
Politics being what it is, I suppose it is no surprise that Herman Cain's rivals for the Republican nomination should heap scorn on his 9-9-9 tax reform plan. I have no massive computer model that can tell me whether Cain's proposal would generate enough revenue to be part of any plan to bring the deficit under control. But I do know this: The objections so far raised are more than a little odd for candidates vying for the support of conservatives.
Start with the fact that Cain is not, well, one of us, "us" being the Republican establishment. His two millionaire opponents, both having reached that elevated station in whole or in part because they were born into it, make it clear that no man who has worked his way up, and made a bit of money in the pizza business, can be un homme sérieux. Developed the plan on the back of a pizza box, they chortle. Never mind that this might be as good a way as using the computer models that told President Obama's team that his massive stimulus plan would lower the unemployment rate. Or that the criticism smacks of the aversion of the British hereditary classes to "trade." It is an unbecoming line of criticism for a party that is supposed to represent the upwardly mobile entrepreneurial class.
In its more sophisticated version this criticism morphs into an attack on Cain for not having consulted the usual gaggle of academics. His main adviser is "not a trained economist," sniffs Politico. Surely Larry Summers would have taken time out from such duties as he might have at Harvard to give Cain his views. Or the conservative economists who advised George W. Bush that his plan to fund the purchase of prescription drugs for old folks was affordable could have been brought in for a full-day seminar at which pizza might be served, reviving memories of those Clinton-era gabfests.
The sad fact is that economists who specialize in macroeconomics—the big picture—do not have a particularly good record of being helpful to policymakers either here or in Europe. It always amazes me that pundits hang on every word of the economists who queue up to announce the latest revisions in their forecasts: "I had it all wrong only weeks ago, so pay attention while I tell you why and give you the latest results of my soon-to-be revised-again look into my crystal ball." Cain has chosen to rely largely on his own real-world experience to come up with a tax structure that might stimulate growth: a 9 percent business, personal income, and sales tax. The other candidates, lacking such experience of their own, substitute for it the academic economists who have brought us to where we are—on the verge of another recession.
More important is that 9-9-9, whatever its other virtues or vices, accomplishes a long-held conservative goal: It transfers a portion of the tax burden from work, risk-taking, innovation, and job creation to consumption. How can a conservative object to such a change? Yes, it is regressive, transferring some of the tax burden from upper- to lower-income families. But opposing the Democrats' proposed tax on millionaires is also regressive. If you are really opposed to any tax that has regressive features, you might as well sign on with Chuck Schumer, unless of course you want to be constructive and make suggestions for reducing the regressivity in a plan that its creator says is "a work in progress." And instead of sneering at that honest admission, ask if you can remember a single feature of Mitt Romney's fully formed, no-further-progress-needed, 59-point plan for job creation. Woodrow Wilson made do with only 14 points, Franklin Roosevelt with only Four Freedoms. Besides, 9-9-9 provides a more compelling rallying call than "See my 59 points."
Finally, conservative opponents of 9-9-9 object that the sales tax component is too easy to raise and cite European experience moving the value-added tax from around 8 percent in the early days to over 20 percent now. But they fail to understand the difference between the parliamentary and presidential systems. In Europe the chancellor of the majority party or coalition proposes some change in taxation, his party or coalition partners say "aye," and the deal is done. No congressional committees to worry about, no obstreperous senators or hostile House of Representatives. Ask and it shall be done. That just isn't the way the Founding Fathers set us up. The president might want to raise the sales tax component of 9-9-9, but he can't point to the swoosh on his Nike sneakers and say "just do it," as any European chancellor of the exchequer can. Doubt that, and read your daily newspaper about Obama's difficulty getting senators in his own party to raise taxes on families earning more than $250,000.
There you have it. Herman Cain might not have credentials that suit the Republican establishment as personified by some of his rivals—neither did Ronald Reagan who worked his way up as, ugh, an actor. He might have decided that the economists who got us here are not the best sources of wisdom. And he might have stuck with principles of taxation long admired by conservatives, but never pursued for lack of political courage.
If you want to attack 9-9-9, it would be a good idea to find better reasons than those trotted out so far. There well might be many, but we haven't heard them yet.
Irwin Stelzer is a Senior Fellow and Director of Economic Policy Studies for the Hudson Institute. He is also the U.S. economist and political columnist for The Sunday Times (London) and The Courier Mail (Australia), a columnist for The New York Post, and an honorary fellow of the Centre for Socio-Legal Studies for Wolfson College at Oxford University. He is the founder and former president of National Economic Research Associates and a consultant to several U.S. and United Kingdom industries on a variety of commercial and policy issues. He has a doctorate in economics from Cornell University and has taught at institutions such as Cornell, the University of Connecticut, New York University, and Nuffield College, Oxford.
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