Beldar on Herman Cain's 9-9-9 plan

I commend to you in its entirety this post by my friend Dafydd ab Hugh at Big Lizards — a discussion of Herman Cain's 9-9-9 plan that Dafydd entitled, "Nein, nein, nein." Dafydd argues that Congress would inevitably raise a national sales tax once it got that fiscal camel's nose under the tent; that the addition of a national sales tax would encourage states and municipalities to raise their own existing sales taxes; and that our more urgent national problem is spending, while more modest tax reforms could probably suffice for the near term. He concludes:

Herman Cain is a great guy, so far as I can tell; and he can do a great service by focusing debate on what really matters right now: the existential threat posed to the United States by Barack H. Obama and the demented Democrats. He might make a good vice president; one hopes he can learn to handle a bureaucracy in time to run for the big chair again in eight years. But right now, his only trick — 9, 9, 9 — is just a catchy and clever red herring.

I reprint here, too, my own critique (slightly edited) that I left as a comment on Dafydd's post at Big Lizards:

Let's just presume for a moment that as a policy matter, Mr. Cain is correct, and that we should abandon our current federal revenue-raising system in favor of his 9-9-9 plan. Let's leave aside our objections over such matters as whether sales taxes/VATs are regressive, or whether they make it too easy for the government to raise taxes in the future. Let's join in Mr. Cain's optimistic assumptions about how the economy's better performance would make up any revenue gaps between his plan and what's currently in place. Just assume with me for a moment, in other words, that we all want the kind of reform Cain proposes, where we go to a flat tax on businesses, a flat tax on individuals, and a flat national sales tax.

And assume we set out to figure out the optimum rates for each of those three kinds of flat-rate taxes, to accomplish a Goldilocks ("just right") combination of those three, so that they produce as much revenue as the federal government now takes in. Yet those numbers must redistribute the burden of that revenue-raising in a simpler, more transparent, and more equitable way, one that also better encourages business development than our current tax code (and its maze of tax breaks and complexities). Mr. Cain's plan purports to do all of these things, if we accept it at face value.

What are the odds that the optimum number for each of these three new types of federal taxation — each very different from one another — would happen to be the very same single-digit integer?

This isn't economics. It's a gimmick. This is national economic "plan" that was obviously reverse-engineered from a catchy slogan.

Mr. Cain can't tell you why 9-9-9 would be better or worse than 8.311 - 12.897 - 5.135. No one's ever run the numbers on anything except 9-9-9 because those are the numbers that had to be accepted in order for the name to be catchy.

I'm in favor of big, bold reforms. I'm very wary of either a national sales tax or a national business VAT for the same sorts of reasons Dafydd has mentioned. But I'm not going to bother taking seriously something this gimmicky; it's not serious enough to trigger a discussion on any of the policy pros and cons of these kinds of taxation in general, because this plan is tied to rates that were picked specifically and solely because they can be easily chanted by a crowd/mob.

In tonight's GOP presidential debate from Nevada (which I recorded but didn't watch live, and which I have paused as I write this), CNN's Anderson Cooper presided over a very intentional and methodical skewering of Mr. Cain's 9-9-9 plan by every other candidate on stage. One criticism that most of the other candidates voiced — and that both Rick Perry and Mitt Romney hit particularly hard — was that taxpayers/voters would rebel against being required to pay both a state sales tax and a national sales tax.

Somehow, Cain couldn't manage to quite frame the "apples versus oranges" metaphor persuasively, although it's a perfectly valid and logical response: Mr. Cain's plan, at least if you take it at face value and accept its underlying assumptions, wouldn't change taxpayers' existing state tax burdens at all, and Cain argues that the federal taxes that his 9-9-9 plan would replace wouldn't extract any additional revenue out of the tax base, but that it would instead redistribute the same overall federal tax burden more equitably and in a way that encouraged economic growth. So I thought that particular line of attack — while probably quite effective, as perceived by many in the audience — was not terribly fair, and indeed was calculated to exploit confusion and ignorance of either federalism in general or the details of Mr. Cain's plan in particular. Probably by tomorrow Mr. Cain will have figured out how to make the "apples and oranges" metaphor work more smoothly than he did tonight, despite several attempts.

But there are plenty of other concerns and criticisms that are fair to raise, and that lots of people besides Mr. Cain's opponents also find troubling. Dafydd's point is undeniable: what's urgent is that we address current spending, then the mathematically and actuarially certain on-coming train of Baby-Boomer-driven entitlement spending. For purposes of addressing our distressing and chronic unemployment, sputtering economy, and growing stagflation, the other urgent high priority is releasing business from the crush of new Obama-era federal regulations — most of which stifle economic development with inadequate or even no benefit in return — and, of course, the slaying of the worst dragon spawned by Obama, his signature infliction upon the Republic, Obamacare. Doing those things would make for an ambitious agenda for any new Congress and POTUS to undertake before the 2014 elections. And perhaps our new president could then undertake further and more radical alteration of the tax code by gathering a mandate for in that campaign season.