Is Herman Cain the Next Ronald Reagan?:
2012 Presidential Candidate Herman Cain is the owner of Godfather's Pizza. This business experience leads him to believe the economy will naturally return to prosperity with less government spending and regulation. Cain shares the Tea Party's fundamental economic platform of simplifying and reducing taxes to drive economic growth, a strategy known as supply-side economics.
Cain charismatically summarizes his economic platform with "Government must get off our backs, out of our pockets and out of our way." For these reasons, he has been favorably compared to former President Ronald Reagan.
Herman Cain's 9-9-9 Plan:
Herman Cain's controversial "9-9-9" tax plan would replace the existing national tax code with 9% business taxes, 9% income taxes, and a 9% national sales tax. Specifically, it would:
- Eliminate all payroll taxes.
- Remove the double taxation of dividends.
- Do away with the Estate Tax and all taxes on capital gains.
- Create "Empowerment Zones" in the inner cities which offer business and individual tax deductions.
- Combine the Fair Tax with the Flat Tax.
- Eradicate the IRS and repeal the 15th Amendment.(Source: Herman Cain 9-9-9 Plan)
Will the 9-9-9 Plan Work?:
Cain says that the 9-9-9 Plan will expand the country's economic output (GDP) by $2 trillion, creating 6 million new jobs, by stimulating business investment by 30%. However, it's more likely to plunge the economy back into recession. An analysis by the nonpartisan Tax Policy Center reported that Cain's plan would raise taxes for those making between $30,000-$40,000 a year and lower taxes for most of those making $200,000 or more. This would further reduce demand by taking money away from those who are most likely to spend it. Despite having lower taxes, businesses would not expand without consumer demand.
Fan of Wall Street:
Cain agrees with the other Republican candidates that the Dodd-Frank Wall Street Reform Act should be repealed. However, he offers no alternative, which leaves Goldman Sachs and other Wall Street banks free to invest depositors' funds into ultra-risky, unregulated derivatives. This deregulation is what created the 2008 financial crisis in the first place. (See How Derivatives Created the Mortgage Crisis.)
Cain's proposal to get rid of the capital gains tax would reward hedge-fund managers, who make most of their income from investment income. This would encourage college students to enter finance rather than medicine or science.
Privatize Social Security:
Cain proposes privatizing Social Security. Workers' contributions would be deposited into privately-run mutual funds, instead of being sent to the Social Security Trust Fund. Diverting funds now would dramatically increase the Federal deficit while simultaneously increasing Wall Street profits. Congress would have to cut spending by $545 billion to make up the difference -- something it was not able to do this summer. Cain models his plan on one used by Chilean dictator Augusto Pinochet, who had the luxury of a military regime to enforce the reduction in government spending. Even so, Chile defaulted on its debt seven years after implementing the plan.
Don't Raise the Debt Ceiling:
This summer, Cain agreed with Republican candidates Romney, Bachmann and Perry that the $14.3 trillion debt ceiling didn't need to be raised. Instead, he said the government should be forced to prioritize whether to "pay down interest on the debt, pay military families, and issue Social Security checks" as tax revenues came in. Faced with these choices, the U.S. might be forced to default on its debt to keep retirees from going without their weekly check. Just the threat of default prompted Standard & Poor's to lower its credit rating on the U.S. from AAA to AA+ this past summer.
Cain's Background:
Cain received a B.S. from Morehouse College in 1967 and a Master's in computer science from Purdue University in 1969. He designed fire control systems for the Navy before working as a computer systems analyst for Coca-Cola. He next became a Vice-President at Pillsbury, and then a regional Vice-President of Pillsbury’s Burger King division. Three years later, he become President and CEO of Godfather’s Pizza, which he returned to profitability in14 months. Soon afterwards, he led his management team to a buyout of the company.
He subsequently became President of the National Restaurant Association and then Chairman of the Board of Directors of the Federal Reserve Bank of Kansas City. Most recently, he hosted a radio talk show in Atlanta. (Source: Cain 2012)
(Article updated October 18, 2011)
