Herman Cain's Economic Amnesia

Republican presidential hopeful Herman Cain appears to be suffering from a mild case of memory loss these days. In an article published last year at The Daily Caller, Cain writes, “The worst idea is a proposed national sales tax which is a disguised VAT (value added tax) on top of everything we already pay in federal taxes.”

The former CEO of Godfather’s Pizza is absolutely right. The trouble is his now famous “9-9-9 Plan” seems to cause quite a discrepancy with the above statement. To be fair, Cain was condemning the proposal of implementing a national sales tax without removing the massive tax burden already imposed on the American people. He goes on to suggest scrapping the entire tax code and replacing it with the Fair Tax. While I applaud his desire to abolish the 16th Amendment and the IRS, many of the criticisms given by Cain in the article could be directed at his current economic plan.

As he notes regarding the threat of a value added tax being imposed, Cain writes:

“In every country that has established a VAT with the promise of reducing its national debt, the VAT has eventually gone up or expanded on top of the existing tax structure. After discovering many of the tax grenades in the recently passed health care reform bill, which is already driving costs up and access down, it would be real easy for an overzealous bureaucrat to insert the language in the legislation ‘national retail and wholesale’ tax.”

Though Mr. Cain does not consider his tax plan to be a VAT, his points concerning the nature of government are just as applicable. Why should I trust an overzealous bureaucrat or politician under “9-9-9” any more than I do now? Why should job creators (the wealthy), feel more at ease with both an income and sales tax structure put in place?

To calm the nerves of his supporters, the Georgia native claims his plan is merely a stepping stone in the right direction of his desired goal to implement the Fair Tax. But yet again, Cain’s own words offer the greatest warning of what economic turmoil can develop from trusting such a promise:

“…Just look at the Social Security system, Medicare and Medicaid. Over the years since their inception, taxes have gone up, benefits have gone down… Giving the administration and Congress another tool to tax us and confuse us is like giving an alcoholic a key to the liquor store with no supervision, only to discover that he locks the door after he is safely inside.”

Once again, I find myself agreeing with the dire warnings of Herman Cain the writer, but am left with much dismay by Herman Cain the candidate. The previous quote illustrates a glaring inconsistency on Cain’s part as he seems to condemn the thought of trusting the government to not manipulate the tax code for its own ends and even casts the notion of expecting new taxes to not become destructive as naïve; unless of course he’s in office, in which case such dangers apparently cease to exist.

The most crucial point discussed in Cain’s article demonstrates the fundamental error in his 9-9-9 proposal. Despite the claims of economic growth and real wealth that will emerge should his tax plan be put in place, as Cain himself said last November, “…we have a spending problem in Washington, D.C., not a revenue problem.” Where are the substantive cuts in federal spending? How many departments is he abolishing? Should the American people be comforted by the thought that their wealth is being taken in a different manner? Is this what prosperity looks like?

Catchy slogans and “economic plans” are not going to bring about recovery. The tax plans proposed by Cain and many of the other candidates demonstrate the fatal flaw in mainstream economic thought: the notion that the economy can be planned. The issue is not necessarily how we are taxed, but why are we taxed and how much we are being taxed. It’s true a progressive income tax punishes success and drives jobs away overseas, but what is overlooked by such “revenue neutral” proposals as Cain supports is the amount of wealth being stolen from the productive sector of society and that government spending causes taxation in one form or another.

Prosperity only comes through production. Something must be produced before it can be consumed, and production is only possible through savings and investment. Real wealth and economic growth will only return to this country when we restore sound money and market interest rates that encourage savings, and drastically reduce the size and cost of government. This can only be achieved not by trusting the government to manage a new tax system, but by starving the beast. Don’t replace taxes, repeal them.

While such economic truths seem to have slipped the mind of business-savvy Herman Cain, they are truths the American people cannot afford to forget.


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This piece originally appeared at RevoluTimes on November 8, 2011