In my column this week, I noted that the very man who provided the official “scoring” for Herman Cain’s 9-9-9 plan, the estimable Gary Robbins, had recently co-written a Wall Street Journal column in which he blasted the idea of a Value Added Tax (VAT) because of its proclivity for serving as in invitation to bigger government. And, since two-thirds of Cain’s plan (in combination) seemed to me to be a functional equivalent of a VAT, I thought Robbins’ critique would largely apply to Cain’s plan.
Well, I briefly interviewed Mr. Robbins today. (Politico did the same yesterday, but my questions were more precise.) His comments seemed, to me at least, to be absolutely right on target, both as to the strengths and weaknesses of Cain’s plan. Indeed, I don’t think I can disagree with a word Mr. Robbins said.
For instance: “If you cut out all the special treatments [in the tax code], you can cut the rate an awful lot. That’s a valuable message.” Cain, he said, merits praise for putting that message front and center in the campaign: “Give Mr. Cain the credit for injecting into the campaign a better way to go. You tax money once and only once.” That’s a great prescription, he said, for growth.
So what about the idea that the nine percent business transaction tax combined with a nine percent sales tax act (in concert) very much like a VAT? Robbins agreed. And he said he is indeed against a VAT, not so much in theory but in practice because of how it has allowed European governments to grow too large and unwieldy. But, he said, that’s in part because a VAT in effect “hides” so much of the taxes because they are built into each transaction, whereas a sales tax is highly visible. Moreover, he said, the very public aspect of tying each of the “nines” together in Cain’s plan would mean that the nines are so embedded in the public mind that any attempt to fiddle with the formula would cause a public backlash. And, he said, “If you can keep [all three 'nines'] tied together, it becomes really difficult to raise them” — because if you raise one, you’ll need to raise all three, and the public would rebel.
Robbins clarified that he did not design Cain’s plan; he was simply asked to “score” it to see what its revenue effects would be — and he did, indeed, find that it would be revenue neutral.
Now this is a key point: DESPITE what Herman Cain himself said in the debate the other day (raising questions as to whether Cain fully grasps the numbers behind his own plan), Robbins did NOT rely on “dynamic” scoring to conclude that it would be revenue neutral. While we supply-siders believe in dynamic scoring, the media doesn’t, and if Cain’s plan would not raise enough money without taking dynamic effects into account, the media and the Obamites would excoriate it for further starving a government already deeply in debt.
Instead, Robbins scored it using “absolutely static” analysis, meaning his scoring should be unassailable from even halfway-fair-minded critics. Indeed, he told me that scored dynamically, Cain’s plan would bring in probably 15 percent more revenue than the current tax system does.
Conservatives who understand these things should welcome, not balk at, added revenues, if those revenues are generated by economic growth rather than by raising rates — rather than, in other words, higher burdens on individuals or on investments. Even Jack Kemp agreed that the government needs more revenues in order to solve its deficit/debt problems. It just shouldn’t get those higher revenues by burdening economic growth and job creation.
All of which leads to Robbins’ conclusion: “I don’t think in this form Cain’s plan is bad; I myself would do it differently.”
What do I think? In theory, I would take Cain’s plan in a heartbeat over the current system. In practice, I think it would be a tremendous short-term improvement, with serious long-term risks. During the debate on Tuesday, one of Cain’s weakest answers was about how he would ensure that 9-9-9 didn’t lead to higher rates later on:
“The first deterrent is that I’m going to ask the United States Congress to include a two-thirds majority vote before they can raise the 9-9-9 tax. The second deterrent is the fact that because it is visible, simple, and transparent, the American people are going to be the ones to hold Congress’ feet to the fire. The third deterrent is that I will be president and I won’t sign anything that raises the 9-9-9.”
While the second argument, which mirrors that of Robbins’, makes sense, the other two don’t even come close to withstanding scrutiny. Does Cain not know the Constitution? There is no way, short of a constitutional amendment, to require a two-thirds vote to raise a tax. Our system, quite rightly, won’t allow it. One Congress cannot bind another to procedures that contradict the Constitution, and a two-thirds requirement to pass a bill (other than to override a veto) is not constitutional.
Second, the problem isn’t that anybody fears Cain would allow 9-9-9 to be raised; the problem is that people fear what would happen in the future. Unless Cain will be president in perpetuity, world without end, amen, then his pledge not to sign such a tax hike is utterly meaningless.
CONCLUSION: Cain is an appealing man with an appealing plan. But it’s a plan fraught with practical drawbacks, or at least potential ones. It’s a bit of a high-wire act, one which might not withstand buffeting from the political winds.