Straight out of the gate at Tuesday night's Republican presidential debate in New Hampshire, Herman Cain touted his 9-9-9 plan, as the first part of his economic strategy, which is "present a bold plan." His bold plan, however, is going to necessarily conflict with the second part of his economic strategy, which is "get serious about the national debt."
Bruce Bartlett, senior policy adviser to Presidents Ronald Reagan and George H.W. Bush, has what is perhaps the deepest and most substantive analysis of the 9-9-9 plan available. Here's the salient part, with regard to deficits:
Veterans of tax reform attempts in the United States know reform is very difficult and time-consuming even once. If the Fair Tax is a good idea, Mr. Cain ought to just do it, without confusing the issue with his unnecessary and highly complicated 9-9-9 plan. After all, one of the prime selling points of the Fair Tax is its simplicity, and the 9-9-9 plan is far from that.
Because so little detail exists, it’s hard to do either a proper revenue estimate or distributional analysis of the Cain plan. It’s obvious, however, that Phase 1 would represent a huge tax cut for the wealthy at a time when federal revenues are at a historical low as a share of the gross domestic product and the economy’s fundamental problem is a lack of aggregate demand.
Thus the Cain plan would increase the budget deficit without doing anything to stimulate demand, because rich people can already spend as much as they want and are unlikely to spend more even if their taxes are abolished.
The poor and the middle class might increase their spending if they could keep more of their earnings, but they will unquestionably pay more under Phase 2 of the Cain plan. With no tax on capital gains, the rich would pay almost nothing, while elimination of all deductions and credits, as well as imposition of a national sales tax, must necessarily raise taxes on everyone else, especially those not now paying income taxes.
At a minimum, the Cain plan is a distributional monstrosity. The poor would pay more while the rich would have their taxes cut, with no guarantee that economic growth will increase and good reason to believe that the budget deficit will increase.
Even allowing for the poorly thought through promises routinely made on the campaign trail, Mr. Cain’s tax plan stands out as exceptionally ill conceived.
Our own Zach Carter points out that Cain specifically referred to his 9-9-9 plan as "revenue neutral" on "Meet The Press" this past Sunday. "Now he's calling for reducing debt. But there's not enough discretionary spending in the budget to close the deficit, so he's implicitly calling for huge medicare cuts."
Cain sparred with fellow GOP candidate Mitt Romney over his economic plan during the debate Tuesday night. "It's a catchy phrase. I thought it was a pizza deal at first," Romney said ofCain's 9-9-9 plan.
"9-9-9 will pass. It's not the price of a pizza," Cain responded. "It didn't come off a pizza box. No. It was well researched."