Published October 20, 2011
Taking aim at minimum wage laws, union protections, and even local building codes, Herman Cain has put the finishing touches on the last missing piece of his signature “9-9-9” plan – an elaborate proposal to create “opportunity zones” in inner-city America that the GOP presidential candidate will unveil during a major campaign appearance in Detroit on Friday morning.
Cain hinted at the move during Tuesday night’s GOP debate in Las Vegas. He and his aides hope the details they provide about their plans to encourage growth in impoverished areas will deflect the surge of recent criticism branding “9-9-9” as unfair to the poor.
But details about the opportunity zone proposal, as obtained in advance by Fox News, will likely make “9-9-9” more, not less, controversial, particularly with organized labor.
To qualify for zone status under Cain’s plan, a given jurisdiction will have to enact policies the unions consider anathema – such as the elimination of the minimum wage, the provision of school vouchers, or the declaration of a zone as a “right-to-work” area.
Leading figures in organized labor swiftly attacked the Cain proposal.
Teamsters General President Jim Hoffa told Fox News in an emailed statement: “Herman Cain’s ‘Opportunity Zones’ appear to be an opportunity for corporate America to exploit workers and turn the United States into a third-world country.”
"It's tough to take anything like that seriously,” snapped AFL-CIO President Richard Trumka, who spoke to Fox News on the sidelines of a union event in Washington. “Look, workers are working hard and their wages have stagnated. To have Herman Cain, a serious contender on the Republican side, make a statement like that – that he wants to further lower wages, he wants to do away with the minimum wage – it's almost laughable."
A five-page internal campaign document entitled “Opportunity Zones – Revitalizing America,” obtained by Fox News, says the “9-9-9” plan “will turn the whole country into one giant Opportunity Zone.”
The document envisions Stakeholder Leadership Teams, comprised of entrepreneurs, trade groups, community leaders and church elders, forming in a “respectable number” of zones across America, each responsible for submitting detailed plans to “the highest levels” of the Commerce Department and the White House on how they would reduce “barriers” to economic growth.
At times, the document appears to stray from conventional conservative rhetoric. “Opportunity Zones must reverse counter-productive incentives and bureaucratic micromanagement created by Democrats and Republicans alike,” the document states. “Access to contracts and capital is skewed towards big business….All building codes, regulations, restrictions, and requirements should be reviewed from the standpoint of whether they impede economic growth.”
A blunt-talking, self-made millionaire and former executive in the fast-food industry, Cain vaulted to the front of the Republican presidential primary ranks in recent weeks on the strength of two factors: his strong performance in televised debates and the alluring simplicity of his “9-9-9” economic plan.
In its first phase, the plan would effectively scrap America’s Byzantine tax code and replace it with three across-the-board-tax rates of 9 percent -- imposed equally, and neutrally, on all individuals, corporations and national sales.
Seldom noted is the plan’s second phase. After an unspecified duration of Phase One – “as long as it takes,” from two years to a decade, a Cain adviser told Fox News – the 9 percent individual and corporate taxes would be eliminated entirely, leaving the nation with only the national sales tax.
Such a tax is widely characterized, including by the Cain campaign on its website, as “the fair tax.” When Phase One ends and Phase Two begins, this national sales tax, in becoming a fair tax, jumps considerably from its original 9 percent rate. As explained on the website fairtax.org, longtime proponents of the fair tax estimate it could reach 30 percent; Cain’s advisers put the figure at 23 or 28 percent, depending on how one runs the numbers.
Yet while borrowing liberally from the fair tax proposal that has circulated for years, Cain deviates from its orthodoxy by eschewing a key component of it: namely, a “prebate” check that the federal government would issue to the poorest Americans, to help them cope with tax rates they had never before had to pay.
When asked about Phase Two of “9-9-9,” Cain aides were adamant in telling Fox News that the candidate would never support direct payments by the federal government to the poor, whether in subsidies or any other form.
Still, the campaign has been stung by recent criticism suggesting that “9-9-9” would cause most Americans to pay more taxes, and disproportionately shift the tax burden to the poor. An analysis by the nonpartisan Tax Policy Center found 84 percent of U.S. households would see their tax payments rise under Cain’s plan, with those earning less than $30,000 likely to see income diminish, after taxes have been deducted, by up to 20 percent.
So, in lieu of “prebates,” the Cain campaign favors the creation of “opportunity zones” – and Friday’s appearance in Detroit will mark the first time the candidate has fleshed out this heretofore hidden aspect of “9-9-9.” The absence of any details about the zone idea thus far has served to hinder a thorough analysis of Cain’s economic proposals.
The Tax Policy Center, for example, noted that Cain’s campaign literature has included “some discussion of deductions for empowerment zones that might relieve some of the tax burden on low wage workers,” but added that the center has “not received any details” about the idea. “[The zones] could relieve some of the burden at the low end of the income distribution,” the center concluded, but cautioned that they would also “reduce the net revenue raised.”
At Tuesday’s GOP primary debate in Las Vegas, former Pennsylvania Sen. Rick Santorum denounced “9-9-9.”
“It’s not good for families, it’s not good for low-income [Americans],” Santorum said.
“That simply is not true,” Cain shot back. “I invite people to look at our analysis, which we make available…And we do provide a provision, if you read the analysis, something we call opportunity zones that will, in fact, address the issue of those making the least.”
As late as Thursday afternoon, Cain’s campaign website made only a few broad references to “empowerment zones,” with specificity lacking. One late change the campaign made – with Cain’s expressed approval – was to switch from the term “empowerment zones” to “opportunity zones.” The Cain team decided the word “empowerment” is too closely associated with liberal politics.
The five-page document obtained by Fox News states that employers in the designated zones “will deduct for staff employed, subject to income limits within the zone. This will help new businesses which generally don’t generate profits in early years.”
Deductions will not be limited to new businesses or new jobs created, but “are designed to benefit all within the Zone,” the document continues. “Those living and working in the Zone will get a deduction.”
In a recent interview with Fox News, a top adviser who helped shape Cain’s campaign platform cited the opportunity zones as the prime vehicle by which the Cain White House would alleviate surging new tax burdens on the poor.
In inner cities, the adviser said, current policies impose an effective marginal tax rate of more than 70 percent on the poor.
“Taxes alone will not solve the problem,” the adviser said. “If the zones knock down barriers to growth, we will match that with incentives.”
Asked to provide examples of barriers to growth that a given jurisdiction could remove in order to qualify for “empowerment zone” status and the accompanying tax benefits, the adviser cited three. They include the elimination of minimum wage laws, which the Cain campaign believes “crush teen employment”; giving parents greater choice in where their children are schooled, a goal to be achieved principally, though not exclusively, through the issuance of vouchers; and the adoption of a “right to work” policy, which frees workers from the requirement to join a union in workplaces where a union has already formed.
“These are monopoly restrictions,” the adviser said.
On its face, the empowerment zone idea appears to face some considerable hurdles. Asked how a given area – a neighborhood, say, like Park Slope in Brooklyn – could enact such provisions without having the authority to rewrite the laws of the city or state in which it is situated, the adviser said the area would have to seek “waivers” from broader jurisdictions. Does Cain envision an entire city or state qualifying as a zone? “the bigger the zone, the better,” the adviser replied.
The selection of Detroit as the venue for Cain’s announcement is calculated. In August 2011, the federal Bureau of Labor Statistics recorded that the city and its surrounding areas posted the nation’s highest jobless rate, at 14.4 percent.
Fox News’ Carl Cameron contributed to this report.