The Nine Steps That Led to the Creation of the 9-9-9 Plan
My message of applying common sense solutions to challenges facing this country is resonating across the USA. There is no better illustration of that than the 9-9-9 Plan, my vision for economic growth.
Since my rise in the polls has put me in the top tier of the Republican presidential field; some critics have tried to muddy the waters and apply false constructs to the plan. Allow me to break the mystique and walk you through the 9 steps of how I came up with the plan.
1. Surround yourself with the right people. My Senior Economic Adviser, Rich Lowrie, of Cleveland, Ohio, doesn't know everything and doesn't have to. I didn't hold it against him that he has a college degree in accounting. He learned economics from friends and mentors like Art Laffer, Jude Wanniski, Steve Moore, Larry Kudlow, Chuck Kadlec and other prominent economic experts. Rich has spent the last dozen years focusing on the financial needs of Main Street -- which makes it easy to see how Washington, D.C. impacts everyone's ability to save, invest and care for a family.
2. Work on the right problem. To get the economy going, one has to understand how it works. We created our 3 Economic Guiding Principles:
1) Production drives the economy, not spending.
2) Risk taking drives growth. Risk is the expenditure of time, effort, creativity, resources etc. with the expectation of success but with no guarantee of such.
3) Measurements must be dependable. A dollar must hold its value the way an hour is always 60 minutes and a right angle is always 90 degrees.
3. Assign the right priorities. Our priorities for designing 9-9-9 are common sense: Simplicity, transparency, efficiency, fairness and neutrality. And I mean Webster's Dictionary definition of fair; not the Obama administration's definition.
4. Be bold. Politicians limit their thinking every time they start with the current tax code or from their assessment of what might pass Congress.
I start with what's right. That is the difference between a proven business leader and a politician: I focus on solving the problem, not just on what can pass.
5. Apply common sense principles. We all know we should tax the largest possible base at the lowest possible rates. We should tax everything once and nothing twice. We should get the government out of picking winners and losers. We should level the playing field and fix what is within our control.
Ideally, we should have a tax code that collects the requisite amount of revenues, leans the lightest on production, does the least damage, and offers the fewest opportunities to evade the tax coupled with the least incentive to do so.
6. Crunch the numbers. There is only one place to start, with current revenues and current GDP. If we tax GDP once, we have a smaller base, higher rates, and begin violating many of the above principles. So we tax it from the production side as value is produced, then from the income side as that value is paid to the factors of production (workers and shareholders) and finally as that value is consumed.
7. Score it. We chose Gary Robbins of Fiscal Associates to conduct an independent analysis, verify the construction of the tax bases and score it both on a static basis: Is it revenue neutral? And on a dynamic basis: What is the economic impact?
Robbins is a former treasury official who ran the econometrics function under Reagan. According to Robbins, this plan is revenue neutral, creates 6 million new jobs, expands the economy by $2 trillion, increases business investment by a third, will boost wages by 10%, ultimately leading to an increase in federal revenues of 15% above baseline.
8. Present it. When people understand it, they will demand it. When politicians feel the heat, they will see the light. Americans are tired of the worst economic times since the Great Depression; ushering in 9-9-9 will help drive growth and reduce unemployment.
9. Defend it. Did you think I would end on any other number? My 9-9-9 plan taxes everything once and nothing twice.
Some critics have argued that the sales tax is regressive. The sales tax will NOT increase prices. Unlike a state sales tax, which is an add-on tax and does raise prices, this is a replacement tax that replaces taxes already embedded in prices through the production and distribution process. When high marginal rates come out, and are replaced by lower marginal rates, marginal production cost decline. Think about a loaf of bread. The wheat farmer, baker, trucker and grocer all pay high corporate rates to get the product to consumers.
Once corporate rates are cut to 9 percent, the cost of that loaf of bread will decline, offsetting the national sales tax.
Instead of tinkering around the edges of our current broken tax code where most Americans don't know their exact rate, my vision is to throw it out and start over again. In other words, it's we the people; taking care of...we the people.
Herman Cain, a Republican is running for president of the U.S. and past president and CEO of the National Restaurant Association and the former chairman and CEO of Godfather's Pizza. For more info, www.hermancain.com.