Posted on | October 16, 2011 | 72 Comments
“I thought David Gregory really lost his cool early on, as he was questioning Cain about 9-9-9. If you watch the video, you can see he’s agitated and grimacing in a way that really lacks the usual polished journalist quality.”
— Ann Althouse, “Herman Cain Nailed Meet the Press”
This is an unexpected but really quite welcome development. Professor Althouse has been critical of Cain previously and (like most in academia) is not generally a fan of the populist style. From the transcript of Meet the Press, she excerpts these examples of David Gregory’s visible frustration:
The reality of the plan is that some people pay more, some people pay less…. You’re saying [prices] actually go down?… This isn’t about behavior, Mr. Cain, this is about whether you pay–if you don’t pay taxes now, and you now have income tax and a sales tax, you pay more in taxes…. Mr. Cain, we talked to independent analysts ourselves…. We’re not just reading newspaper clips here… They tell us, they’ve looked at this, based on what’s available of the plan, and it’s incontrovertible.
I hadn’t really spotted that, but she’s right: Cain stood his ground, and one of the points that flustered David Gregory was this:
MR. GREGORY: The wealthiest Americans would pay less, the poorest Americans and middle class would pay more. You don’t dispute that.
MR. CAIN: I do dispute that. You are making — you and others are making assumptions about what wealthy Americans would do with their money, and you’re making assumptions about what the middle class and the poor. You can’t predict the behavior. If wealthy Americans…
MR. GREGORY: This isn’t about behavior, Mr. Cain, this is about whether you pay — if you don’t pay taxes now, and you now have income tax and a sales tax, you pay more in taxes.
MR. CAIN: More people will pay less in taxes. More people will pay less in taxes when you consider all the taxes.
What Cain was saying is that every system of taxation involves hidden economic incentives, and incentives influence behavior. Cain was correctly saying that the sales tax element of “9-9-9,” which Gregory and others assume would impose higher taxes on the poor, would only cause them to pay more taxes if they do not respond to the incentives, namely to spend less — or buy more secondhand merchandise, which isn’t taxed under his plan.
Cain is likewise correct in saying that “you can’t predict behavior” — i.e., The Law of Unintended Consequences. While this is as good an argument against “9-9-9” as it is in favor of it, Cain is correct that we cannot make easy assumptions about how such a radical alteration of the federal tax system would impact the economic behavior and financial well-being of various classes of people.
We can agree that a flat tax will generally be of most benefit to the wealthy (who pay a much higher percentage of their income under the existing progressive system) without assuming, willy-nilly, that others will be impoverished as a result. And the point of “9-9-9” is not to achieve “social justice,” but rather to unleash capital investment to spur economic growth. It is a supply-side solution to our current economic woes, and as such has been praised by the Club for Growth and by Art Laffer.
Would a man rather be unemployed and paying no taxes, or would he rather have a job and pay taxes? That’s the real choice, and yet David Gregory can’t seem to understand it.
We could update an old joke Ronald Reagan used to tell: “A recession is when your neighbor loses his job. A depression is when you lose your job. And a recovery is when David Gregory loses his job.”