Our exclusive interview this week with Richard Lowrie, the planner who helped craft GOP Presidential hopeful Herman Cain’s 9-9-9 plan, has generated lively discussion on our site. Here are some excerpts from the discussion boards. The link to the conversation is here.
While I disagree with the 9-9-9 plan I think that it is wonderful that Mr. Lowrie is willing to provide meaningful assistance to a candidate for political office. His lack of credentials should not reflect upon him, but rather on the Cain campaign. It reminds me just a little bit of Dave calling in accountant buddy Maury in order to fix the national budget, but anyone who volunteers time and resources to help a cause should be commended.
I worry about opening Pandora's box with a national sales tax. If 9-9-9 were implemented, I would like the states to collect the sales tax and pass the total onto the federal government. Raising the rate should require 2/3 of the states to agree.
by the observer
Lack of "credentials" should never be a factor. Judge the idea on its merits. Personally I think the 9.25% State AND local sales tax I pay PLUS 15.3% self employment plus federal and CA State taxes along with the rest of the taxes ought to be enough to give me European style health and retirement benefits...
It is an unfortunate idea that useful planning at the presidential level is exclusively the domain of Ivy League economic wonks who can't agree on whether Keynes or Von Mises should carry the day.
As with good financial planning, simple is good. I advise clients that if they are not able to describe the general terms of how their plan works to a friend over a cup of coffee - then they are in the wrong plan.
Cain's plan is eloquent in its simplicity. Limit spending to receipts. Collect receipts fairly at equal rates from all persons, natural or corporate. Don't allow any administration to "pay" for spending plans today by committing future legislators to any specific course of action.
Wow no wonder the plan is such idiocy, if the designers really think these represent "truths".
Lowrie says he and Cain agree on three “simple truths.” The first, as they see it: Production drives the economy, not spending. “We all have to produce first and only then can we consume,” he says. “Production pulls along consumption like a caboose and people get that backward all the time.” The second, in their view: Risk-taking drives growth. “If you need to expand the economy by one more unit this year, then you need to take a risk, whether that’s one salesman making one more phone call or one trader making one more trade.” The third: The dollar must hold its value. “Ask people what it would be like to wake up every morning and have to ask how many inches there are in a foot? It would be chaos. The dollar has to hold its value in the same way that there are always 60 seconds in a minute."
Businesses expand in response to increased demand, so the first is backwards most of the time. The 70's was different, and then we did have excess demand which was fueled by rapid money growth. Not our present problem.
Lots of things drive growth- like population growth. Innovation is also a key driver, however that is not always the same thing as risk. There are lots of researchers whose job is to explore. I'd hardly consider much of their work taking risks. And a salesman making a call is also just doing their job.
The third sounds like a desire for a currency that never fluctuates in value against anything--which is just plain wishful thinking--while at it, might as well wish for a pony too.
Often "simple" is used as a cop out for critical thinking and analysis. And 9-9-9 is just that.
Our main problem can be seen if you look at disparity of income growth over the last 50+ years. Not that it's someone's fault, it’s primarily a result of globalization and technology advancement. It is however foolish to shift the tax burden from those that benefit the most from these two trends, to those who benefit least. And talk about killing the economy- the current "truth" is that we do have a shortage of demand (that of course is not always the "truth"; in the 70's we did not have a shortage of demand).