The Daily Rundown | October 12, 2011
>> the man who was center stage last night. joining me now is herman cain , businessman, former godfather's pizza ceo. thanks for coming on. let's dig into 999. as you know, you were pushing back on this last night, bruce bartlett , a former reagan and bush official had this to say about your plan at the new york kiems. at a minimum, the cain plan is a distributional monstrosity. the poor would pay more while the rich would have their taxes cut. i want to focus in the state of florida , mr. cain , you could have people paying a 15% tax on consumer items. this is tough for people making under $50,000 a year.
>> well, chuck, this is why -- first of all, the fact that i got attacked so much, and my plan got attacked so much last night, that's a good thing, because it gives me an opportunity to correct some of those misperceptions. here's what a lot of people missed, including bruce bartlett bartlett. we'll be happy to share our analysis. we're working on that now, because there's so much misinformation. start with the 999, every worker pays 15% payroll tax . now they're going to pay 9%. that's a 6 percentage point difference. the 999 plan replaces payroll tax , capital gains tax , corporate income tax , personal income tax and the death tax . five taxes we replace with those three. we start with throwing out the current tax code .
>> mr. cain , everything you've described only benefits those with very high incomes. what do you do for the family of four that makes $50,000 a year? they're not thinking about a death tax . they're not benefits from capital gains taxes.
>> let's take your $50,000 a year family of four scenario. okay.
>> today under the current system, they will pay over $10,000 in taxes, assuming standard deductions and standard exemptions. eight gone through the math. $10,000. with 999, they're going to pay the 9% tax on their income, so that's only 4,500 dlrs$4,500 dlrs. if you go and look at what they -- how much of it they would probably spend on sales taxes for new goods, not used, used goods , they don't pay sales tax , they are still going to have money left over, chuck. so what i asked people to do. go through the math for your situation, because not all situations are the same, and for most people, they're going to have a net-net tax decrease because we've expanded the base.
>> now, how do you handle this issue with demand? by essentially raising the price of new goods and having so, instead of going back to the state of florida , instead of a 6% sales tax , you're looking at a 15% sales tax . that could cause sticker shock and actually pull back consumers from buying goods which then of course hurts the economy.
>> okay. you raised two questions here. let me take them one at a time. the first one is the sales tax in the state of florida or any other state, i'm not addressing that. that's going to be there whether we have the old system or the new system. so let's not muddy the water with that. that's a totally situation. now, when you look at the sales tax and the fact that we are taking out imbedded tacks that are built into the goods and services in this country, prices will not go up. they will not go up.
>> but will they go down?
>> people who are stretching that -- they will probably go down. we simply can't predict how much they would go down.ything that we buy today, there areembedded taxes. one of the great features on the first nine, a business can deduct its purchases and capital investment . only purchases made from companies here in the united states , it levels the playing field . this way, our products don't have those imbedded taxes in it. because of competition, the prices will actually go down.
>> all right. you predicted that if -- now that you're in the top tier , you were going to get more questions. i promise you this is not a pop quiz about foreign leaders. i want to go into some things you've written. this is something you wrote in 2005 . saying, arguing there was no housing bubble . you wrote this in 2005 in business and media institute. coverage of the bush economy reads like a collection of democratic party press releases calling a strong economy everything from strong or volatile or dicey. that kind of ignorance makes homeowners feel their most expensive possession can turn worthless. that won't happen. housing situation, that did happen. it only happened within three years. what did you miss in 2005 about the housing bubble ?
>> what i missed in 2005 was just how bad fannie mae and freddie mac had distorted the housing market . that's why i said what i said in '05 that i further learned later in terms of fannie mae and freddie mac . i honestly did not realize just how bad it was, just how bad the whole bonding and derivatives thing was and we were on the brink of a total financial meltdown. i learned later on by looking into it deeper that the situation was a lot worse than i thought in 2005 .
>> well, in 2008 , this is september 1st , 2008 , another column you wrote about the economy, and it reads as follows. you wrote the supposed failure of bush's economic policies has been a constant theme of the zks since the 2006 elections when the democrats regained control by convincing enough of the voters that the economic sky was falling and the war in iraq could not be won. they plan to continue those themes right through election day on november 4. economic sky was falling september 1, 2008 . 15 days later, the lehman brothers collapse. we know what happened after that, a total near sky is falling moment. so how -- i guess i would say this, how do you reassure voters that despite all the experience you're running on in the business community , your time on the fed, you missed the housing bubble and you missed the economic collapse ?
>> well, it's real simple, chuck. i have economic advisers working with me now who spend time studying these various analyses. when i wrote those papers, i was only responding to reports that i like everybody else , was getting through the media. those kind of public reports.
>> which turned out to be right, by the way. you were criticizing those reports, but they turned out to be right.
>> well, yeah. but what i'm saying, is i'm going to have -- i will have people around me who are going to help me do deeper analyses on some of these things, okay. yeah, i missed some of these things. i'm not perfect. i'm very quick to say i made a mistake or i missed it. but i didn't have sophisticated analyses helping me to draw the conclusions that i was drawing at that time. remember, i have admitted the housing bubble and the economic meltdown of 2008 , it was much worse than i ever realized until the lehman brothers situation started and until more and more was revealed about the depth of the problems at fannie mae and freddie mac . i admit i didn't know all the details about those situations.
>> you served on the kansas city fed back in the mid '90s. any regrets on your support of the lowering of interest rates in hindsight?
>> not from what we did in the 1990s , because in the 1990s , our mission was price stability . we did a good job under the circumstances in my opinion of being able to keep it in check and keep it under control. that's very different than the situation today. i don't agree with a lot of the policies today. but this fed has been forced into it because of a $14 trillion national debt , foreigners are now getting leery about buying our debt. that's why they've continued to do all these crazy things they're doing. our credit has been down graded. we didn't have those dynamics back in the 90s. we were able to keep prices pretty well under control.
>> how would a president cain respond to these allegations about iran?
>> president cain would respond to these allegations about iran by first asking all of my intelligence sources to come this, asking the joint chiefs of staffs, getting everybody that knows something about this situation to come in, let's take a look at the complete picture, let's take a look at all of the data and then make a decision. i can't say what i would do sitting here based upon just the news reports. what they did is inexcusable. what we do about it would require some very careful consideration.
>> all right, mr. cain , i have to leave it there. thank you for coming on.
>> chuck, i enjoyed it. thank you.