HUMAN EVENTS Interview:Herman Cain Will Crusade Against Income Tax

Herman Cain, former CEO of Godfather’s Pizza, is running for the Republican nomination in the race to replace retiring Democratic Sen. Zell Miller of Georgia. Cain is a real-life Horatio Alger. Born in 1945 in Memphis, Tenn., he was raised in Georgia, where his mother worked as a maid, and his father once held three jobs, as a chauffeur, janitor and barber. Cain graduated from Morehouse College with a bachelor of science degree and earned a master’s in computer science from Purdue. He started in the restaurant business at the Pillsbury Co., working his way up through its Burger King subsidiary. In 1986, Pillsbury made him president of its Godfather’s Pizza subsidiary, which was doing poorly. Cain turned the company around, and in 1988 purchased it from Pillsbury. His range of experience extends into public policy. In 1994, he was elected president of the National Restaurant Association, where he was a vocal opponent of Hillary Clinton’s national health care plan. He is also a former chairman of the Federal Reserve Bank of Kansas City. Cain would like to use a U.S. Senate seat to crusade for replacing the federal income tax with a consumption tax. His opponents for the nomination are Rep. Mac Collins (lifetime American Conservative Union rating: 96%), Rep. Johnny Isakson (lifetime ACU rating: 84%) and Al Bartell, a black businessman who won 12% of the vote last year in the Republican lieutenant governor primary. HUMAN EVENTS: You have announced that you are running for the United States Senate? HERMAN CAIN: Yes, I did. Why are you running? CAIN: Because I believe that with my 35 years of business experience, with my relative corporate success, I am in a position to make a difference and to give back to this country. I was not in a position to do so earlier in my career when I was still trying to climb the corporate ladder. I came from very humble beginnings. My mother was a domestic worker, a maid. My father was a barber, a chauffeur and a janitor. So I don’t have a big inheritance waiting for me if I were to decide that I want to go off and do something noble. I had to wait until I made some money. Now I can do something noble, and I believe that my experiences, my passion, and my energy, will allow me to win this U.S. Senate seat, as well as be able to push some of the issues that I feel passionate about. What are those issues? CAIN: My top three: First of all, replacing the tax code. You notice that I did not say “reform.” I did not say “fix.” That is an oxymoron. Replace the tax code. Secondly, restructure Social Security. I believe, as President Bush believes, that we need a system of personal retirement accounts. There is a way to get there, while we still make sure that people that are on Social Security can elect to continue to get their benefits, people that are near Social Security can still elect to be on it. It would be an optional migration from the current dead-end Social Security system to a system of personal retirement accounts. There’s enough money there now to make sure that those people that are that close to it can still get their benefits under the current system, while we allow younger workers to migrate to the system that was successfully introduced in the country of Chile in 1980. My third issue is less government control of health care. One of the dirty little secrets is that Medicare is on a trajectory for bankruptcy. More and more government control of health care through the tax code, through restrictions on employers, is what causes employers to try and create one-size-fits-all health care options for their employees. Those one-size-fits-all options are what are driving up the cost, and driving down the choices. So I favor allowing more market dynamics to determine what options are available to people, taking away the restriction that employees cannot deduct the cost of health insurance premiums just like employers—employers can deduct it as a business expense but if the employers decide to give it to the employee and let the employee go out and shop his own you can’t do that, because of the tax code, going back to the number one issue. Those are my three bell-whether issues. Why? Because as goes our progress on those three, so goes the future economic prosperity of our country. Period. When you speak about replacing the tax code, what would you replace it with? CAIN: I would replace it with a national sales tax/consumption tax. It has already been introduced by Congressman John Linder [R.-Ga.] in the House. It has been well-researched by an organization called Americans for Fair Taxation started in 1995. It has been well-researched, well-documented. It has a lot of support from economists, intellectuals, academics, practitioners, business people. There’s a lot of support for it. The consumption tax would provide, on average, a 30% increase in take-home pay for the average worker. The typical workers making $85,000 a year or less would be able to take home all their pay, because it replaces the personal income tax (so no deductions are necessary). It replaces the payroll tax. And it also replaces corporate income taxes and it replaces the estate tax. It replaces all of those and it generates the same amount of revenue with a 23% rate that people would pay on all new goods and services. Do you plan to sign the tax pledge of Americans for Tax Reform to oppose new tax hikes? CAIN: Grover Norquist’s? Yes. CAIN: I’ve already signed it. He even took a picture of me. It’s interesting that you favor the consumption tax because that would seem to put you in a different camp from the candidate for President whom you were co-chairman of the campaign for in 1996, Steve Forbes. He advocates the flat tax, and the maintenance of the personal deduction for home mortgage interest. CAIN: Right. It satisfies certain principles that both of them have in common. Yes, I supported Steve Forbes because, at the time, I thought that the flat tax on income had the best chance for getting traction and beginning to move. Steve Forbes ran his campaign trying to get traction on the flat tax. The reason I supported the flat tax and I can easily support the consumption tax was because in 1995 when I worked with Jack Kemp on the Economic Growth and Tax Reform Commission, those were the two solutions that we proposed be considered to solve the problem. We didn’t take sides on one or the other. Being realistic, being pragmatic, because Steve Forbes was running on that one, I could support that. Now that he is not running, and now that [former House Majority Leader] Dick Armey [R.-Tex.] has retired, now that [former vice presidential candidate, Housing secretary and Rep.] Jack Kemp [R.-N.Y.] has retired, we have no one championing the flat tax on income in Congress. We do have movement in Congress with respect to the consumption tax. My life-long objective is for one of those to become the law of the land. The other reason, just purely theoretically, that I now prefer the consumption tax, in addition to its political viability, is the fact that you don’t have to get into exceptions. Because fundamentally, instead of taxing people on what they earn—my dad was penalized for working three jobs—it taxes them on what they spend. He didn’t spend a lot of money, which is why my mother is able to live on what he saved. And that’s the type of unleashing of the economic potential of this country that I’m interested in doing. Ideally, starting from scratch, you think that the consumption tax is the best way to go. CAIN: Yes, because you don’t get into debate over what should the exceptions be. Talking about political traction, Bill Archer, who used to be chairman of the House Ways and Means Committee, was a great champion of the consumption tax, too. He got all the way up to being the top guy in the House of Representatives on taxes, and he couldn’t get it onto the agenda of the Republican Party. Do you believe that you can drive this onto the agenda of the Republican Party? CAIN: Yes, I do, for the following reasons. First of all, I have told many of my supporters and many of the people that I’ve talked to, the way you get it onto the agenda of the Republican Party is that when I am pounding the podium in Congress, the public has to stay engaged. When the phones start ringing and it is that close to becoming something that we can make the law of the land, that’s when we must energize and mobilize the public. And because my message on those three issues is beginning to resonate with people, it’ll be fairly straightforward to get people excited about it and make sure you get it onto the agenda. So, that’s where it falls now. So, you envision Herman Cain being a crusader for the consumption tax. CAIN: Absolutely—in the Senate. I have been a crusader for the consumption tax outside of the legislative process. When I was the chairman of the Tax Leadership Council for Americans for Fair Taxation. I have been fighting tax issues every since 1988, when I first went on the board of the National Restaurant Association. Every time one of these screwy taxes come up, that they want to hit the restaurant industry with, I found myself an anti-tax advocate. You know, like meal deductibility. Who appointed them in charge of determining how much of a meal is supposed to be business related or not business related? The restaurant industry got dinged several times because of those kinds of things. So I have de facto been an anti-tax advocate because of the craziness and the insanity in the tax code. So, yes, I would be a crusader inside the legislative process and not just on the outside of the legislative process. On your second issue, Social Security: Would you like to see everybody have a private Social Security account that they own, that they control, and not the government? CAIN: Yes. Would you like to see that expand beyond the current proposal where we talk about having one or two points out of the whole 15% payroll tax? Would you like to see that where people actually own their own retirement? CAIN: The 2% is a nice politically expedient entry into this whole idea, and I respect that. The President has done a great service by saying he thinks we ought to consider something like that. And because of the way Washington politics works and this whole process works, by putting 2% on the table, then they don’t have this great big flag to scare people. Because that’s all it is: scare tactics. While that is being proposed by the President and moving through, I will be out there advocating that eight points be put on the table for people to control. Four points would be allowed to help sustain current benefits for current retirees, to allow people who elect to stay on the current system to be able to do that if they want to. But most younger workers would be glad to give up four points so you could sustain it and they don’t have to depend upon it when they get ready to retire. So, I would be a crusader for a much bigger portion. Obviously that’s not going to fly right away. But one of the messages is there’s enough money there now to take care of the people that are already on Social Security and those that want to stay on Social Security just like they did in Chile, but allow the younger workers, who will take that eight 8 points, and be able to increase it, and they own it, and they can pass it onto their families if they chose to do so. It’s a matter of being able to explain it to people to take away the fear factor. The only alternative that the other side—anti-change people, I think you call them liberals here in Washington, D.C. . . . We call them Teddy Kennedy. CAIN: Teddy Kennedy, right. The only argument they have is to scare people by saying what it’s going to do simply because of change itself. So you’re right. I kind of like the term crusader. No one has called me that yet. They’ve called me a lot of things . . . but they hadn’t called me a crusader yet! We’ll call you a crusader. CAIN: All right And you envision Herman Cain in the Senate crusading on this issue and trying to drive it on to the national agenda? CAIN: Absolutely. I understand that there will be a lot of issues that I have to deal with, there will be a lot of issues that I have to take a position on, but I can show you that a lot of the issues, and a lot of the changes in legislation, and a lot of the changes in the tax law, would be eliminated if we just face the real issue and solve the problem. Let me give you an example: I did testimony in Washington, D.C. several months ago, and they had a subcommittee for the international board of adjustability of whatever. I simply went in and said, “Well, if you replace the tax code with a consumption tax, that issue goes away!” It levels the playing field. You don’t have to worry about all these tariffs from one country to the other. It’s not facing the real issue. I was there with six economists. They were all taking about how to mess with the issue around the fringes. I simply said, “Do you want to fix the problem or not?” and explained how it would fix the problem. A lot of issues that they fight over here in Washington, D.C., they simply go away if they do it the right way. We have an experiment that was put in place in 1913 that failed one year after that, and it’s been around for 90 years, and we haven’t changed it yet! Ideally, what proportion of America’s wealth should the government be taking? Whether you want to talk about it in terms of GDP or income, what would be a good, reasonable proportion? CAIN: Ideally, zero. Now let me answer that one first. That’s not practical. Studies have shown that 23% of what people spend will replace all of the money that we now raise with this messed-up tax code. We spend $250 billion a year, collectively, trying to file income tax forms, hire CPAs, and stay out of jail—and some of us still can’t stay out of jail simply because nobody understands it. It eliminates that $250 billion. It eliminates the $127 billion that’s left on the table because of loopholes. There’s even better news. Because a consumption tax will stimulate the economy, as the economy grows and people spend more, the 23% will actually generate more revenue for the issues that we face. So I believe that number, using the consumption tax, is 23%. Let’s talk about your third prong here, which is health care. One of the biggest issues before Congress right now is the Medicare prescription drug bill, which would be the first new entitlement since Medicare itself. The President supports this, the Republican leadership in both the House and Senate support it, do you support it? CAIN: Let’s back up for a moment. The President supports a good piece of legislation that will address prescription drug for seniors. The bill that’s being worked on, based upon my limited outside knowledge of it—what I have read in the paper—that’s being worked on in the Senate, is a bad piece of legislation. I don’t believe the President is going to sign a bad piece of legislation. He wants a good piece of legislation. I support providing prescription drugs benefits for those 24% of the seniors who do not have it. This is back to my common-sense approach to solving problems. The legislation that’s being kicked around, that they are working with, attempts to do a one-size-fits-all prescription benefit for the people who don’t need it, and for the people who need it. My approach would simply be to take the 24% who do not need it. There’s been some analysis done by the Heritage Foundation which shows that instead of a $400-billion next generation of Medicare that will absolutely go bust, you can do it for $100 billion. And, secondly, when you focus in on the right problem and develop a solution that solves the problem, you can put some incentives in there that will cause people to make the right choices, so that it doesn’t become another entitlement. Let’s talk about spending. Discretionary domestic spending is increasing with a Republican Congress and a Republican President. Would you be someone who worked to cut federal spending, and, if so, where do you see that it should be cut? CAIN: The first place that I would vote to not increase spending is discretionary spending. . . . One of the problems that we have is that so much [spending] has already been committed from previous budgets, previous administrations, this type of thing. But there’s still a portion that’s discretionary spending. I believe that we should show that kind of fiscal discipline, and not increase discretionary spending. You’d freeze it? CAIN: I’d freeze it! Republicans used to argue that there were whole categories of federal spending and cabinet agencies that weren’t constitutional, that weren’t necessary, that would be better off down on the state and local level. Jack Kemp when he was HHS secretary wanted to privatize a lot of the public housing. Bob Dole wanted to give public education back to states. Those things seem to have fallen off the Republican radar screen. Where do you see that the federal government is doing things that it shouldn’t be doing, just wholesale ought not to be doing? CAIN: I can’t give you a list. But philosophically I believe that there are some things that we shouldn’t be doing. One of my principles of management has been that the closer you can get the solution to the problem, the more effective it’s going to work. That means back in the states, back at the local level, whether you’re talking about education, whether you’re talking about public housing—and I happened to agree with Jack Kemp’s approach about setting up a system where people can buy the public housing. Let me tell you about something that happened today: I got into a taxi this morning . . . and I said [to the driver], “You know, I really appreciate this cab. It’s clean!” He said, “Thank you, sir. I own it.” That’s real fundamental! People take care of things that they own. They care about things that they have ownership in. And if people feel as if they no longer have ownership in government, ownership in their future, ownership in what happens to them, guess what? They won’t care about those things. A big issue in Washington, D.C., is the D.C. appropriations bill that includes a pilot school choice program that would give kids $7,500 scholarships so they can choose to leave the D.C. public schools and go into private schools. Do you favor that approach nationwide? Would you put any limits on school choice? Or how broadly would you like to see school choice catch on? CAIN: That’s two questions. Do D.C., then generally. CAIN: First of all, I absolutely respect and admire what Mayor Tony Williams is doing. Because he basically said, “My patience has run out. You all keep telling me to be patient, and these kids don’t get but one chance to grow up.” So, he has tried to wait for the system to fix it, and it didn’t do it. He’s tried to wait for some new ideas, and they didn’t come forward. So, he went against the political grain and said, “Okay, I’m going to put it back in the hands of the parents.” I absolutely respect that. Now what I’m saying is that decision needs to be made, as in D.C., at the local level. It should not be a program that’s dictated from the federal government. No. But legally you should be able to do that. The local school system, the local parents, should be able to make the decision as to whether or not they want to open up vouchers and open up choice through whatever means necessary. Given that it’s a state and local issue, do you think that communities in Georgia should choose school choice? CAIN: Some should, some shouldn’t. Not all of them are so bad that you need to do that. That’s why I’m saying it should be a choice made by that local school district. Where do you stand on abortion? CAIN: Pro-life, conception to the grave. Do you favor a human life amendment? CAIN: Explain to me what you mean by the human life amendment. Well, the human life amendment, which has been in the Republican platform since, I think, 1980, and would go in the United States Constitution, stating just that an unborn child has a right to life from conception. CAIN: I would support that, stated the way you state it. Yes, I would. Another big bill pending in the Senate that you might have to vote on if you’re elected is a ban on all human cloning, which President Bush supports. Would you vote for a ban on all cloning of human beings? CAIN: That’s not a simple yes-no answer. Because there are some medical-biological aspects of this whole cloning thing, this whole stem-cell tissue thing, that I don’t want to give a blanket yes-no to at this particular point. So I’m going to not answer that one, because, I think it’s more complicated than just banning all human cloning. I need to know more about that before I can say, and I need to know specifically what it says. So you’re undecided on that issue? CAIN: I’m undecided on that. Where do you stand on the 2nd Amendment? CAIN: I support the 2nd Amendment. Why? CAIN: Because I believe that our Founding Fathers were correct when they said that you should have the right to bear arms. Secondly, my own practical experience growing up in Georgia. I was sharing with John Gizzi that my father was a chauffer and one of my father’s responsibilities as a chauffeur for the CEO of the Coca-Cola Co. was to carry a gun in order to be able to protect him if some unexpected incident happened in the course of his doing his business. And one of the things that my Dad had to do was to drive his boss to parts of rural Georgia. And so to go to rural Georgia not having a gun, for whatever reason, didn’t make any practical sense. But fundamentally I believe that we should have the right to bear arms, period. Do you own a gun? CAIN: I own a .22-caliber pistol that I got from my father that I keep for sentimental reasons. So, when I was asked this question by a lady at a recent coffee down in Sea Island, Ga., I said I do own a gun, it’s a .22 caliber pistol, and if I went hunting it probably wouldn’t kill anything. A former senator from Georgia, who shall remain nameless, said, “Don’t worry, I’ve got plenty of guns, I’ll loan you some.”


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