Cain's 9.9.9 Plan and the Trade War with China

What is the relationship here?

Hay. We don't have to start a trade war with China by snapping 15% tariff on imports. Guess what --- how about a 9% national sales tax and then cut payroll tax from over 13% to 9%, and corp income tax from 25% to 9%, just like what Herman says.

What is the net-effect here?

All imports will be 9% more expensive.

And tax on domestic goods will be subsidized by reduction on payroll tax and corporate income tax. Corporations will have less tax burden to hire in the USA and more incentive to repatriate money back to the USA to invest.

WTO can not argue a thing. Almost every other nation in the world levies VAT (value-added tax) or sales tax. China has it at over 20%. Europe too.

I say we need a VAT (though this may scare a lot people in this country), for the very reason why they are scared --- YES. To suppress consumption.

We are having structural economic problem and the recession will stay for long time unless we introduce structural change to the economy. We have been a consumer driven economy for 100 years and it has reached a point that the economy of high consumption and low investment can not sustain. We need to discourage consumption and encourage investment and hard working.

The end is unavoidable. Either we pro-actively change the economic structure or we will eventually be facing the day of reckoning --- when dollar loses reserve status and plunges and we won't afford consuming any more.

This slow motion train wreck started in 2000 --- when tech bubble reached its high. Since then real wage has not increased a bit in this country. What did we do to sustain the consumption economy? First, central bankers kept rate low for prolonged period to encourage reckless mortgage lending, so that citizens can keep borrowing against their houses to pay for luxury goods and dream vacations. Then housing bubble bursted. What our politicians do? Of course --- Government Handouts. Tax base is shrinking to under 50% of the population. Middle class is shrinking at an even faster rate. Without serious reform, we will either become a socialist country (if we are actually lucky) like Europe or a total anarchy, which means hell for this country as everybody is entitled to have a gun.

We have to consume less and invest more. We have to cut government spending, reform entitlements, and encourage private sector investment and risk taking by revolutionizing taxation. We have to encourage capital inflow to recapitalize this country by lowering corp tax and rationalizing immigration policy. We have to cut government handouts and encourage people to work to feed themselves. We have to do all those and race against time, which we borrowed against the reserve status of US dollars. Our high living standard will be all over if we fail to do those before one day US dollars lose reserve status.