Republican presidential hopeful Herman Cain’s recently revealed plan for “Opportunity Zones” is a simplistic and misguided attempt to mitigate the incredible regressivity of his “9-9-9” tax plan. He hasn’t really explained in detail how these zones would work, but this much is clear: They would do more harm than good. Taken together, Cain’s economic plans are the distillation of conservatives’ misguided and failed theories on how to create economic growth and prosperity.
Announcing the policy in downtown Detroit, the former Godfather’s Pizza CEO presented the zones as a “free market policy” that would unleash boundless economic growth. Under the Cain plan, so-called “Stakeholder Leadership Teams,” comprised of local entrepreneurs, community activists, and church leaders, would identify “barriers” to economic growth that they believe are holding back the area, and ways to remove those barriers. They would then submit their plans to the Commerce Department and the Cain administration would bestow the Opportunity Zone “designation” on a limited but unspecified number of localities. Residents and businesses in these zones would be entitled to extra tax deductions.
The question is: What kinds of barriers does Cain think are standing in the way of local economic development? A senior Cain advisor said that policies such as a school vouchers program, the elimination of the minimum wage, and the passage of “right to work” laws, which weaken labor unions, would be looked upon favorably when asked by Fox News which policies would qualify an area as an Opportunity Zone.
Actually, two of the three suggested ways to qualify as an Opportunity Zone would eliminate policies that help increase the wages of workers.
Conservatives have long decried the minimum wage as a job killer and claim that repeal would create jobs for low-skill workers. In reality, increasing the minimum wage does not reduce employment, and repealing the law would only reduce the wages of low-end workers.
Conservative apathy to unions is also well documented. A “right to work” law sounds innocuous but it would serve only to weaken unions, which in turn would reduce the incomes of households, unionized or not.
Of course, residents of an Opportunity Zone would have the advantage of receiving tax deductions from the 9-9-9 plan. The 9 percent income tax would be eliminated for residents and workers in the zones. But paying slightly lower taxes on significantly lower income will be cold comfort.
The likelihood of Cain’s plan ever being implemented is low given the radical restructuring of the federal tax code and state and local laws he proposes. And the plan would run into legal issues if a city proposed eliminating a state-mandated minimum wage.
But understanding the thinking that inspired Cain’s economic policy proposals is important. 9-9-9 and the prospect of Opportunity Zones are logical conclusions of recent conservative economic thinking. In their minds, if the government would repeal worker protections and reduce taxes on the extremely wealthy, then prosperity would rain down from on high.
Recent history, however, shows how such policies work. The first decade of the 21st century saw policymakers pass laws based on the premise that what’s good for the top 1 percent is good for the United States. The results are underwhelming to say the least.
While the Bush administration was busy passing tax cut after tax cut for the wealthy, weakening the Department of Labor, and allowing the purchasing power of the minimum wage to deteriorate, income for working households in the middle actually fell.
Herman Cain repeatedly states that his fellow candidates and other critics have not read the full details of his economic plans. If they did, then their fears would be assuaged, he claims. Unfortunately, the opposite seems to be true. Cain’s proposed Opportunity Zones would do little to spark growth and would increase the amount of income inequality in affected areas.
Cain’s ideas are bold, as he says. They boldly triple down on the failed economic strategy of catering to the rich and placing all economic burdens on the middle and the poor. Perhaps Cain should find a new recipe.
Nick Bunker is the Special Assistant for the American Worker Project at the Center for American Progress Action Fund.