Jay Rasking 10-14-11
Full Article:
http://jayraskin.wordpress.com/2011/10/14/checking-the-fact-checkers-on-herman-cain-and-godfathers-pizzas
An article printed by PolitiFact.com called Did Herman Cain turn around Godfather’s Pizza? did not check the facts. In fact, it found no facts and therefore printed opinions instead:
Pizza is Cain’s biggest selling point. He says his track record running Godfather’s Pizza, a chain that once billed itself as “the cure for the pizza emergency,” shows he has the ability to run the country. The 620-store chain was on the brink of bankruptcy when he arrived in 1986, he says, and he “turned it around with common-sense business principles.”
A PolitiFact examination of Godfather’s, based on interviews with industry analysts and company officials, shows Cain is largely correct. The chain wasn’t literally preparing paperwork for bankruptcy, but it was widely considered troubled. Cain changed that by uniting the franchisees, overhauling the chain’s advertising, and getting his team focused on its core mission: pizza.
Ms. Holan immediately catches Mr. Cain in a lie. “The chain wasn’t literally preparing paperwork for bankruptcy, but it was widely considered troubled.” There is a big difference between a company widely considered troubled and a company near bankruptcy. Almost every large company in the United States at one point or another has been widely considered troubled. It is not unusual for a company that does not meet financial expectations, to be widely considered troubled. Being widely considered troubled does not mean a company is going bankrupt or anywhere near going bankrupt. Here are the facts about Godfather’s Pizza.
The company had been among the fastest growing pizza chains in America and a great success from its start in 1973 until 1984, two years before Pillsbury appointed Cain as a manager. According to the N.Y. Times (May 19, 1985):
IN 1973, William M. Theisen’s Omaha beer parlor, Wild Willy’s, was doing a booming business with the pizza place next door: Through a passageway between the two establishments, bar patrons were able to order pizza to go with their beer – and even Mr. Theisen became hooked on the thick, rich pies. Soon, he and his neighbor joined forces to form Godfather’s Pizza – and when the 27-year-old Mr. Theisen bought out his partner shortly afterward, he was full of big plans for his favorite pizza.
Within 10 years, he turned Godfather’s into the country’s third-largest pizza operation in sales, behind pizza Hut and Domino’s. It became a chain of nearly 900 company-owned and franchised restaurants with more than $300 million in annual revenues, including $121 million from the company-owned outlets alone. Trade journals ranked it No. 1 in sales growth for fast-food chains in 1977, 1978 and 1979. It had one of the highest returns on investment in the fast-food business between 1979 and 1982. In those years, 641 restaurants were added.
On September 27, 1983, Donald M. Smith and Chart House incorporated purchased 800 Godfather Pizza Restaurants for $306 million dollars.
Two years later, Pillsbury Inc. bought the franchise for an undisclosed amount. Herman Cain was put in charge of Godfather on April 1, 1986. Thus Cain took over a company that had been worth $306 million two and a half years before. Two and half years later on Sept 20, 1988, Cain and his management group bought the company for about $30 million...
The real question that the fact checkers did not discover or investigate is how did a company worth $306 million, 30 months before Herman Cain was put in charge, come to be worth $30 million, 29 months after he was put in charge? The question is how did the company lose 90%, some $276 million, in value during this time and how much of this loss occurred while Cain was running the company? Cain naturally apportions all the blame to his predecessors and claims the company was near bankruptcy when he took over. The real question thus becomes how much Godfather’s Pizza was really worth when Cain started running it.
Until 1984, Godfather’s Pizza was one of the most profitable Pizza Chains in America. It was still making profits in 1984, Although, at that point, the new owners of Godfather’s Pizza, Diversified Foods, made some errors and the financial picture becomes complicated.
As noted, Chart House bought 800 Godfathers Pizzas in Oct 1983. Chart House which already owned 375 Burger King units among its 517 hamburger, steak, barbecue, and Mexican restaurants in 30 states became Diversified Foods Inc. after buying Godfather Pizzas.
While Godfathers did expand to 900 restaurants in 1984 and sales grew to $365 million from $340 million in 1983, profits according to Donald M. Smith, new president of Diversified Foods Inc., plummeted from 121.8 million to $18.6 million. This was due to the disastrous introduction of a pan pizza. The Los Angeles Times reported:
The company blames the earnings drop in part on the costs of product development–especially its multimillion-dollar entry into the pan pizza market, which one restaurant analyst called an “overwhelming disaster.”
Despite the setback, things were not looking that bad for Godfather’s Pizza. On September 14, 1984, the Wall Street Journal reported:
Godfather’s currently is rolling out a new deep-dish pizza that is expected to replace the current variety by next month. Management itself admits the old product, which the company hastily introduced earlier this year, was too costly to prepare, inconsistent from store to store and “too doughy, too buttery and too rich.” In tests, Godfather’s says consumers preferred its new, lighter pizza 4-to-1 over Pizza Hut’s deep-dish version, and the pie is far easier to make. Mr. Smith says advertising expenditures to promote the new pizza will rise, as the company tries to woo back customers.
If Diversifoods succeeds in overcoming its difficulties with Godfather’s, the company hopes to go after Pizza Hut and other competitors with a vengeance. To compete over the long term, Godfather’s must increase the number of markets where it has as many or more stores as its competitors, Mr. Smith says.
That potential is very attractive to some investors. Michael Culp, an analyst at Prudential-Bache, notes that while Pizza Hut currently has more than 4,000 stores in this country, Godfather’s has fewer than 1,000. “They can open a couple thousand of these restaurants over the next few years” if they can raise volume and get profit margins in line, he says. Mr. Culp thinks 75% to 80% of Godfather’s annual growth will come from physical expansion...
This is an investor’s analyst saying in the Wall Street Journal that Godfather’s Pizza could be competing with the largest Pizza company in America Pizza Hut over the next few years. This is 18 months before Cain took over. It is a month before David M. Smith offers a management buyout to stock holders, a $525 million dollar offer to buy the nearly 900 Godfather Pizzas plus 525 other restaurants held by Diversified Inc. The offer was terminated soon thereafter and the board of directors got rid of Smith on Jan 3, 1985.
Moving ahead about six months, problems continue, but the outlook for Godfather’s Pizza is still optimistic about ten months before Cain takes over. A May 19th, 1985 New York Times article describes the troubles:
Its operating earnings plunged 94 percent in 1984, to $978,000. Late that year, some franchisees, rebelling against management, started withholding royalty fees. In February 1985, Concept Development Inc., the chain’s largest franchisee with 125 restaurants, filed a $44 million suit against Diversifoods, charging that it “diminished Godfather’s name and market recognition,” causing “the chain to splinter into a noncohesive group of independents.”
Despite this, the assessment for the future is positive and there is no talk of bankruptcy. The article notes that things were getting back on track:
Despite its problems, however, Godfather’s is now trying to regain its wings as a highflier. John M. Creed, who replaced Mr. Smith as Diversifoods’ president in January, says that the chain has shelved any expansion. It has dismissed about 25 percent of Godfather’s corporate staff and is closing unprofitable stores. It is introducing new products, such as thin-crust pizza and pizza by the slice, and it is starting to offer home delivery.
Diversifoods has hired a new president for Godfather’s – its third since January – and under Henry V. Pettis, Godfather’s is now trying to foster the kind of strong ties with franchisees that Mr. Theisen used to build the company. And that seems to be working. Mr. Creed said that many franchisees were beginning to pay royalty fees again.
These actions, Mr. Creed said, should enable Godfather’s to break even by the end of the year, “with the potential to make money.”
In other words, Godfather’s Pizzas had record profits in 1983, a small profit in 1984, and according to the company president in May of 1985 would break even in 1985 “with the potential to make money”.
In August of 1985, Pillsbury bought Diversified Foods Inc., including 873 Godfather’s Pizzas plus 375 Burger Kings and some other smaller restaurant chains, for $390 million dollars. It is difficult to say how much Pillsbury paid for the Godfather’s Pizzas and how much they paid for the other restaurants. In 1983, Godfather’s had done $340 million in sales and had sold for $306 million, in 1984, it did 365 million in sales, and in 1985, it did $325 million in sales. While sales had dropped 5% from 1983 to 1985, it is hard to see why this should have caused a drastic change in the company’s value.
Most importantly Pillsbury was showing commitment to the franchises’ future According to an August 20, 1985, N.Y. Times article, “Pillsbury Keeping Godfather’s Pizza”:
Sales at Godfather’s, the nation’s third-largest pizza chain, after Pizza Hut and Domino’s, slipped badly last year as the company tried unsuccessfully to roll out a deep-dish pan pizza. A Pillsbury spokesman said: “We understand the pizza business. We have the nation’s No. 1 frozen pizza in Totino’s and we’ll bring the resources to Godfather’s to make substantial improvement there.” Godfather’s owns 209 restaurants and franchises an additional 664 restaurants.
They had cause for optimism. In official filings, Diversified Foods had done these projections for the future of Godfather’s Pizza:
For the years 1986 through 1990, the strategies developed figures for three different scenarios: an aggressive plan, a moderate one and an aggressive one without Godfather’s.
In 1986, Diversifoods would have earned about $59 million with Godfather’s and $47 million without it in cash flow. Fifty-nine million dollars yields a 15% pretax return. The $12 million difference between keeping and dumping Godfather’s expands from there.
By 1990, Diversifoods could have been grossing cash flow of $146 million under the best circumstances with Godfather’s, $116 million with Godfather’s under moderate conditions and only $116 million in the best case without Godfather’s.
In terms of cash flow, Pillsbury could make back its investment by the end of the decade.
Earnings per share make a similarly convincing case to keep Godfather’s. Based on a best-case scenario including Godfather’s, Pillsbury paid about 10.6 times next year’s earnings. But without Godfather’s, Pillsbury’s purchase price would be a far less economical 13.2 times.
But it is pretax cash flow that really matters in an acquisition. And in those terms, Pillsbury should be getting more than 20% returns on its invested capital in three years.
Not only was Godfather’s Pizza not anywhere near bankruptcy when Pillsbury Inc took it over, but they had projections showing that the company would be making profits of up to $12 million (59 – 47 million) in 1986 and expanding profits up to $30 million (146 – 116 million) in 1990.
Within five months there was more reason for optimism. Pillsbury settled the lawsuit with Concept Development Inc., the franchise owner that had sued Diversified Foods for mismanagement for $44 million dollars. Pillsbury agreed to buy 18 more Godfather’s Pizzas from Concept Development for $2 million dollars.
Godfather Pizzas was never in danger of bankruptcy, but it did have serious management problems in 1984 and 1985. However it made a small profit in 1984, probably had a small loss in 1985 and was expected to return to making good profits from 1986 to 1990. Then Herman Cain took over.
While we cannot precisely tell the value of Godfather’s Pizza at the time Cain took over, we can give a ballpark estimate based on facts presented in Rick Telberg’s Sept 15, 1985 article, How Pillsbury ‘stole’ Diversifoods for just $390 million, published in National Restaurant News. He writes:
If projections developed by Diversifoods Inc. executives prove true, then Pillsbury Co.’s $390 million payment for the Burger King franchisee and Godfather’s Pizza franchisor will look like a firesale bargain in a few years.
According to internal business plans Diversifoods furnished Pillsbury during secret negotiations, the big packaged-foods marketer acquired the ailing restaurant conglomerate for about six times next year’s gross cash flow.
The norm, if there is any in the restaurant business, is about seven times cash flow, a price established, more or less, by Denny’s Inc.’s $734 million management buyout in January.
In addition, the projections suggest that Pillsbury would have been foolish to dump Godfather’s. In each of three possible scenarios, a Godfather’s divestiture would have reduced Pillsbury’s returns on the deal.
Besides, there are few companies capable of acquiring Godfather’s that would also have the deep pockets needed to wait for a turnaround. And, if Pillsbury sold Godfather’s, the company could have armed a potential enemy, blocking its long-stated desire to enter the pizza business.
Pillsbury’s acquisition ended one of the saddest sagas in the restaurant business–the brief life and painful death of Diversifoods.
Diversifoods was formed in January 1984 through the merger of Burger King franchisee Chart House Inc. of Lafayette, La., and Godfather’s Pizza Inc. of Omaha.
But almost as soon as the ink was dry on the deal, valued at about $700 million...
If just after buying Godfather’s Pizzas for $309 million, the company was worth 700 million, Godfather’s Pizza represented 309/700 of the worth of the company, about 44%. Taking 44% of the purchase price of $390 million by Pillsbury, we get 171.6 million. However, we do have to take into account that Godfather’s Pizzas revenues dropped 5% from 1983 to 1985 and profits were marginal in 1984 and 1985. We can take away another 10% to account for that, bringing us to a value of about $155 million. We should also take into account the loss of around 100 out of 873 stores when Pillsbury settled its lawsuit with the renegade franchise owners Concept Development Inc. While this represents 12% of the franchise, we may assume they had slightly better than average units and take away another 15%. This still leaves us with a value of roughly $130 million as the value of Godfather’s Pizzas when Herman Cain took over in April 1986. The figure $130 million also seems about right for a company projected to potentially make $12 million in profits the following year, rising to $30 million five years later.
In a January 2, 1985 article in Nation’s Restaurant News we read, “Analyst Tami Preston said that Alex. Brown & Co. has valued the Burger King division of Diversifoods at $150-$155 million.” Even if we assume a huge 15% increase in value eight months later, at the time Pillsbury bought Diversified, that brings the value of the Burger Kings up to a maximum of $180 million. Substract the $180 million for the Burger Kings from the $390 million total price, we get $210 million for all the non-Burger King restaurants. Godfather’s represented over 900 of the 1100 remaining units at Diversified. Besides Godfather’s, there were 65 Luther’s barbecue restaurants, 55 Chart Houses and Moxie’s gourmet Burger restaurants. If we assume that the 900 Godfather’s were only worth half as much as the other 200 restaurants, that still gives us around $140 million for the Godfather’s and $70 million for the others...
Showing posts with label Herman Cain. Show all posts
Showing posts with label Herman Cain. Show all posts
Sunday, November 27, 2011
How Well Did Herman Cain Know Lawrence King?
Herman Cain isn't the only African-American conservative who spent time in Omaha, Nebraska during the mid-eighties. From DownWithTyranny.blogspot.com:
Omaha is tornado country, so when I say it's a great big small town, I'm talking acreage versus gossipy connectivity. It's flat and spread out with few tall buildings, but everyone is a whisper away from everyone else's business. It's not so big as to be home to two up-and-coming black Republicans with strong ties with the bigwigs in the Republican Party who could never cross paths. Restaurant people of all colors make it a point to know each other. To know what secrets wandering waiters and chefs may have taken with them as they move from job to job, etc... Wealthy Republicans are an even tighter clique. Wealthy black Republican restaurateurs in Omaha Nebraska in the late '80s were more likely to have been twins than not to have social if not business ties.
Lawrence E. King was a fixture in the Omaha black community. He had seen his opportunity gathering up black folks' money in a credit union known as the Franklin Credit Union, which he'd taken over in 1970. By 1976 there where whispers about this 300-pound socialite living large. There were minor stabs at investigating him, but the police did not want to be seen as the big bad white guys picking on the little ol' great big black man.
Tales of King entertaining guests with cocaine, hookers and hustlers were pervasive, but Omaha has some strange code of silence. It had been for many years a sort of mob neutral zone. "Tony might whack Vinnie in Chicago," but in Omaha their kids and wives would peacefully shop, play and picnic together. Drawing attention is not acceptable. Bush flew to Omaha on 9/11 in a very standard emergency protocol, and not one in ten Americans ever knew. Lily Tomlin and her partner Jane Wagner were a known couple around "The Big O" long before Lily came out. Omaha had lots of stories and still does, but none of them are news.
King -- who had been recruited by the RNC to get out the black Republican vote -- in his rise through the Republican ranks, was able to be the sum of their black best friends, as it were. He sang the national anthem at the 1984 and 1988 Republican conventions. In 1986, the Franklin Federal Credit Union moved into brand-new digs that also served as headquarters for King's burgeoning catering and food-service empire. King began making donations to the Omaha Press Club, the Republican Party and even gay rights organizations (especially those funding area youth programs). Upon being told he had no style by a ten-year-old boy, he went shopping and became a clothes junkie, big-time-- thus earning the nickname "Reverend Alice." People really began talking. Franklin Federal Credit Union seemed to be all right until an audit of King's taxes revealed what appeared to be some missing funds. A phony "certificates of deposit" scheme. Initially it was thought that $400,000 had disappeared. Then $4 million. Ultimately $40 million was determined to have vanished.
The FBI raid of the credit union sparked rumors that drugs and child pornography were discovered in the lower levels of the facility. It had been whispered that King had used the basement of the credit union as a "waiter academy" to train young men (twinks and blinks) in the fine art of waiting tables for what was hopefully to become his restaurant empire. In an Omaha World Herald interview, he spoke about how he wanted his places to be real elegant; the waiters would wear white dinner jackets. But King's deeper desires were rumored to be something quite different.
There was a lot of recruiting going on for guys to come be part of King's catering business. Many teens and young men talked of being expected to "put out," and rumors of pornographic video shoots circulated in the gay and black communities. After the raid there was an investigation into what had become of the missing funds. Eventually a private investigator was hired by the state legislature to look into stories of an international child prostitution ring. He interviewed dozens of waiters and folks around Omaha who had been curious about King's lavish gifts and extravagant ways. But things seemed tempered by the fact that King hung out with presidents, and area journalists. And owned a bank, and a sushi bar and...
The investigator is said to have flown to Chicago to meet with a person who had damning photographic evidence as to what was going on in the bowels of Franklin. That investigator never made it back to Omaha. His plane mysteriously blew up on the return flight. Primary witnesses suddenly changed their stories, and those who did not were convicted of perjury. One rent boy who testified that he was farmed out to several closeted power brokers in and around Omaha died mysteriously in New Mexico.
King was convicted of bank fraud and served nearly 10 out of the 15 years to which he was sentenced, but the grand jury concluded that all of the salacious allegations were merely "a big hoax" (wtf!) These allegations included supplying children for satanic blood rituals in Spain and supplying teens to a sex party in Washington, D.C., where some of those teens claimed they saw George W. Bush in attendance.
The story is larger and dirtier than what is within the scope of a DWT guest blog, and in fact was the subject of a Discovery Channel investigative report. Alas, that program was "purchased" a week before it was to air by some anonymous party...
Full Article:
http://downwithtyranny.blogspot.com/2011/07/does-herman-cain-have-40-million.html
Omaha is tornado country, so when I say it's a great big small town, I'm talking acreage versus gossipy connectivity. It's flat and spread out with few tall buildings, but everyone is a whisper away from everyone else's business. It's not so big as to be home to two up-and-coming black Republicans with strong ties with the bigwigs in the Republican Party who could never cross paths. Restaurant people of all colors make it a point to know each other. To know what secrets wandering waiters and chefs may have taken with them as they move from job to job, etc... Wealthy Republicans are an even tighter clique. Wealthy black Republican restaurateurs in Omaha Nebraska in the late '80s were more likely to have been twins than not to have social if not business ties.
Lawrence E. King was a fixture in the Omaha black community. He had seen his opportunity gathering up black folks' money in a credit union known as the Franklin Credit Union, which he'd taken over in 1970. By 1976 there where whispers about this 300-pound socialite living large. There were minor stabs at investigating him, but the police did not want to be seen as the big bad white guys picking on the little ol' great big black man.
Tales of King entertaining guests with cocaine, hookers and hustlers were pervasive, but Omaha has some strange code of silence. It had been for many years a sort of mob neutral zone. "Tony might whack Vinnie in Chicago," but in Omaha their kids and wives would peacefully shop, play and picnic together. Drawing attention is not acceptable. Bush flew to Omaha on 9/11 in a very standard emergency protocol, and not one in ten Americans ever knew. Lily Tomlin and her partner Jane Wagner were a known couple around "The Big O" long before Lily came out. Omaha had lots of stories and still does, but none of them are news.
King -- who had been recruited by the RNC to get out the black Republican vote -- in his rise through the Republican ranks, was able to be the sum of their black best friends, as it were. He sang the national anthem at the 1984 and 1988 Republican conventions. In 1986, the Franklin Federal Credit Union moved into brand-new digs that also served as headquarters for King's burgeoning catering and food-service empire. King began making donations to the Omaha Press Club, the Republican Party and even gay rights organizations (especially those funding area youth programs). Upon being told he had no style by a ten-year-old boy, he went shopping and became a clothes junkie, big-time-- thus earning the nickname "Reverend Alice." People really began talking. Franklin Federal Credit Union seemed to be all right until an audit of King's taxes revealed what appeared to be some missing funds. A phony "certificates of deposit" scheme. Initially it was thought that $400,000 had disappeared. Then $4 million. Ultimately $40 million was determined to have vanished.
The FBI raid of the credit union sparked rumors that drugs and child pornography were discovered in the lower levels of the facility. It had been whispered that King had used the basement of the credit union as a "waiter academy" to train young men (twinks and blinks) in the fine art of waiting tables for what was hopefully to become his restaurant empire. In an Omaha World Herald interview, he spoke about how he wanted his places to be real elegant; the waiters would wear white dinner jackets. But King's deeper desires were rumored to be something quite different.
There was a lot of recruiting going on for guys to come be part of King's catering business. Many teens and young men talked of being expected to "put out," and rumors of pornographic video shoots circulated in the gay and black communities. After the raid there was an investigation into what had become of the missing funds. Eventually a private investigator was hired by the state legislature to look into stories of an international child prostitution ring. He interviewed dozens of waiters and folks around Omaha who had been curious about King's lavish gifts and extravagant ways. But things seemed tempered by the fact that King hung out with presidents, and area journalists. And owned a bank, and a sushi bar and...
The investigator is said to have flown to Chicago to meet with a person who had damning photographic evidence as to what was going on in the bowels of Franklin. That investigator never made it back to Omaha. His plane mysteriously blew up on the return flight. Primary witnesses suddenly changed their stories, and those who did not were convicted of perjury. One rent boy who testified that he was farmed out to several closeted power brokers in and around Omaha died mysteriously in New Mexico.
King was convicted of bank fraud and served nearly 10 out of the 15 years to which he was sentenced, but the grand jury concluded that all of the salacious allegations were merely "a big hoax" (wtf!) These allegations included supplying children for satanic blood rituals in Spain and supplying teens to a sex party in Washington, D.C., where some of those teens claimed they saw George W. Bush in attendance.
The story is larger and dirtier than what is within the scope of a DWT guest blog, and in fact was the subject of a Discovery Channel investigative report. Alas, that program was "purchased" a week before it was to air by some anonymous party...
Full Article:
http://downwithtyranny.blogspot.com/2011/07/does-herman-cain-have-40-million.html
Saturday, November 26, 2011
Herman Cain on Libya
When asked his position on Libya, Herman Cain replied: "Libya? Who's she? I never even touched her!!!"
Friday, November 18, 2011
Cain Dropping Like a Rock
Herman Cain's repeated attempts to brush aside sexual harassment charges are faltering and his once high-flying presidential campaign is likely to suffer, according to neutral Republicans.
Cain had managed to tread water for more than a week after news reports first surfaced of two anonymous charges of sexual harassment made when he led the National Restaurant Association in the 1990s. But when Sharon Bialek went public Monday to say he'd once groped her, the story started to seriously threaten Cain's public support.
"He was already slipping before these stories came out. This will accelerate his decline," Republican pollster Whit Ayres said.
"Now we see Cain supporters having pause," Iowa Republican analyst Craig Robinson added. "He can no longer laugh it up. This is serious, serious stuff."
"My sense is he's dropping like a rock," South Carolina Republican strategist J. David Woodard said...
Cain sinking like a stone, neutral GOP analysts say
Steven Thomma | McClatchy Newspapers
11-8-2011
http://www.mcclatchydc.com/2011/11/08/129690/cain-sinking-like-a-stone-neutral.html
Cain had managed to tread water for more than a week after news reports first surfaced of two anonymous charges of sexual harassment made when he led the National Restaurant Association in the 1990s. But when Sharon Bialek went public Monday to say he'd once groped her, the story started to seriously threaten Cain's public support.
"He was already slipping before these stories came out. This will accelerate his decline," Republican pollster Whit Ayres said.
"Now we see Cain supporters having pause," Iowa Republican analyst Craig Robinson added. "He can no longer laugh it up. This is serious, serious stuff."
"My sense is he's dropping like a rock," South Carolina Republican strategist J. David Woodard said...
Cain sinking like a stone, neutral GOP analysts say
Steven Thomma | McClatchy Newspapers
11-8-2011
http://www.mcclatchydc.com/2011/11/08/129690/cain-sinking-like-a-stone-neutral.html
Sunday, November 13, 2011
Poll: Clinton favored over 2012 GOP candidates
David Jackson, USA TODAY
Oct 27, 2011
http://content.usatoday.com/communities/theoval/post/2011/10/hillary-leads-gop-presidential-candidiates-poll-says/1
People can't help but wonder what might happen if Hillary Rodham Clinton ran again for president.
A new Time magazine poll shows Clinton easily defeating the major Republican candidates, were she somehow to become the 2012 Democratic nominee for president.
Clinton leads Mitt Romney, 55% to 38%; Rick Perry, 58% to 32%; and Herman Cain, 56% to 34%, among likely voters in a general election.
(Time magazine notes, "The same poll found that President Obama would edge Romney by just 46% to 43%, Perry by 50% to 38% and Cain by 49% to 37% among likely voters." Clinton's leads are bigger.)
Of course, it's easier to be popular when you're a global diplomat rather than a down-in-the-pit politician.
Clinton --- who lost the 2008 nomination fight to Obama -- says she has no interest in another White House run.
But there's always the 2016 election ...
Oct 27, 2011
http://content.usatoday.com/communities/theoval/post/2011/10/hillary-leads-gop-presidential-candidiates-poll-says/1
People can't help but wonder what might happen if Hillary Rodham Clinton ran again for president.
A new Time magazine poll shows Clinton easily defeating the major Republican candidates, were she somehow to become the 2012 Democratic nominee for president.
Clinton leads Mitt Romney, 55% to 38%; Rick Perry, 58% to 32%; and Herman Cain, 56% to 34%, among likely voters in a general election.
(Time magazine notes, "The same poll found that President Obama would edge Romney by just 46% to 43%, Perry by 50% to 38% and Cain by 49% to 37% among likely voters." Clinton's leads are bigger.)
Of course, it's easier to be popular when you're a global diplomat rather than a down-in-the-pit politician.
Clinton --- who lost the 2008 nomination fight to Obama -- says she has no interest in another White House run.
But there's always the 2016 election ...
Saturday, November 5, 2011
And His Social Policy Was Inspired by Grand Theft Auto...
If Herman Cain's "9-9-9" tax plan sounds like a special deal for a crappy medium Godfather's Pizza and some hot wings, it's because it is:
http://www.godfatherspizzaschofield.com/pdf/Godfather%27s%20Menu%20%20Feb%202011.pdf
Still, Cain's Pizza Plan may have other inspirations behinds. As Joan d'Arc of Paranoia Magazine forwarded to The Konformist:
"In Herman Cain's America, the tax code would be very, very simple: The corporate income tax rate would be 9 percent, the personal income tax rate would be 9 percent and the national sales tax rate would be 9 percent. But there's already a 999 plan out there, in a land called SimCity... Long before Cain was running for president and getting attention for his 999 plan, the residents of SimCity 4 were living under a system where the default tax rate was 9 percent for commercial taxes, 9 percent for industrial taxes and 9 percent for residential taxes. "
Source:
http://www.huffingtonpost.com/2011/10/13/herman-cain-999-sim-city_n_1008952.html
http://www.godfatherspizzaschofield.com/pdf/Godfather%27s%20Menu%20%20Feb%202011.pdf
Still, Cain's Pizza Plan may have other inspirations behinds. As Joan d'Arc of Paranoia Magazine forwarded to The Konformist:
"In Herman Cain's America, the tax code would be very, very simple: The corporate income tax rate would be 9 percent, the personal income tax rate would be 9 percent and the national sales tax rate would be 9 percent. But there's already a 999 plan out there, in a land called SimCity... Long before Cain was running for president and getting attention for his 999 plan, the residents of SimCity 4 were living under a system where the default tax rate was 9 percent for commercial taxes, 9 percent for industrial taxes and 9 percent for residential taxes. "
Source:
http://www.huffingtonpost.com/2011/10/13/herman-cain-999-sim-city_n_1008952.html
Sunday, October 16, 2011
Inside the Cain Tax Plan
BRUCE BARTLETT October 11, 2011
http://economix.blogs.nytimes.com/2011/10/11/inside-the-cain-tax-plan/
Bruce Bartlett held senior policy roles in the Reagan and George H.W. Bush administrations and served on the staffs of Representatives Jack Kemp and Ron Paul.
With recent polls showing increased support for Herman Cain as the G.O.P. presidential nominee, attention is being drawn to his platform, especially what he calls the 9-9-9 tax plan. News reports describe it as a 9 percent tax rate on business and personal income, combined with a 9 percent national sales tax.
Little detail has been released by the Cain campaign, so it’s impossible to do a thorough analysis. But using what is available on Mr. Cain’s Web site, I’m taking a stab at estimating its effects.
First, the 9-9-9 plan is actually an intermediate step in Mr. Cain’s plan to overhaul the tax system and jump-start growth. Phase 1 would reduce individual and business taxes to a maximum of 25 percent, which I assume means reducing the top statutory tax rate to 25 percent from 35 percent.
No mention is made on the site of a tax cut for those now in the 10 percent, 15 percent or 25 percent brackets. This means that the only people who would get a tax rate cut are those now in the 28 percent, 33 percent or 35 percent brackets. According to the Joint Committee on Taxation, only 4 percent of taxpayers pay any taxes at those rates.
As for corporations, Mr. Cain’s proposal is primarily going to benefit those with revenues of more than $1 million a year, because they account for 98.7 percent of all receipts by C corporations. (A C corporation is a legal entity separate and distinct from its owners that is taxed as a corporation; its shareholders pay taxes individually on their gains.) Those companies with receipts over $50 million account for 88.8 percent of total receipts.
Other business entities — sole proprietorships, S corporations (which have between 1 and 100 shareholders and pass through net income or losses to shareholders) and partnerships — would not benefit because they are not taxed on the corporate schedule. But they represent 92 percent of all businesses.
Second, Mr. Cain would eliminate all taxes on profits earned by multinational corporations outside the United States. It’s hard to know the impact of this provision, but according to Martin Sullivan, an economist with Tax Analysts, the 50 largest corporations in the United States generated half of their profits in other countries.
The actual benefit of Mr. Cain’s proposal would be much greater to many of them, because, according to Mr. Sullivan, while some of these 50 companies have no foreign operations, others derive 100 percent of their gross profits in foreign countries. In 2010 these included Philip Morris, Pfizer and Abbott Laboratories.
Third, Mr. Cain would abolish all taxes on capital gains. Such taxes typically generate more than $100 billion in federal revenue annually, according to the Tax Policy Center. According to the Joint Committee on Taxation, two-thirds of all capital gains are reported by those with incomes over $1 million.
Mr. Cain says these three proposals, which he would put into effect immediately without offsetting the lost revenue, will jump-start economic growth. He offers no evidence for this assertion; it is simply put forward as self-evident. But the experience of the George W. Bush administration was that cuts in tax rates on the wealthy and on capital gains had no effect whatsoever on growth, according to the Congressional Research Service.
And this is only Phase 1 of the Cain plan. In Phase 2, the payroll tax would be eliminated, causing more than $800 billion in revenue to evaporate. The estate and gift tax would be abolished, further reducing taxes on the wealthy. And the 9-9-9 plan would be implemented.
It’s important to understand that the 9 percent rates on personal and business income would apply to very different tax bases than now exist. For individuals, the tax would apply to gross income less only the deduction for charitable contributions. No mention is made of a personal exemption.
This means that the 47 percent of tax filers who now pay no federal income taxes will pay 9 percent on their total income. And elimination of the payroll tax won’t even help half of them because the earned income tax credit, which Mr. Cain would abolish, offsets both their income tax liability and their payroll tax payment as well.
Additionally, everyone would now pay a 9 percent sales tax on all purchases. No mention is made of any exemptions from this tax, so we may assume that it will apply to food, medical care, rent, home and auto purchases and a wide variety of other expenditures now exempt from state sales taxes. This would increase their cost of living by 9 percent while, at the same time, the poor would pay income taxes.
The business tax in the Cain plan bears no resemblance to the present corporate income tax. The tax would apply to gross sales less dividends paid and all purchases from other companies, including investment goods. Thus, there would be no deduction for wages.
How benefits would be treated is unclear, because purchases of things like health insurance might constitute a purchase from another company and remain deductible. If so, what is to stop a company from paying its employees by leasing their cars and homes for them and even buying their food and clothing? That would reduce their taxable revenue.
The abolition of any deduction for wages is likely to raise the cost of employing workers, even with abolition of the employers’ share of the payroll tax. And since the dividend deduction doesn’t appear to be related to profitability, companies could borrow to pay dividends and still get the deduction. Even a novice tax lawyer could easily make a tax shelter out of that.
And here’s the kicker in the Cain plan. Phase 2 is merely a transition to yet another fundamental tax reform. In Phase 3, the United States would adopt the so-called Fair Tax, which would replace all federal taxes with a 30 percent sales tax on all goods and services. In a previous post, I explained why the Fair Tax is a bad idea. I went into more detail in testimony before the House Ways and Means Committee on July 26.
Whatever one thinks of the Fair Tax, it makes not the slightest bit of sense to have a plan that requires fundamental changes to the federal tax system twice to achieve its objective.
Veterans of tax reform attempts in the United States know reform is very difficult and time-consuming even once. If the Fair Tax is a good idea, Mr. Cain ought to just do it, without confusing the issue with his unnecessary and highly complicated 9-9-9 plan. After all, one of the prime selling points of the Fair Tax is its simplicity, and the 9-9-9 plan is far from that.
Because so little detail exists, it’s hard to do either a proper revenue estimate or distributional analysis of the Cain plan. It’s obvious, however, that Phase 1 would represent a huge tax cut for the wealthy at a time when federal revenues are at a historical low as a share of the gross domestic product and the economy’s fundamental problem is a lack of aggregate demand.
Thus the Cain plan would increase the budget deficit without doing anything to stimulate demand, because rich people can already spend as much as they want and are unlikely to spend more even if their taxes are abolished.
The poor and the middle class might increase their spending if they could keep more of their earnings, but they will unquestionably pay more under Phase 2 of the Cain plan. With no tax on capital gains, the rich would pay almost nothing, while elimination of all deductions and credits, as well as imposition of a national sales tax, must necessarily raise taxes on everyone else, especially those not now paying income taxes.
At a minimum, the Cain plan is a distributional monstrosity. The poor would pay more while the rich would have their taxes cut, with no guarantee that economic growth will increase and good reason to believe that the budget deficit will increase.
Even allowing for the poorly thought through promises routinely made on the campaign trail, Mr. Cain’s tax plan stands out as exceptionally ill conceived.
http://economix.blogs.nytimes.com/2011/10/11/inside-the-cain-tax-plan/
Bruce Bartlett held senior policy roles in the Reagan and George H.W. Bush administrations and served on the staffs of Representatives Jack Kemp and Ron Paul.
With recent polls showing increased support for Herman Cain as the G.O.P. presidential nominee, attention is being drawn to his platform, especially what he calls the 9-9-9 tax plan. News reports describe it as a 9 percent tax rate on business and personal income, combined with a 9 percent national sales tax.
Little detail has been released by the Cain campaign, so it’s impossible to do a thorough analysis. But using what is available on Mr. Cain’s Web site, I’m taking a stab at estimating its effects.
First, the 9-9-9 plan is actually an intermediate step in Mr. Cain’s plan to overhaul the tax system and jump-start growth. Phase 1 would reduce individual and business taxes to a maximum of 25 percent, which I assume means reducing the top statutory tax rate to 25 percent from 35 percent.
No mention is made on the site of a tax cut for those now in the 10 percent, 15 percent or 25 percent brackets. This means that the only people who would get a tax rate cut are those now in the 28 percent, 33 percent or 35 percent brackets. According to the Joint Committee on Taxation, only 4 percent of taxpayers pay any taxes at those rates.
As for corporations, Mr. Cain’s proposal is primarily going to benefit those with revenues of more than $1 million a year, because they account for 98.7 percent of all receipts by C corporations. (A C corporation is a legal entity separate and distinct from its owners that is taxed as a corporation; its shareholders pay taxes individually on their gains.) Those companies with receipts over $50 million account for 88.8 percent of total receipts.
Other business entities — sole proprietorships, S corporations (which have between 1 and 100 shareholders and pass through net income or losses to shareholders) and partnerships — would not benefit because they are not taxed on the corporate schedule. But they represent 92 percent of all businesses.
Second, Mr. Cain would eliminate all taxes on profits earned by multinational corporations outside the United States. It’s hard to know the impact of this provision, but according to Martin Sullivan, an economist with Tax Analysts, the 50 largest corporations in the United States generated half of their profits in other countries.
The actual benefit of Mr. Cain’s proposal would be much greater to many of them, because, according to Mr. Sullivan, while some of these 50 companies have no foreign operations, others derive 100 percent of their gross profits in foreign countries. In 2010 these included Philip Morris, Pfizer and Abbott Laboratories.
Third, Mr. Cain would abolish all taxes on capital gains. Such taxes typically generate more than $100 billion in federal revenue annually, according to the Tax Policy Center. According to the Joint Committee on Taxation, two-thirds of all capital gains are reported by those with incomes over $1 million.
Mr. Cain says these three proposals, which he would put into effect immediately without offsetting the lost revenue, will jump-start economic growth. He offers no evidence for this assertion; it is simply put forward as self-evident. But the experience of the George W. Bush administration was that cuts in tax rates on the wealthy and on capital gains had no effect whatsoever on growth, according to the Congressional Research Service.
And this is only Phase 1 of the Cain plan. In Phase 2, the payroll tax would be eliminated, causing more than $800 billion in revenue to evaporate. The estate and gift tax would be abolished, further reducing taxes on the wealthy. And the 9-9-9 plan would be implemented.
It’s important to understand that the 9 percent rates on personal and business income would apply to very different tax bases than now exist. For individuals, the tax would apply to gross income less only the deduction for charitable contributions. No mention is made of a personal exemption.
This means that the 47 percent of tax filers who now pay no federal income taxes will pay 9 percent on their total income. And elimination of the payroll tax won’t even help half of them because the earned income tax credit, which Mr. Cain would abolish, offsets both their income tax liability and their payroll tax payment as well.
Additionally, everyone would now pay a 9 percent sales tax on all purchases. No mention is made of any exemptions from this tax, so we may assume that it will apply to food, medical care, rent, home and auto purchases and a wide variety of other expenditures now exempt from state sales taxes. This would increase their cost of living by 9 percent while, at the same time, the poor would pay income taxes.
The business tax in the Cain plan bears no resemblance to the present corporate income tax. The tax would apply to gross sales less dividends paid and all purchases from other companies, including investment goods. Thus, there would be no deduction for wages.
How benefits would be treated is unclear, because purchases of things like health insurance might constitute a purchase from another company and remain deductible. If so, what is to stop a company from paying its employees by leasing their cars and homes for them and even buying their food and clothing? That would reduce their taxable revenue.
The abolition of any deduction for wages is likely to raise the cost of employing workers, even with abolition of the employers’ share of the payroll tax. And since the dividend deduction doesn’t appear to be related to profitability, companies could borrow to pay dividends and still get the deduction. Even a novice tax lawyer could easily make a tax shelter out of that.
And here’s the kicker in the Cain plan. Phase 2 is merely a transition to yet another fundamental tax reform. In Phase 3, the United States would adopt the so-called Fair Tax, which would replace all federal taxes with a 30 percent sales tax on all goods and services. In a previous post, I explained why the Fair Tax is a bad idea. I went into more detail in testimony before the House Ways and Means Committee on July 26.
Whatever one thinks of the Fair Tax, it makes not the slightest bit of sense to have a plan that requires fundamental changes to the federal tax system twice to achieve its objective.
Veterans of tax reform attempts in the United States know reform is very difficult and time-consuming even once. If the Fair Tax is a good idea, Mr. Cain ought to just do it, without confusing the issue with his unnecessary and highly complicated 9-9-9 plan. After all, one of the prime selling points of the Fair Tax is its simplicity, and the 9-9-9 plan is far from that.
Because so little detail exists, it’s hard to do either a proper revenue estimate or distributional analysis of the Cain plan. It’s obvious, however, that Phase 1 would represent a huge tax cut for the wealthy at a time when federal revenues are at a historical low as a share of the gross domestic product and the economy’s fundamental problem is a lack of aggregate demand.
Thus the Cain plan would increase the budget deficit without doing anything to stimulate demand, because rich people can already spend as much as they want and are unlikely to spend more even if their taxes are abolished.
The poor and the middle class might increase their spending if they could keep more of their earnings, but they will unquestionably pay more under Phase 2 of the Cain plan. With no tax on capital gains, the rich would pay almost nothing, while elimination of all deductions and credits, as well as imposition of a national sales tax, must necessarily raise taxes on everyone else, especially those not now paying income taxes.
At a minimum, the Cain plan is a distributional monstrosity. The poor would pay more while the rich would have their taxes cut, with no guarantee that economic growth will increase and good reason to believe that the budget deficit will increase.
Even allowing for the poorly thought through promises routinely made on the campaign trail, Mr. Cain’s tax plan stands out as exceptionally ill conceived.
Cain’s ’999' Plan Would Cause Largest Deficits Since WWII
Cain’s ’999' Plan Would Cause Largest Deficits Since WWII, While Increasing Taxes For Most Americans
Pat Garofalo
Oct 5, 2011
http://thinkprogress.org/economy/2011/10/05/336649/cain-999-analysis-deficits
2012 GOP presidential hopeful Herman Cain — who has seen a recent surge in the polls — has been trumpeting the supposed benefits of his “999? economic plan, which would implement a 9 percent flat-tax on personal income and corporate income, along with a 9 percent national sales tax, while scrapping the rest of the tax code (including all of the deductions and all of the taxes on investment income such as capital gains).
Cain claims that his plan would not be “regressive on the poor,” but economists disagree due to the imposition of a national sales tax that would wallop the poor significantly harder than the rich. Cain also claims the plan will be revenue-neutral, in that it would raise as much revenue as the current tax code. I had Center for American Progress Director of Tax and Budget Policy Michael Linden run the numbers on Cain’s plan, and it turns out that it wouldn’t be deficit-neutral — not even close (all calculations are based on 2007 tax data, the last year before the Great Recession):
– For the income tax portion: In 2007, total Adjusted Gross Income on all income tax returns was $8.7 trillion. Since Cain’s plan would exempt investment income, but would have no other deductions, that brings taxable income down to $7.4 trillion. A flat 9 percent tax would therefore have yielded about $665 billion in income tax revenue.
– For the corporate tax portion: In 2007, there was a total of $1.3 trillion in reported corporate income subject to tax. A flat 9 percent would have yielded $112 billion in revenue.
– For the sales tax portion: I used generally accepted estimates of the revenue generated from a value-added-tax (see here and here, for example). Those estimates suggest that a broad-based 5 percent tax on goods and services would generate about 2 percent of GDP in revenue. That implies that a 9 percent tax in 2007 would have generated about $500 billion.
– Together, then, the 9-9-9 plan would have generated a bit less than $1.3 trillion in total federal tax revenue. That may sound like a lot, but it’s only 9.2 percent of GDP. In 2007, we actually collected 18.5 percent of GDP in tax revenue. In other words, the 9-9-9 plan would cut federal revenue in half!
“Even if we reduced federal spending to the ‘historical average’ (when the population was younger and health care cost much less) it would still leave us with deficits over 11 percent of GDP (bigger than any deficit since WWII, including the deficits of the past three years),” Linden noted.
Linden also found that someone in the bottom quintile of earners — who currently pays about 2 percent of his or her income in federal taxes — would pay about 18 percent under Cain’s plan (9 percent on every dollar they make, plus 9 percent on every dollar they spent, which would likely be close to all of them). A middle-class individual would see his or her taxes go from about 14 percent to about 18 percent. But someone in the richest one percent of Americans would see his or her tax rate fall from about 28 percent to about 11 percent.
So Cain’s plan — which has earned accolades from the likes of supply-side guru Art Laffer — would explode the deficit, while increasing taxes on the poor to pay for a giant tax cut for the rich. As Center for American Progress Vice President for Economic Policy Michael Ettlinger put it, the plan “would be the biggest tax shift from the wealthy to the middle-class in the history of taxation, ever, anywhere, and it would bankrupt the country.”
Pat Garofalo
Oct 5, 2011
http://thinkprogress.org/economy/2011/10/05/336649/cain-999-analysis-deficits
2012 GOP presidential hopeful Herman Cain — who has seen a recent surge in the polls — has been trumpeting the supposed benefits of his “999? economic plan, which would implement a 9 percent flat-tax on personal income and corporate income, along with a 9 percent national sales tax, while scrapping the rest of the tax code (including all of the deductions and all of the taxes on investment income such as capital gains).
Cain claims that his plan would not be “regressive on the poor,” but economists disagree due to the imposition of a national sales tax that would wallop the poor significantly harder than the rich. Cain also claims the plan will be revenue-neutral, in that it would raise as much revenue as the current tax code. I had Center for American Progress Director of Tax and Budget Policy Michael Linden run the numbers on Cain’s plan, and it turns out that it wouldn’t be deficit-neutral — not even close (all calculations are based on 2007 tax data, the last year before the Great Recession):
– For the income tax portion: In 2007, total Adjusted Gross Income on all income tax returns was $8.7 trillion. Since Cain’s plan would exempt investment income, but would have no other deductions, that brings taxable income down to $7.4 trillion. A flat 9 percent tax would therefore have yielded about $665 billion in income tax revenue.
– For the corporate tax portion: In 2007, there was a total of $1.3 trillion in reported corporate income subject to tax. A flat 9 percent would have yielded $112 billion in revenue.
– For the sales tax portion: I used generally accepted estimates of the revenue generated from a value-added-tax (see here and here, for example). Those estimates suggest that a broad-based 5 percent tax on goods and services would generate about 2 percent of GDP in revenue. That implies that a 9 percent tax in 2007 would have generated about $500 billion.
– Together, then, the 9-9-9 plan would have generated a bit less than $1.3 trillion in total federal tax revenue. That may sound like a lot, but it’s only 9.2 percent of GDP. In 2007, we actually collected 18.5 percent of GDP in tax revenue. In other words, the 9-9-9 plan would cut federal revenue in half!
“Even if we reduced federal spending to the ‘historical average’ (when the population was younger and health care cost much less) it would still leave us with deficits over 11 percent of GDP (bigger than any deficit since WWII, including the deficits of the past three years),” Linden noted.
Linden also found that someone in the bottom quintile of earners — who currently pays about 2 percent of his or her income in federal taxes — would pay about 18 percent under Cain’s plan (9 percent on every dollar they make, plus 9 percent on every dollar they spent, which would likely be close to all of them). A middle-class individual would see his or her taxes go from about 14 percent to about 18 percent. But someone in the richest one percent of Americans would see his or her tax rate fall from about 28 percent to about 11 percent.
So Cain’s plan — which has earned accolades from the likes of supply-side guru Art Laffer — would explode the deficit, while increasing taxes on the poor to pay for a giant tax cut for the rich. As Center for American Progress Vice President for Economic Policy Michael Ettlinger put it, the plan “would be the biggest tax shift from the wealthy to the middle-class in the history of taxation, ever, anywhere, and it would bankrupt the country.”
Awesome Quotes
"It's a catchy phrase, in fact I thought it was the price of a pizza."
Jon Huntsman on Herman Cain's "9-9-9" tax plan
Jon Huntsman on Herman Cain's "9-9-9" tax plan
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