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Dr. Larry Arnn’s Hillsdale Dialogue on the Tax Bill, and How the Congress Needs To Work with President Trump on Restoring Legislative Power

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HH: Normally, the Hillsdale Dialogue, which many of you are addicted to, appears on Friday at this hour. Today, it is at Thursday in the third hour of the show, because tomorrow, we celebrate Veterans Day, which falls on a Saturday. It is also the Marine Corps birthday, and it is my annual Semper Fi Fund fundraiser. So Dr. Arnn, in a rare, gracious moment to me, at least, agreed to actually get up early. He usually sleeps in like Churchill to 11 or 12 and join me on a Thursday morning to discuss many, many important topics. Dr. Arnn, president of Hillsdale College, you can see everything Hillsdale at www.hillsdale.edu. You can watch his amazing Constitution course and the work of his colleagues as well, and you can listen to all of our dialogues dating back to 2013 at www.hughforhillsdale.com. Hopefully, he will have forgotten a couple of jabs I took at him in the course of that introduction now. Good morning, Dr. Arnn.

LA: Yeah, good morning. Was anyone listening to you when you said any of that? (laughing)

HH: (laughing) Hey, I have a bunch of stuff to talk with you. You occasionally will take one of my recommendations seriously, right? Will you please read a book that I recommend to you?

LA: Okay.

HH: It is called World Without Mind by Franklin Foer. He used to be the editor of the New Republic. He’s a man of the left. And I believe you may actually take steps to limit Hillsdale students from using Facebook after you have read it.

LA: You know…

HH: It is, it is an eye-opening scary look at what social media is doing to us.

LA: We’re, oh, he’s the guy who used to work at Facebook, right? I read something about this book.

HH: No, no, he used to work at the New Republic and got fired because he refused to become sort of new media addicted.

LA: Yeah, well, we in orientation at the college, we’ve started including warnings to kids about social media, because they do, you know, it, you can just get lost in this world. And we read this story about how you don’t really connect with anybody. You’re connecting to your phone. And the relationships are transient and superficial, and there are many of them. So I’ve read some stuff about that, but I will look at that book there, because here at Hillsdale College, we are concerned about that.

HH: Well, I’m glad, because I was, I learned so much scary stuff about the algorithmic approach, and what they value and what they don’t value. And they do not value what you value and I value. Secondly, this is a very obscure part of the tax code, but I want to talk about it with you, because you’re in a position to comment authoritatively, a rare thing when it doesn’t involve Churchill, history or the ideas of the world. The tax bill in the House eliminates, or actually requires colleges to declare as income, tuition waivers extended to the children of their faculty and staff, or extended to those children of faculty and staff if they are attending a college in a consortium of colleges that agree to do that. That will require a huge tax payment, a lot of income for a lot of people for whom tuition has been waived. Moreover, it will be sudden so that students who made their decision in reliance upon that provision of the tax code will be penalized immediately. What do you make of that idea?

LA: It’s one of a few things that are in this tax bill. I mean, there’s a lot of things in this tax bill that are bad, by the way, although it’s a great thing and I support it. But one of a few things that are bad in there is, are these things on education. And they are justified by the fact that education is so heavily subsidized. And it is. You know, what does that do for poor us who don’t take any money from the government? But think about the approach, right, because if you justify raising taxes on a thing because you’re already subsidizing it too much, why would not the reaction be to diminish the subsidies?

HH: Diminish the subsidy, yes. Yes.

LA: And see, the thing is if you take this attitude about everything you subsidize, the government can never get any smaller. Eventually, the road that we’ll walk down is that everything will be paid for by the government, and everything will be deductible. And every penny will be taken. So I mean, nothing will be deductible, and every penny will be taken. So that thing is silly, and you know, you don’t, it’s, college employees, you know, how does that work at Hillsdale College? Well, Hillsdale College is a very desirable place to go to college. And the great question is can they get in? And they’re just rejoicing when they get in. And they don’t, you know, it’s hard to get into Hillsdale College. And it’s rejoicing not just because, you know, you can get free tuition if you worked at the college for two years or more. But it’s also rejoicing because it’s a different kind of place. And it means that the maintenance workers’ kids, for example, can have an elite college experience, and they think that they’ll grow up to be good people. Well, heck, you know, we’re going to have to, if they do this thing, we’re going to have to find a way to work on making that up, right, because I know those people, and you don’t want their kids to be, I mean, what are they going to do, go somewhere else? That would be terrible for them. so it’s, all of these things, but especially this one on education, just open your ears. When the justification for raising taxes on a thing is that we’re subsidizing a lot, if the reaction to that is not to subsidize it less, then you are actually making an argument for unlimited government.

HH: You are. Now a second part of the tax code which is not part of that argument is that we do use preferences to encourage things. One of the things we encourage is adoption. So we have an adoption tax credit. Kevin Brady is himself the father of two adopted children. And he said it’s very difficult for him to have advanced this, but he didn’t want to treat one set of parents differently from another set of parents. James Lankford, senator from Oklahoma, just told me, Dr. Arnn, that it will be back in the Senate version of the bill, because it’s a lot more at stake here than just one set of parents. What do you think about the adoption tax credit?

LA: Well, you know, I am the father of an adopted child. He’s in the Army right now.

HH: I’d forgotten that.

LA: We call him the stray.

HH: (laughing) I had actually forgotten that. Normally, I forget who’s an adopted kid or not, because their parents don’t much care whether they’re adopted or not.

LA: (laughing) Well, our Tony is referred to as the stray. And we actually made up a private family name for him, because we all had them, you know? We’ve got the horse and the Pook. Tony is Murfett. But, and that doesn’t mean anything, except that’s what his name is.

HH: Don’t let his squad know that.

LA: Well, I’m afraid I might have just done.

HH: Yup.

LA: But he’s, you know, so they should treat them all the same. And you know, this, one of the things that’s going on in this tax bill, I hope and believe, is that they’re cleaning up a lot of preferences and particular messes. And you know, in the ideal world, by the way, the tax code would provide a 15 or 18% rate for everybody, and you could do that and have a big exclusion for lower income people. Well, that’s the flat tax, right? And I believe in that. But we don’t live I that world, and so this is one that I, let’s put it this way, do not oppose.

HH: Oh, you do not oppose it? So you want it restored?

LA: I do not…yeah, I do. It should stay there. And it, you know, but there’s a bunch of these things, right? And they’re just like that. So there’s a strong argument about why you’ve got to get rid of that thing or keep that thing. And if you’re trying to flatten the rates, then a lot of these things are going to have to be gotten rid of.

HH: One of the things there’s a strong argument for keeping, but it doesn’t look like it’s prevailing, is the state and local tax deduction. The strong argument for keeping is that it will keep the Republicans in the majority. And to remove it will make them into the minority. What do you make of that argument?

LA: Well, I think if they become persuaded of that argument, they will not pass that provision. (laughing)

HH: (laughing) Yeah, that’s what I think, too. And it’s, there are a lot of Republicans in New York and California who like Darrell Issa, who say they won’t vote for the bill because it’s in there. What they’ve got to do is get it out of the bill, because they have to vote for the bill, or they’re going to lose Republican votes.

LA: Yeah, that’s right. Yeah, I know.

HH: So it’s, they’ve got to make…

LA: It is certainly true that from the point of view of common sense and practical judgment, that thing needs to go. And the reason is it’s just like that thing about education subsidies and education taxes. It’s a left hand and a right hand argument. A hundred years ago or any time before that, actually 60 years ago or any time before that, the federal, well, maybe 80 years ago, the federal government was smaller than the state governments. And what it’s done with its brilliant income tax especially is that it’s taken the lion’s share of the majority of the tax revenues in the country. And there’s a sop to the states. It has, you know, let them deduct their taxes off the federal, their revenues off the federal taxes. A better would be to clean all that up, right, and return a lot of the functions, which is most of them, in the administrative area, almost everything that’s done in the federal government is supposed to be done in the states, if at all. So the reason this debate is so difficult is it puts pressure on the states, then, to economize.

HH: Right.

LA: And that’s a good idea. And I will just add a note of caution, because it just so happens that I was a great follower of Margaret Thatcher and knew her and lived there for a while, while she was prime minister. And what did she fall over? What cost her the premiership? And the answer was a provision that state, and city and municipal taxes, they would have to pay a larger share of the cost, and everybody’s property tax bills went up.

HH: And everybody got rid of her as prime minister. I’ll be right back, America. Dr. Larry Arnn, the Hillsdale Dialogue continues on, and we will talk about Virginia, I assure you, after the break.

— – – – – –

HH: Dr. Arnn, one last tax code question before we move on. In the Washington Post this week, my column was about raising revenue, because they have to keep the net effect of the tax bill to a [trillion] and a half dollars of red ink. And they’re having trouble doing that, so they have to add revenue. One idea comes from our friend, Senator Cotton, which is to repeal the individual mandate, which is, by the way, a freedom thing as well, and that would save between $300-400 billion dollars. So hopefully, that will be done. I also propose increasing the gas tax, because it’s more of a fee on people who use infrastructure, and instituting a delivery fee on every residential delivery of a purchased good on the internet of 5%, again, in keeping with the, from the time of Lincoln forward belief in internal improvements and paying for them by the people who use them. What do you make of the three ideas for raising revenue?

LA: Well, the first one is genius. Tom Cotton and Ted Cruz have come up with that. I actually spoke to Senator Cotton last night. He was full of hope about that. And this, I can’t tell right now, but there’s some sign that it’s in the markups. It’s coming out of the Senate this morning.

HH: Excellent.

LA: I need to be sure about that. And it is just a brilliant idea, because it engages on that point, right? Just remember, the whole manner and method of the federal government is on the left hand and the right hand. And on the left hand, they give something, usually something valuable, often not, and then what they take is just everything you have. And so (laughing)

HH: (laughing) That’s well put and true.

LA: Let’s trade, they love to say, right? So what we’ll do is we will require you to have insurance, o irresponsible soul who can’t run your own life, and all we want is like 30% of your income. And it distorts the market, and so Tom Cotton’s point made to me last night on the phone was, he said he can say to those Republicans who are reluctant to vote for this thing that not only does it repeal a heavy tax, but it lets them escape from the market into which they are forced to buy. And because of the forcing, the thing they’re buying is more expensive.

HH: And I honestly do not believe how a Republican can be against this.

LA: Right.

HH: It is a freedom-inducing expanding basic premise that we have hated about Obamacare from the beginning, that they made people sitting alone in their room the subject of federal power. That’s…

LA: That’s it.

HH: It’s unbelievable.

LA: It is, and it’s, and just, you know, this whole deal, by the way, that under the rules, what the rules are in the Senate is if they, if the thing costs more than X over 10 years according to a calculation, that they might as well let 3rd graders do the calculation for all, you know, because what’s going to be the effect of this over ten years? It’s highly speculative.

HH: Right.

LA: But if this calculation run by people who are not wholly neutral shows that is costs more than $1.4 trillion, I think is the number, then they require more votes in the Senate to pass it. And that means the bias is everything has to be kept the same. And we’ve baked big government into the system, and it’s very hard to get it out.

HH: By the way, I think it would be a great improvement if we let 3rd graders make the calculation, because they would say we don’t know how to do that. What do you think, we’re nuts? And that would be true.

LA: Yeah, that would be, I’m thinking of the 3rd grade teacher in my daughter’s charter school that she runs.

HH: Yeah.

LA: You know, if she’s listening, she’ll be thinking they’re slandering my kids. They could do that.

HH: They could do that. No, they couldn’t. No one can project. No one can project 10 years from now. I mean, just think about it. Just think about it. The world changed in the last six weeks. We had three deadly hurricanes, one deadly set of fires, a Las Vegas massacre, a Sutherland Springs massacre, and a terrorist attack in New York. And that’s in seven weeks. Who can predict ten years? It’s just nuts. I’ll be right back with Dr. Arnn when we talk about what did Virginia mean when we return.

— – – — –

HH: I am joined by Dr. Larry Arnn, who I believe over the past two years has been more often right about electoral politics than anyone else in the country, even though we both stayed in Switzerland through the Republican primaries. And he actually…

LA: Who backed why?

HH: (laughing) Perhaps, but you anticipated the Trump win, and very few people did. And so now we have a new set of data – Virginia, New Jersey, Bill de Blasio winning, but in Ohio, the passage of Amendment 1, which is an anti-crime bill, 84-16%, and in Utah, the very easy holding of the Congressional seat. And we have this as well. Charlie Sykes, who is a long-distinguished pedigree as a conservative in Wisconsin wrote minutes ago, “Two things we learned from Tuesday’s election – 1. The Trump base is still solid and unmovable, and 2. The Trump base is a minority of the electorate, to which I responded 100% correct. It needs coalition partners to make a majority, either or both anti-Hillary Clinton voters as in ’16, or anti-progressive centrists who swing (and always Reaganauts – nat. security, religious liberty, Constitutional originalist conservatives like me). What do you think about Virginia, Larry Arnn?

LA: Well, first, there’s a kind of shocking development that comes from Northern Virginia, and that is it appears that most of the people who work for the federal government are liberals.

HH: (laughing)

LA: (laughing)

HH: Can I give you another shocking bit of data?

LA: Yeah.

HH: In Loudoun County, Ed Gillespie won Loudoun County, which is about, Leesburg is an hour outside of D.C., but D.C. is expanding like Rome did to hill after hill. It’s getting bigger. Loudoun County voted for Ed Gillespie three years ago for Senate by 500 votes. It voted for Northam by 23,000 votes. The average income in Loudoun County is $117,000.

LA: Yeah.

HH: It was not populated when I lived here in the 80s. It was farmland.

LA: Yeah, yeah, well…

HH: What does that tell you?

LA: Just look at the architecture, it’s one of my favorite points, right? Just walk around Washington, D.C., and if you come across an ugly building, which you will everywhere, it’s new, and what’s going on in it is unconstitutional.

HH: (laughing)

LA: And (laughing) so, and so those people, right, I mean, first of all, Trump wants to drain the swamp, right? And these, some people appear to be taking it personally.

HH: Yes.

LA: So there’s that. That’s a lesson. The second lesson, your tweet back and forth with Sykes is exactly informative, right? In order, by the way, to make an enduring change in American politics, you need a majority, and you need it to last. And of course, it will be a coalition, but it has to be a coalition around something. Now Trump has just raised questions for the GOP and for the Democratic Party, too, and for the nation, because he brought a bunch of new people in, right? And what were his themes? His themes were this is America, we should all be treated alike, the government is a swamp, we should calculate all our policies for the interest of the citizens of the United States of America. And then there were policy issues of a big sort having to do with the regulatory state, with immigration, and with trade. So that’s the Trump thing. Now the right thing to do for everybody who’s in Trump’s political party, you know, and he did win the presidency, the right thing for them to be doing is thinking how do we combine those new people with what we’ve already got? And you can’t start with just a raw, political calculation. It has to start with what do you believe, you know? If you think, for example, that signing trade agreements, one of the people who works on the trade agreements in the Trump administration is a student of mine. I won’t say who he is. But he told me now that he’s working on those things and seeing what they say, we’re building the European Union, right? European Union, international bureaucracy, huge and powerful that governs much of Europe now, that grew out of purported free trade agreements. And what resulted from it was regulatory arrangements. So the point is you don’t have to disagree that free trade is better in principle. I agree with that. You could attack these trade agreements on that basis, and maybe then you could combine what Trump got with what was already in the Republican Party. And they should be thinking about that. And I think thinking about Trump’s tweets is less urgent than thinking about that, because first of all, there isn’t anything to be done about those tweets, and…

HH: He’s not giving them up.

LA: Yeah, and you know, I don’t read the tweets, but I do notice that the news often starts with the tweets, and that means that he’s picked what the subject of the news is that day, and I think he prefers that. So I would say that you know, politics in America are in turmoil. I also think there isn’t any, you know, here’s another point. I should make this point. If you look what happened since the day Ronald Reagan retired, there has been no one of either party run for office, not less, for president, much less get elected, in either party, on a general platform of repeal, of draining the swamp or cutting the size and scope and intrusiveness and expanse of the federal establishment. No one has made that a general theme. Reagan did. And so now Trump has come along and done it. And just look at the course. The government is larger since Reagan was retired. It is much more dangerous. It is a much bigger percentage of the economy, and therefore much, much more influential in elections. And so the course that we’re on is not all that great. And that means, in fact, it’s disastrous, potentially. We’ve been losing, and so if Trump is united around the great themes of our country and its control by the citizens, then somebody, and it takes a lot more people than Donald Trump to do this, somebody has to turn that into a working agenda for limited government in America in both foreign and domestic policy.

HH: And the efficacy, we have to be for liberty again.

LA: Yeah.

HH: I keep coming back to my audience and my students and in my, we have to be for liberty, and we have to defend it as a positive good. That’s one of the reasons why I’m on my campaign against social media now that I’ve read Franklin Foer’s book, is they’re a threat to liberty. They really are a genuine danger. Concentration of wealth, power and especially of information control is a dangerous thing to liberty. And people don’t understand, I think it is in Thucydides. The secret to happiness is freedom, and the secret to freedom is courage. We have to make that argument, Larry Arnn.

LA: Yeah. And time and again, you see Trump react to, you know, there’s some, to use Supreme Court language, discrete and insular minorities, some group of people who feel oppressed, and what they want to do is change the law so that everyone and everything has to be reorganized around their claims. And Trump will say you know, why don’t we all just be civil to each other and let people live the way they want to? And that’s a really excellent solution to the problem. And what’s lost in these things, in this claim for a false kind of equality, are the claims of liberty. What about the idea that people just get to live their own lives and are responsible for those lives?

HH: And that they be allowed, for example, to worship God as they understand God to be, and to do so without any interference. If, I believe Justice Jackson said, if there is a North Star in our Constitutional firmament, it is that no man’s opinion shall be coerced. And therefore, I can’t be made to bend the knee at any altar in which I do not believe. And I think, you know, Trump lacks the eloquence to make these arguments, but he intuits them, Larry Arnn. What tactical advice, you are the great student of Churchill, who himself immersed himself in the tactics of campaigns and elections for a century, right? For a century, he did it. What tactical advice do you have for President Trump on changing his path so he doesn’t lose his majority, because you know the Democrats will impeach him.

LA: Yeah, they will, and so you know, first of all, he, the first thing he’s got to do is press on. And there isn’t any use urging him to do that. He’s very likely to do that. To be more eloquent, well, first of all, you know, your producer, Duane, our friend, was pointing out to me this morning that speech that Trump gave to the South Korean Congress…

HH: Oh, it’s wonderful, wonderful.

LA: That thing is awesome.

HH: His three best speeches…

LA: And 10,000 Trump…

HH: His three best speeches have been Saudi Arabia, Poland and South Korea.

LA: But you know, think back. How long has it been since Trump gave a major set piece speech that it wasn’t excellent? In Poland, you mentioned, right?

HH: Yeah.

LA: But a lot of these things, you know, he has a governing theme. And you know, he, let’s say I talked to a senior leader of the Senate yesterday, and I really like this guy. And he’s very controversial with conservatives, but he said you know, I wish he wouldn’t attack me in public. And I replied, good point. (laughing)

HH: (laughing)

LA: So yeah, he shouldn’t, you know, he should, I would hope that they’re getting used to working with each other, and it’s coming up on a year. They should sit down like grownups, all of them, and I’m not criticizing any party in this. They should sit down like grownups and say what is the way forward? Let us be ambitious about that. Let us think that we wish, I mean, you know, my favorite thing, right, all the issues of public policy that are debated today are trees, and we forget about the forest.

HH: And we have got to get the forest back. In the last segment of this week’s Hillsdale Dialogue, we’ll talk about the forest. I think part of that forest are the three aircraft carriers, I just tweeted out a picture of the three of them, together in the Pacific. That’s part of the forest.

—- – – — –

HH: So Dr. Arnn, we’ve got five minutes here. What do you want the Republicans in Congress to do to make sure that this time next year we’re not talking about a wipeout of the Republican Party in Congress?

LA: Well, one thing that I strongly recommend is that they do the biggest and most important thing, and that is they should recover to themselves the legislative power. In the Constitutional debates, Madison makes plain that the reason separation of powers will prevail, and that’s the single most important thing about the Constitution, gives the document its structure, for example, would prevail because the branches would each be ambitious and jealous of their powers. And beginning, the argument began in the 1890s, but in the 1960s, mostly, and 70s, the Congress alienated the legislative power to the bureaucracy. I’ll tell you the scope of it. In the last two year Congress that ended last year, the Congress passed 300 bills in two years. That’s about the average for more than 100 years. But in the last year of Obama, 87,000 pages were added to the federal register.

HH: Oh, that is astonishing.

LA: They came, look at the scope of that, right? And that means that legislation, which is first of all above all else supposed to be passed by the representative of the people delegating that authority is one of the most unconstitutional things. And they did it, and they did it out of ambition. They thought it’s a brave, new world, they choose that expression carefully. It’s a brave, new world, and we can now manage, we Congressmen, a vast mechanism much larger than before to make life much better than ever for everybody. Just think of the things we’re talking about, the details run in the federal government that are coming up in this tax bill. It’s way too many. So what I think now is there’s a historic opportunity. And that consists partly in the fact that the president who comes out of nowhere has made a theme of this in his life for 30 years. Amazing nobody knows that, but I looked it up, right? People always say how did you know that, and I say I work in a college. We look stuff up.

HH: (laughing)

LA: But (laughing) but it, so, but the second thing is Congress is coming to see, I hear this more and more, they have actually become unimportant in the system. A very senior person in the executive branch, a civil servant, a great guy, said to me when I first came to work here, if we got a letter from a Congressional committee, everything stopped to answer it. Now, we just throw it on the desk, and we might get to it, and we might not. And we even ignore their subpoenas.

HH: Yeah.

LA: And so Congress, and see, just remember, you may not like Congress, but they are the people that you elect, and they are the ones you can throw out, whereas you don’t even know the names of the ones who’ve passed all these regulations, right?

HH: And I can tell you from personal experience they will not return your phone calls. They don’t care what you think.

LA: So they won’t, yeah, they don’t care, right? And it’s just too, you know, we just, so the point is that is contempt for self-government, for the rule of the people. Now there’s some really artful things going on in the executive branch, especially Mick Mulvaney and the Office of Management and Budget, and at the Domestic Policy Council. And they are step by step reducing the regulatory state to some political accountability. The Congress should just put that into law and make it a major theme. And then, I think, that would lay the ground for them to get along with the President. And see, Tom Cotton is a model about this. He doesn’t like everything the President does. He just likes some things a huge amount, and so he works on those things. And then behind the scenes…

HH: And that is the way to do it. But I’m going to conclude by saying that I want to expand the regulatory state in one place.

LA: Yeah?

HH: I want to expand its power over these concentrations of wealth and power in Silicon Valley, and I would encourage you to read World Without Mind urgently, because we have in our midst a cancer, and it’s social media. And it is, it’s truly freedom-destroying. And I saw someone go off on it this morning online. And I think after you, those of us who read books are unaware, and who reject Facebook leisure, are unaware of the scope and the scale of its invasion of our young people’s lives. But it’s just terrifying, Dr. Arnn, and so I hope you will take that with you and have a wonderful week. We will be back next week on the Hillsdale Dialogue in the regular hour that is accorded to us, which is the final hour of the radio week.

End of interview.

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