The Tax Bill and Virginia's Gubernatorial Race

HUGH HEWITT: Morning glory, America. It is Hugh Hewitt. And 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 also is the Marine Corps birthday. And it's my annual Semper Fi fund fundraiser.

So Dr. Larry 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 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 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.

LARRY ARNN: Yeah, good morning. Was anyone listening to you when you said any of that?

HUGH HEWITT: 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? It is--

LARRY ARNN: OK.

HUGH HEWITT: It is called World Without Mind by Franklin Foer, F-O-E-R. 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. It is an eye-opening, scary look at what social media is doing to us.

LARRY ARNN: Yeah, oh, he's the guy who used to work at Facebook, right? I read--

HUGH HEWITT: No, he used to work at the New Republic and got fired. Because he refused to become new media addicted.

LARRY ARNN: Yeah, well, we, in orientation at the college, we've started including warnings to kids about social media. Because they do-- 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. Because, at Hillsdale College, we are concerned about that.

HUGH HEWITT: Oh, I'm glad. Because 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're 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?

LARRY ARNN: 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, although it's a great thing, and I support it. But one of the few things that are bad in there are these things on education. And they are justified by the fact that education is so heavily subsidized. And it is.

What does that do for poor us who don't take any money from the government? But think about the approach. 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?

HUGH HEWITT: Diminish the subsidy, yes.

LARRY ARNN: 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. I mean, nothing will be deductible, and every penny will be taken.

So that thing is silly. And you don't-- college employees-- 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 get-- it's hard to get into Hillsdale College.

And it's rejoicing not just because you can get free tuition if you've 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 worker's kids, for example, can have an elite college experience. And they think that they'll grow up to be good people.

Well, heck, we're going to have-- if they do this thing, we're going to have to find a way to work on making that up. 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'd be terrible for them.

So it's all 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.

HUGH HEWITT: 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?

LARRY ARNN: Well, I am the father of an adopted child. He's in the Army right now.

HUGH HEWITT: I'd forgotten that. I had actually forgotten that. Normally I forget who's an adopted kid or not because their parents don't much care whether they are adopted or not.

LARRY ARNN: Well, I tell him he's referred to as the stray. And we actually made up a private family name for him. Because we all had them. We've got the horse and the [? pook. ?] Tony is [? Murfit. ?] And that doesn't mean anything, so that's why he's named that.

HUGH HEWITT: Don't let his squad know that.

LARRY ARNN: I'm afraid I might have just done.

HUGH HEWITT: Yep.

LARRY ARNN: But he's-- so they should treat them all the same. And 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 in the ideal world, by the way, the tax code would provide a 15% or 18% raise for everybody.

And you could do that and have a big exclusion for lower income people. Well, that's the flat tax, and I believe in that. But we don't live in that world. And so this is one that I-- let's put it this way-- do not oppose.

HUGH HEWITT: Oh, you do not oppose it. So you want it restored.

LARRY ARNN: Yeah, I do. It should stay there. And it's-- but there's a bunch of these things that are just like that. So there's a strong argument about why you 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 got rid of.

HUGH HEWITT: 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?

LARRY ARNN: Well, I think if they become persuaded of that argument, they will not pass that provision.

HUGH HEWITT: There are a lot of Republicans in New York and California, 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.

LARRY ARNN: 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 or a right hand argument.

100 years ago or any time before that-- actually 60 years ago or any time before that, 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 it has taken the lion's share of the majority of the tax revenues in the country. And as a sop to the states, it has let them deduct their their revenues off the federal taxes.

A better thing would be to clean all that up 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 at the states, if at all. So the reason this debate is so difficult is, it puts pressure on the states then to economize.

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 she was prime minister.

And what did she fall over? What cost her the premiership? And the answer was, a provision that state-- that city and municipal taxes, they would have to pay a larger share of their cost. And everybody's property tax bills went up.

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

Welcome back, America. It's Hugh Hewitt, joined by Dr. Larry Arnn, president of Hillsdale College. The Hillsdale Dialogue is a week early, a day early this week. Because tomorrow is Veterans Day's observation.

And it's also the Marine Corps birthday. And it's our annual Semper Fi fund fundraiser. So the injured marine Semper Fi fund will be here today. And Hillsdale Dialogue is today as a result. Tomorrow the Semper Fi fund will be.

Dr. Larry Arnn is my guest, president of Hillsdale College, all things Hillsdale at Hillsdale.edu, including a free subscription to Imprimis, the speech digest. Many remarkable online courses, every conversation I've had with Dr. Arnn and his colleagues dating back to 2013 available at HughforHillsdale.com.

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 $1.5 billion 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 and $400 billion, 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?

LARRY ARNN: 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 I can't tell right now. But there there's some sign that it's in the mark up that's coming out of the Senate this morning.

HUGH HEWITT: Excellent.

LARRY ARNN: Sure about that. And it is just a brilliant idea. Because it engages on that point. Just remember, whole manner and method of the federal government is on the left hand and on the right hand. And on the left hand, they give us something, usually something valuable, often not. And then what they take is just everything you have, and so--

HUGH HEWITT: That's well put and true.

LARRY ARNN: Let's trade, they love to say. So what we'll do is, we will require you to have insurance, oh irresponsible soul who can't run your own life. And all we want is 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 that you 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 a market into which they're forced to buy. And because of the forcing, the thing they're buying is more expensive.

HUGH HEWITT: And I honestly do not believe how a Republican can be against this. 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 is unbelievable.

LARRY ARNN: It is. And it's-- this whole deal, by the way, that under the rules, what the rules are in the Senate is, if the thing costs more than x over 10 years, according to a calculation that, they might as well let third graders do the calculation for all-- because what's going to be effective over 10 years is highly speculative.

HUGH HEWITT: Right.

LARRY ARNN: But if this calculation, run by people who are not wholly neutral, shows that it 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.

HUGH HEWITT: By the way, I think it would be a great improvement if we let third 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.

LARRY ARNN: I'm thinking of the third grade teacher in my daughter's charter school that she runs. If she's listening, she'll be thinking, they're slandering my kids. They could do that.

HUGH HEWITT: They could do that. No, they couldn't. No one can project 10 years from now.

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 terrorism attack in New York. And that's in seven weeks. Who can predict 10 years?

It's nuts. I'll be right back to talk more. And we'll talk about what did Virginia mean when we return.

Welcome back, America. I'm 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--

LARRY ARNN: That's why.

HUGH HEWITT: 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% to 16%. And in Utah, the very easy holding of the congressional seat.

And we have this as well. Charlie Sykes, who has a long distinguished pedigree as a conservative in Wisconsin, wrote minutes ago, "Two things we learned from Tuesday's election. One, the Trump base is still solid and immovable. Two, 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. Parens, and always Reagonots, not security, religious liberty, constitution originalist conservatives like me. What do you think about Virginia, Larry Arnn?

LARRY ARNN: 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.

HUGH HEWITT: Can I give you another shocking bit of data? In Loudoun County, Ed Gillespie won Loudoun County, which is about, Leesburg is an hour outside of DC. But DC 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.

It was not populated when I lived here in the 80s. It was farmland. What does that tell you?

LARRY ARNN: Just look at the architecture. It's one of my favorite points. Just walk around Washington, DC. And if you come across an ugly building-- which you will everywhere-- it's new. And what's going on in it is unconstitutional.

And those people-- first of all, Trump wants to drain the swamp. And some people appear to be taking it personally.

HUGH HEWITT: Yes.

LARRY ARNN: And so there's that. That's a lesson. The second lesson, your tweet back and forth with Sykes is exactly informative.

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 to answer the nation. Because he brought a bunch of new people in. 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 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-- 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?

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 a European Union. 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.

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.

HUGH HEWITT: He's not giving them up.

LARRY ARNN: Yeah, and 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 the subject of the news that day. And I think he prefers that.

So I would say that politics in America are in turmoil. I also think there isn't any-- 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 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 expense 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.

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

LARRY ARNN: Yeah, time and again, you see Trump react to-- there's some, to use Supreme Court language, discrete and insular minority, 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, 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?

HUGH HEWITT: And that they be allowed, for example, to worship God as they understand God to be and to do so without any interference. 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 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 immersed himself in the tactics of campaigns and elections for a century. 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.

LARRY ARNN: Yeah, they will. So I, first of all, 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, your producer Duane, our friend, was pointing out to me this morning that speech that Trump gave to the South Korean--

HUGH HEWITT: Oh, it's wonderful.

LARRY ARNN: --congress. That thing is awesome.

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

LARRY ARNN: But since that, how long has it been since Trump gave a major set piece speech that it wasn't insolent? In Poland, you mentioned. But a lot of these things, he has a governing theme.

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.

So yeah, he shouldn't. 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-- my favorite thing, all the issues of public policy that are debated today are trees. And we forget about the forest.

HUGH HEWITT: 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.

Welcome back, America. It's Hugh here at the Hillsdale Dialogue in its victory lap for this week. It's on Thursday today, not tomorrow. Because tomorrow is the Semper Fi fund show for the injured marine Semper Fi fund on Veterans Day and the Marine Corps birthday.

Dr. Larry Arnn is president of Hillsdale College, which produces its fair share of marines and other members of the service, its fair share of Supreme Court clerks, its fair share of White House staff. 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 wipe out of the Republican Party in Congress?

LARRY ARNN: 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 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.

HUGH HEWITT: That is astonishing.

LARRY ARNN: Look at the scope of that. 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. People always say, how did you know that? And I say, I work in a college. We look stuff up.

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, 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.

HUGH HEWITT: Yep.

LARRY ARNN: 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.

HUGH HEWITT: And I can tell you from personal experience, they will not return your phone calls. They don't care what you think.

LARRY ARNN: Yeah, they don't care. 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 Mike Mulvaney and the Office of Management and Budget and 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 dislikes some things a huge amount. And so he works on those things.

HUGH HEWITT: 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. 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'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.

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.