Shrinkage Tantrum-2 & Hillsdale

Author: David R. Kotok, Post Date: December 5, 2017
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We thank readers for their thoughtful comments regarding our discussion entitled “Tax Bill & Shrinkage Tantrum.” For those who may have missed it, here is the link: http://www.cumber.com/tax-bill-shrinkage-tantrum/.

One astute reader called our attention to the internal workings of the Senate via a link to a Politico story about Hillsdale College in Michigan. Here is that link: https://www.politico.com/story/2017/12/01/senate-tax-bill-hillsdale-college-endowment-275980?lo=ap_e1.

The Politico report articulates how this single school was destined for special treatment in the tax bill. The “carve-out” amendment was authored by Senator Pat Toomey (R-Pa). There is no explanation of Toomey’s role as the sponsor. His general statement is quoted by Politico.

In the midst of the notorious Senate debate last Friday evening, a bipartisan effort passed an amendment to strip the Toomey-authored provision from the final bill. The Politico report has the details. It also describes the connections between Hillsdale College and the DeVos family and relationships that allegedly tied the amendment to our Education Secretary.

My point here is not just about this attempt to use a legal provision to favor Hillsdale. I’ve never been to that college and have no plans to visit. My point is that the political forces of our nation continue to use these special interest maneuvers, as Toomey tried to do. Only the intense scrutiny of a free press saves our citizens from many politically motivated giveaways like this. We have written on this issue and cited examples in the past. The best a citizen can do is to protect the freedom of our press and to encourage the press to report without inhibition, to remain observant and vociferous, and to not give up. We must not fall silent.

Incidentally, Hillsdale College advertises a free course called Constitution 101 on social media, along with a batch of other free courses listed at its website. (See https://www.hillsdale.edu/academics/free-online-courses/.) It might be instructive to compare that Constitution 101 course with, say, one from Yale (see for example https://www.coursera.org/learn/written-constitution).

On a different issue, a skilled and seasoned reader (who will remain anonymous) sent the following observation:

“Unfortunately, by the lessons my mentor taught me about econometrics, the reliability of ANY estimate like the CBO estimate you attached, for any year into the future, falls in a parabolic manner. The first year may have 66% reliability, but by year five that’s likely to be no more than 25%, and by year 10 it is entirely garbage. That doesn’t mean Congress is wrong to use these processes – there needs to be some standardized basis for understanding what they are doing. In this case, however, when one combines (1) a demonstrably benign T-rate assumption, (2) absolutely no assumption on the credit spreads that the private sector will have to pay, and (3) the fact that government is now only a tiny fraction of the size of the total US economy (the post WW II data on which I learned econometrics was far more heavily weighted to government than now), whatever may trigger the tantrum you note, it will render this projection irrelevant.”

Another skilled and deeply experienced reader, who shall also remain anonymous, sent an extensive analysis of the tax reform effort. Here is an excerpt:

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