Pelopidas Hack Criticizes MU Prof, Show-Me Institute's "Chief Economist"
HATFIELD: Okay. We were talking about this e-mail concerning Dr. Haslag which is Exhibit 5. Dr. Haslag concludes in the next to last paragraph under the ballot initiative considered, the tax base will be more volatile than under the current policy. And I noticed later in the e-mail, I think you disagreed with that conclusion, correct?
HATFIELD: And you said his math is incorrect?
HATFIELD: And can you explain to me in layman's terms how so?
TOMICKI: Certainly. Well, the way he calculates volatility, he takes a weighted average of the two tax components. Here he takes 75 percent of the volatility of 1.25 and then he takes a quarter of 8 percent and arrives at a 4.9 percent volatility. I compare this in my e-mail to Travis as looking at a portfolio of tax sources. You have different sources of tax that generates some sort of income, just as if you had a portfolio of stocks. The formula for calculating the variance or for the standard deviation of a portfolio of assets is not the way Joe Haslag calculates it. It's simply arithmetically incorrect. It's basic Finance 101. And I detailed the exact numbers of how this happens here.
HATFIELD: So your calculation there is known in the science world as beta; is that right?
TOMICKI: No, I don't believe.
TOMICKI: Beta is a variable that comes out of regression analysis comparing rates of return on assets, generally stocks or mutual funds, to some sort of market index, generally the S&P 500. Beta will tell you – and betas, by the way, are not always statistically significant. That's one thing that people don't mention. Betas tend to tell you how volatile the stock is with respect to a specific market index.
HATFIELD: Okay. Do you have an understanding of where Dr. Formula -- Dr. Haslag came up with his formula?
TOMICKI: No, I have no idea.
HATFIELD: It doesn't look familiar to you at all?
TOMICKI: No. It looks like something that I would do on the back of a paper. It seems the first one thinks of -- one would think of. But it's not correct. We know from portfolio theory that's the formula for a portfolio variance.
HATFIELD: All right. So you refer to Dr. Haslag's calculation as a particularly embarrassing mistake?
TOMICKI: I think that's -- I think if it was presented to his fellow members on the board, I think he would particularly be embarrassed.
HATFIELD: And why is that?
TOMICKI: Because it's such a basic fundamental mistake. It's just basic and fundamental. It's taught to students in Finance 101 how to calculate the variance of a portfolio and he doesn't do that correctly. He forgets to square the terms and he arrives at just a very weird number.
HATFIELD: Okay. Have you had other experiences with Dr. Haslag where he has done incorrect calculations?
HATFIELD: What were those?
TOMICKI: The first Show-Me study which I discussed at the beginning which talked about what the tax rate on sales would have to be to replace all income taxes in Missouri. Again, it assumed all personal consumption would be taxed. That's -- that was presented in a paper that was taken seriously and those numbers were used in a bill, a piece of legislation that was proposed in the Missouri House. And yet his analysis didn't exclude things that are non-taxable and things that the government of Missouri shouldn't tax or can't tax pursuant to the constitution or federal tax like Medicaid which is not taxable or food stamps. So he wrote a paper that was taken seriously and used as a basis for legislation that had fundamental flaws that believed that the government could collect tax on individuals living in their own houses. That's their own consumption and other such things. So he's been wrong on many occasions.
HATFIELD: That paper you're referring to about the legislation, I believe was co-authored by somebody named Grant Casteel; is that right?
TOMICKI: I don't know and I don't believe so. This particular paper was a Joe Haslag only paper.
HATFIELD: Do you know Grant Casteel?
HATFIELD: Do you believe Dr. Haslag is qualified to give opinions on fiscal impact of proposed measures?
TOMICKI: Well, I don't think he's ever prepared a fiscal impact of a measure.
TOMICKI: I think he is qualified in a sense that he is mathematically able to compile such data. But he has never done it. And every occasion which he's written a paper, he's always referred to theoretical models or economic constructs, which ultimately are not representative of Missouri economy or ballot issues from Let Voters Decide.
HATFIELD: So you're saying you have to have a specific proposal in front of you?
TOMICKI: You have to -- he can talk very well and very knowledgeably about economic models of growth and why growth would occur or why not, what the inputs to those models are. But as far as I'm aware, he's never worked on a paper that looked at an actual economy. All the economies are theoretical models that he's worked on.
HATFIELD: Okay. And so I asked you if he was qualified, and you started with he's never prepared a fiscal impact on a proposal; is that right?
TOMICKI: I've never seen one that he's prepared that --the one study that I referred to at first was not credible because it confirmed -- conferred a rate that was simply impossible in reality.
HATFIELD: And I kind of take it from your answer, that you think it's -- when I asked the question is he qualified to give an opinion, it's relevant to your answer whether he had ever prepared a fiscal impact before; is that right?
TOMICKI: I think the fact that he only has worked on theoretical models makes him qualified to testify on impacts of theoretical models. The reason I've been asked to prepare the fiscal model and the fiscal impact note was because I've been working on this for a certain period of time and only looking at the actual kind of realities of the State of Missouri. So I think Joe, if he spent several months studying this and reviewing it, would certainly be qualified to testify to real world sort of realities.
pixelskylines
janainaart
romaincrisis
kianamaiart
snowghoul