PAUL KRUGMAN: An Unjustified Privilege

[kevinmc]

During the 2000 presidential campaign, Ralph Nader mocked politicians of both parties as “Republicrats,” equally subservient to corporations and the wealthy. It was nonsense, of course: the modern G.O.P. is so devoted to the cause of making the rich richer that it makes even the most business-friendly Democrats look like F.D.R.

But right now, as I watch Senate Democrats waffle over what should be a clear issue of justice and sound tax policy — namely, whether managers of private equity funds and hedge funds should be subject to the same taxes as ordinary working Americans — I’m starting to feel that Mr. Nader wasn’t all wrong.

What’s at stake here is a proposal by House Democrats to tax “carried interest” as regular income. This would close a tax loophole that is complicated in detail, but basically lets fund managers take a large part of the fees they earn for handling other peoples’ money and redefine those fees, for tax purposes, as capital gains.

The effect of this redefinition is that income that should be considered by normal standards to be ordinary income taxed at a 35 percent rate is treated as capital gains, taxed at only 15 percent instead. So fund managers get to pay a low tax rate that is supposed to provide incentives to risk-taking investors, even though they aren’t investors and they aren’t taking risks.

For example, the typical hedge-fund manager has a 2-and-20 contract — that is, he gets a fee equal to 2 percent of the funds under management, plus 20 percent of whatever his fund earns. It’s not exactly straight salary, but none of this income comes from putting his own wealth at risk. Except for the fact that he might make a billion dollars a year, he resembles a waitress whose income depends on a mix of wages and tips, or a salesman who lives on a mix of salary and commissions, more than he resembles an entrepreneur who sinks his life savings into a new business....

http://freedemocracy.blogspot.com/2007/07/paul-krugman-unjustified-privilege.html

[AX10]

1. K & R!

[Maat]

2. I love Paul Krugman.

He is able to clearly explain very complicated economic matters; and, he brings information to the forefront that others don't.

[lostnotforgotten]

3. Take That Nader Bashers - I get So Tired Of Listening To Those Types

He was right and the collective lot of Nader bashers was wrong.

Witness the power of the DLC and the democratic traitor Hillary Clinton.

[Jim Lane]

6. You might read what Krugman actually wrote

In the linked column, Krugman writes that Nader's charge was "nonsense" -- and it sure was.

As Krugman summarizes Nader's view, "Ralph Nader mocked politicians of both parties as 'Republicrats,' equally subservient to corporations and the wealthy." Let's evaluate that position in view of the facts:

* Some Democratic Senators are "on the fence" or "waffling" about the carried interest loophole.
* A Republican President and Republican-majority Congress passed huge tax cuts that are benefiting the wealthiest Americans by hundreds of billions of dollars per year.

President Al Gore would not have signed those tax-cut bills. Compared to the damage Bush has caused, the Democrats could go along with the carried interest loophole -- which, by the way, they haven't done, Krugman says only that they're considering it -- and it would still be only a drop in the bucket by comparison.

Krugman probably doesn't spell this out because he assumes his readers can count. Of course, in the case of Nader supporters, there is circumstantial evidence to cast doubt on that assumption.

[depakid]

7. As usual: Some Democratic Senators are "on the fence" or "waffling"

....there’s also the Republicrat issue: the hesitation of the Senate Democrats is terrible for the party’s image. It conveys the impression that they’re as beholden to hedge funds, one of the few types of businesses whose campaign contributions strongly favor Democrats, as Republicans are to the oil and drug industries.

This sort of thing is perhaps THE most serious problem in the party today- it keeps people thinking that there's very little difference between the parties (other than the perception that Democrats are weak and inept- and unable or unwilling to stand up for what they supposedly believe in).

[camero]

8. It helps also to read the next paragraph

But right now, as I watch Senate Democrats waffle over what should be a clear issue of justice and sound tax policy — namely, whether managers of private equity funds and hedge funds should be subject to the same taxes as ordinary working Americans — I’m starting to feel that Mr. Nader wasn’t all wrong.

And a democratic congress fails also to overturn those republican tax cuts.

More smoke ans mirrors from the political upper class.

[Laelth]

4. Excellent analysis.

Thanks for posting.

k&r

-Laelth

[Uncle Joe]

5. Kicked and recommended.

Thanks for the thread kevinmc.