The Real Debt Debate Sticking Point?

July 6th, 2011 at 10:28 am David Frum | 16 Comments |

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Politico insinuates this morning that a big sticking point for the GOP in the debt-ceiling negotiations is a demand that the earnings of hedge funds continue to be taxed at the 15% capital-gains rate rather than income-tax rates. Can this be true?

Indeed, with more than $1.5 trillion in spending cuts on the table, House Republicans have sent signals that eliminating breaks for jet-makers and oil companies could be palatable as part of a debt-limit package. But they will fight to prevent a tax hike on hedge fund managers, who earn on the income they generate for investors.

House Majority Leader Eric Cantor has said he didn’t exit the talks over those provisions, but rather Democrats’ desire to eliminate certain tax breaks for people who make more than $200,000 or couples who make $250,000 or more. Another sticking point was Democratic efforts to ban “last in, first out” accounting, in which the most recent assets acquired are assumed to be the first sold off. Cantor has also signaled openness to ending ethanol subsidies.

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16 Comments so far ↓

  • Watusie

    David, I’m going to assume that you read comments on your own posts, or at least your staff does. So allow me to use this space to bring your attention to the fact that you’ve got a post containing a complete and total fabrication by John Vecchione on your front page:
    http://www.frumforum.com/where-was-the-ambassador-at-the-reagan-statue-unveiling

    Do you have any standards at all?

    • TerryF98

      I agree, This forum’s reputation is down the toilet if Frum leave that total falsehood to stand.

      Does this blog have any standards at all or even an editor who cares a toss?

    • Graychin

      Not much better:

      The Sinister Agenda of the Gaza Flotilla

      Fiscal Stimulus Didn’t Work – Now What

    • chicago_guy

      Agreed. While it’s good to have a site that professes to offer “real world” conservative views, FF isn’t helped when it presents misinformation or distortions of the facts.

      • D Furlano

        I agree with the above posters. If you let people post any POS that they want I think you marginalize your forum.

    • Slide

      Are there any standards for truth on the FF anymore? Take down the false and intentionally misleading article by Vecchione.

  • ottovbvs

    Oh god David, of course it is. The carried interest scam is dear to hearts of Wall Street. Some of these tax breaks for businesss get lost in the general maw but this is personal. And have you noticed how what’s “on the table” keeps bouncing around. I’ve seen estimates from 1.5 trillion to 2.5 trillion spread over 10 years but the nature of these “savings” is always very murky which tells me the media have no more idea what’s going on than we do.

  • sparse

    “Politico insinuates this morning that a big sticking point for GOP in debt-ceiling negotiations is a demand that the earnings of hedge funds continue to be taxed at the 15% capital-gains rate rather than income-tax rates. Can this be true?”

    i read the article (note: the link takes you to the top of page two out of three) and it seemed to say to me that the hedge fund issue is not really a sticking point at all. sure, it is not the republicans’ favorite idea of all time, but it clearly is not the one they are balking at. they are balking at the changes for the 250k+ crowd.

    but in the article, i think the real question was revealed- not one of policy or principle, but of politics and power. the republicans are inconsistent in what they are balking at (different people seem to have staked out different degrees of intransigence) because they have not yet agreed on a united strategy:

    “For months, Republicans have been divided over whether to push for one major deal or take a piecemeal approach that would result in multiple votes before the next election. House Republicans, worried about mustering the needed votes for any increase in the debt cap, prefer a single roll call. Senate Republicans, however, have been open to forcing multiple votes, which could be used to hammer a Democratic Party that is defending 23 seats and a thin four-seat majority in the Senate.”

    when they sort out whether to approach this in one go or in dribs and drabs, they will begin to produce consistent party-wide positions. and those positions will include reasonable revenue-side solutions. the current opposition to any “tax increase” is simply a matter of a convenient line in the sand to draw while they come up with a strategy .

    unfortunately, the strategy they most want to come up with is one to win the debate about the debate. i continue to prefer a government that governs, and will vote that way every time.

  • armstp

    Most commentators are assuming that the GOP will clearly be blamed for a government default and its fall-out. I am not so sure it will be that clear or why that even matters, as there is likely both a short-run and a long-run GOP strategy at play here.

    Obviously, Republican voters will blame Obama and Democratic voters will blame the GOP, but what about the Independents who will decide the next election?

    Nate Silver somewhat covers this point in this post:

    “2. One poll suggests that Republicans would incur somewhat more blame than Mr. Obama in the event of a failure to raise the debt ceiling. The difference is modest — 42 percent would blame the Republicans against 33 percent blaming Mr. Obama (with 13 percent suggesting that they’d blame both sides) — but Mr. Obama’s relatively strong personal favorability, coupled with the intrinsic unpopularity of Congress and some of the aesthetic advantages that the White House enjoys in times of national emergency, might imply that while both sides would get lots of blame, the Republicans would get a little bit more of it.”

    “3. Irrespective of the explicit political consequences of a debt default itself are the implicit consequences of a significantly weakened economy; that’s where Mr. Obama might be more vulnerable. However, the notion that the public mechanistically reacts to every tick of change in the economic fundamentals and reflexively blames the president for all of it is somewhat oversold.”

    http://fivethirtyeight.blogs.nytimes.com/2011/06/24/on-the-claim-that-republicans-want-a-debt-default/

    What Nate Silver is saying is that sure the GOP might get slightly blamed more for the act of the default, but if it leads to a weaker U.S. economy then that will ultimately fall on Obama at election time in 2012.

    With this in mind it puts the whole GOP strategy in a better context. Take the hit on the default, but a year from now people will have forgotten about it and will be blaming Obama for 9% unemployment or even a further deterioration of the economy from the default and all the uncertainty.

    This is the key issue to all of this: how will Independents react to a debt default and what will their longer-term thoughts be on any economic fall-out? who will they blame?

    If David Brooks at the NYT kind of represents right leaning independents then the fact that he called the GOP idiots on this really matters regarding the default itself, but longer-term the GOP making the economy worse might help them. It depends on who wins the PR war and PR is something the Dems do not do very well.

    • balconesfault

      BTW – Silver deserves kudos for his analysis far and above almost anything found in the current media. Anyone who’s followed him knows that Silver has serious Democratic leanings, and wants the answer to be “The GOP Would Completely Get Blamed” … but that’s not where he ends up when he dispassionately looks at the data.

      THAT, my friends, is what “Fair and Balanced” really looks like.

  • Graychin

    “Can this be true?”

    You betcha! It’s a simple application of the Golden Rule. Him who has the gold makes the rules.

  • Xunzi Washington

    Frum,

    I know that you aren’t asking your commentators this question because you don’t know the answer already, which is clearly “yes”.

    So since you already know that answer, what are you going to say about it? Are you going to write a column about how Obama is to blame because he doesn’t yell and scream enough? Or are you going to excoriate the insanity being perpetrated by YOUR party?

  • sgath

    Yes, David. In the span of 10 years the democratic party is now more right wing economically than you are. You ought to join the Greens or something.

  • Raskolnik

    Please fire Vecchione, he is a liability in the long term and he makes you look bad. Or, at least, check what he writes before you allow him to post it.

    –A Fan

  • Slide

    “It depends on who wins the PR war and PR is something the Dems do not do very well.”

    I’m not sure Paul Ryan would agree with you.

    “The Ryan privatization plan is deeply unpopular: Fresh polling by Bloomberg released Thursday found that Americans think they would be worse off if Ryan’s Medicare proposal is adopted by a margin of 57 percent to 34 percent — including 58 percent of electorally key independents who dislike the plan.

    But the new polling by Anzalone Liszt Research, the Democratic-aligned polling firm, found an even more dramatic response on Medicaid if respondents are told of the impacts seniors face.

    Told that the Ryan budget “would cut $750 billion from Medicaid, including funding for 80 percent of nursing home residents, forcing many seniors to be kicked out of their nursing homes,” 63 percent of respondents said they were “very” concerned. That figure was 69 percent for seniors and 64 percent for independents.

    About 64 percent of senior nursing home residents depend on Medicaid as the primary means of paying for their housing. Still more rely on Medicaid for other expenses or to be able to stay in their own homes.”

    http://www.huffingtonpost.com/2011/06/23/poll-seniors-nursing-home-paul-ryan_n_882860.html

  • jonnybutter

    Politico insinuates…

    Oh my. Politico insinuates a laughable gop talking point? What are the odds? Thanks David! Thanks for doing all you can to support a party which you think – or insinuate – is irresponsible and dangerous!

    I have news for you, buddy: if you want a sane conservatism, the present GOP must first be destroyed. Even Andrew Sullivan knows that.