Paul Krugman on good Democrats, bad Democrats, and the ugly thing the bad Democrats are about to do:
A Test for Democrats, by Paul Krugman, Commentary, New York Times: It’s been a good Democrats, bad Democrats kind of week. The bill expanding children’s health insurance that just passed in the House makes you want to stand up and cheer. Reports that Senator Charles Schumer opposes plans to close the hedge fund tax loophole make you want to sit down and cry.
Let’s start with the good news: The House bill ... would provide coverage to five million children who would otherwise be uninsured.
The bill is so good that it has Republicans spluttering. “The bill uses children as pawns,” declared Representative Pete Sessions of Texas. Yes, the Democrats are exploiting children — by providing them with health care.
The horror, the horror!
What’s especially encouraging is the way House Democrats were willing to take on the insurance companies. The bill pays for children’s health care in part by cutting subsidies to Medicare Advantage, a privatization scheme that yields big profits for insurers...
All in all, the bill is both a fine piece of legislation and a demonstration that Democrats can stand up to special interests. Happy days are here again.
Or maybe not.
The hedge fund tax loophole is a crystal-clear example of unjustified privilege. ... For example, ... pension fund ... manag[ers] ... are taxed ... at rates up to 35 percent. But if that money is invested with a hedge fund ... the fees the ... manager receives ... are mainly taxed as capital gains, with a maximum rate of 15 percent. ...
We’re told that the tax rate on hedge fund managers has to be kept low to encourage risk-taking. But the managers aren’t risking their own money. The only risk ... is the uncertainty of their fees — and as any ... salesman who depends on commissions can tell you, most people with uncertain incomes don’t get any special tax breaks.
We’re also told that management fees would rise, reducing returns to investors... — as if someone with a $100-million-a-year hedge fund job would walk away if his take-home pay fell from $85 million to $65 million.
And we’re talking about a lot of lost revenue here. The Economic Policy Institute estimates ... $6.3 billion a year — the cost of providing health care to three million children. Of that total, almost $2 billion a year ... goes to just 25 individuals.
If being a Democrat means anything, it means opposing this kind of exorbitant privilege. Yet ... Mr. Schumer says that he opposes any increase in hedge fund taxes unless tax breaks for the energy and real estate industries are also eliminated, and pigs start flying. Seriously, his claim that he really would support closing the hedge fund loophole if other, deeply entrenched tax privileges were eliminated ... is a fig leaf that hides nothing.
Mr. Schumer ... insists that the large financial contributions that hedge funds make to his party aren’t influencing him. Well, I can’t read his mind, but from the outside his position looks remarkably like money-driven politics as usual. And that’s not acceptable.
Look, the worst thing that could happen to Democrats is for voters to conclude that there’s no real difference between the parties, that when you replace Republicans with Democrats, all you do is replace sweet deals for Halliburton with sweet deals for hedge funds. The hedge fund loophole is a test — and it’s one that Mr. Schumer is failing.