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August 17, 2010

Tables, Turned


in July the chairman and cofounder of the Blackstone Group, one of the world’s largest private-equity firms, amped up the rhetoric. Stephen Schwarzman—the leading John McCain supporter in a firm that, in 2008, gave more money to Obama—was addressing board members of a nonprofit organization when he let loose. “It’s a war,” Schwarzman said of the struggle with the administration over increasing taxes on private-equity firms. “It’s like when Hitler invaded Poland in 1939.”...

Schwarzman’s original beef with Obama grew out of a 2008 campaign promise that “carried interest”—the compensation structure of private-equity-fund managers—would be taxed as ordinary income (35 percent) instead of capital gains (15 percent)...the commissions and fees that hedge-fund managers reap (20 percent of their clients’ profits) are not, strictly speaking, capital gains because the managers themselves never held the stocks.

Mock all you want, lefties, but the joke will be on you when the Nazis invade Poland again and everyone compares it to raising taxes on hedge fund managers.

—Jonathan Schwarz

Posted at August 17, 2010 05:45 PM

am i completely naive, or has the right, beginning with nixon and striving incessantly thereafter, completely ruined the public discourse?

Posted by: Guest at August 17, 2010 08:48 PM

I don't think the capital gains rate for hedge fund management profits was ever written into law. If they make a fuss about this, those taxes might just as well be collected retroactively. (Without penalty, of course, because it was all a misunderstanding.) I wonder how much that would come to.

Posted by: Nathan Myers at August 17, 2010 10:04 PM

It is more like the bombing of Nagasaki because the destruction it so total and instantaneous.

Schwartman's war on simile is Carthaginian in scope and scale.

Posted by: seth at August 18, 2010 01:13 AM


Maybe he can make lemons from lemonade by cornering the market on salt and plows.

Posted by: JerseyJeffersonian at August 18, 2010 09:15 AM

An article about Schwarzman in the New York Times on November 28, 2004 was titled: "The Making of a Wise Man". Beneath a photo of the smiling billionaire behind a cluttered desk, appearing hard at work but happy, was the following caption: "Stephen A. Schwarzman, the chief executive of the Blackstone Group. 'I just want to give something back,' he said of his ambitions outside of the business world."

Ah yes, "I just want to give something back."

Posted by: N E at August 18, 2010 10:49 AM

am i completely naive, or has the right, beginning with nixon and striving incessantly thereafter, completely ruined the public discourse?

you're not only completely naive, but also stupidly partisan.

the "left" has helped the "right" in the project about which you complain. good thing you identify as part of the "left," then... no?

Posted by: CF Oxtrot at August 18, 2010 11:16 AM

>the "left" has helped the "right" in the project about which you complain.

Yes, a bipartisan effort.

That's a cool word--bipartisan. Can't compromise or even agree on anything, that sounds too wimpy. "A bipartisan effort." Yeah, that has a better ring to it, doncha think?

Posted by: Paul Avery at August 18, 2010 11:45 AM

And, oh yeah, and speaking of bipartisanship, despite more boring and threadbare Hitler analogies, Democrats Go GOP on Tax Cuts By Anthony DiMaggio is interesting read:

Posted by: Paul Avery at August 18, 2010 12:00 PM

Guest@8:48 pm/CF Oxtrot: I'm thinking that American Discourse has ALWAYS been like this, its just WE gots the internet now and the PUSS shows through more now that the bandaid is off. (WE used to burn witches at the stake, and Ben Franklin thought small pox innoculation was a bad idea---think about it)

Posted by: Mike Meyer at August 18, 2010 12:59 PM

Paul Avery

If a family with family income of 200,000 gets a 1,000 tax cut, and a family that makes 500,000 gets a $1,230 tax cut, that amounts to a 23% increase in the tax cut from one family to the next. But to me it's a reach to say, as DiMaggio did, that the family with income of $500,000 got a "major payday." And it's especially a reach when the "temporary" cut that the rich family has had for the past nine years actually gave them much lower taxes, so the Obama proposed "cuts" are actually pretty noticeable increases. I hope that makes sense.

What's more, if a family that makes $75,000 gets a $500 tax "cut" and a family that makes $1,000,000 gets a $2500 tax "cut", that is indeed "five times the tax cut benefit" for the richer family. Just as 5 five dollars is five times one dollar. But that is really misleading. Giving the rich family a permanent $2500 tax cut instead of making permanent the much, much bigger (perhaps $50,000) temporary tax cut Bush gave them seems like a big step in the right direction to me.

DiMaggio's math is misleading. The "temporary" Bush cuts lowered taxes much more than the cuts Obama proposes to make permanent, and not extending those cuts is effectively a sizeable tax increase for the rich by Obama, and also, it bears observing, a hefty one compared to the percentages DiMaggio quotes. Increasing taxes to give the rich family a "cut" of five times that of the poorer family means they only get $2500 off their taxes rather than tens of thousands of dollars. One could more meaningfully say the proposed GOP tax cuts are more than ten times those proposed to be made permanent by Obama. And one could say that Obama isn't really cutting the taxes of the rich at all; he's raising them, though not in one bite all the way back to the level from which Bush dropped them.

So I think DiMaggio told the wrong story and told it in a Fox news sort of way.

Posted by: N E at August 18, 2010 10:50 PM

Until there is ACCOUNTABILITY TO THE TAXPAYER, over how the money is spent, then I would rather No One pay anything, rich or poor.

Posted by: Mike Meyer at August 19, 2010 03:25 AM

The deal with carried interest is this: the sort of set that would normally be very enthusiastic for Obama are set to be personally hurt by the change in rules. Remember when Obama changed (or tried to change, can't remember if it went through) the rules on charitable giving and tax deductions, and all the charities, whom you would expect to be his natural constituency, raising hell?

Well, cut into hedge fund managers and you cut into art dealers, artists, charities, etc. Hedge-funders tend to be much more magnanimous and munificent in donations and supporting art and all that than latter-day industrialists and self-made-former-used-car-salesmen. Wal-Mart's hick bosses just stash their money somewhat back in the sticks, and don't do anything useful with it. Hedge-fund managers spend their money all on art, architects, fashionable charities, green causes, educational institutions, etc.

Posted by: Myles SG at August 19, 2010 12:31 PM

"Wal-Mart's hick bosses just stash their money somewhat back in the sticks . . ."

Apropos of that, this is one of my favorite lifestyles of the rich and famous news stories:

(By the way, at least one very successful hedge fund manager has given away hundreds of millions of Euros to establish a foundation to end world hunger, so there are some exceptions.)

Posted by: N E at August 19, 2010 12:45 PM

And a progressive income tax is like the Holocaust. Hey, he already invoked the Nazis, so why not keep going?

Posted by: Batocchio at August 19, 2010 04:29 PM

Mr. Avery should read the original CBPP report, which is featured on the organization's website.

It states that the average cut for those in the 200,000 to 500,000 range is not a thousand, but $6,743. This amounts, for someone who makes 300k, to a 2.2% cut for the year, which is more than the 1.8% cut those who make $50,000 will average.

The much larger point in the article, I should point out, is that the Dems. are going Republican in the sense that they're pushing the "government is the problem" framework, rather than expanding social welfare and stimulus spending. The majority of the commentary at the end of the article makes this point, so the earlier point quibbling about percents of tax cuts per income bracket is not all that compelling, and relatively much less important. the "meandering into the midterms" in the piece clearly refers to the larger point, which is that the Dems. should be making expansion of gov. responsibilities (single payer health care and a new stimulus) the priority, rather than simply "getting government out of the way" of the public.

Posted by: Anthony DiMaggio at August 19, 2010 05:54 PM

I see Anthony DiMaggio has responded to NE, not Paul Avery, but he did not link his useful and informative site. See below.-Tony

Posted by: tony at August 19, 2010 07:02 PM

Here is another link for Mr DiMaggio for his outstanding book "When Media goes to War..." I am only half way through it so maybe it is premature on my part to say it is outstanding but it is!-Tony

Posted by: tony at August 19, 2010 07:08 PM

Anthony DiMaggio is right about the larger point of his article, but those numbers up front are misleading and it's impossible to fairly assess a battle by considering the positions and strategies of only one side. Everything Obama is doing has to be done with consideration of the positions of the GOP and his adversaries and questionable allies in his own party. That article advocates well enough, but I'm too ill informed about the substance of the tax cut debate to assess how Obama's proposal compares. I'll read the CBPP article if I can find it. I was busy before and didn't have time.

Obama seems to be, with the rest of us, in a "doom loop," a term that I love coined by someone about the problems in the financial sector that is mentioned in Simon Johnson's book 13 Bankers. Maybe if Obama had been bold and come out swinging from the opening bell of his Presidency he could have headed this off, but I doubt it. It would have been a long-shot, because the GOP has all the independents worried about the deficiet and nobody seems to understand demand side economics. Still, Obama should have tried harder, and I bet that one day he'll look back with regret on that.

Then again, it's hard to believe that trying would be enough. I saw today that a much larger percentage of the population now believes Obama is a Muslim.

Doom loop.

Posted by: N E at August 19, 2010 08:51 PM

When hedge fund managers pay too low a tax, it's Hitler invading Poland to correct it. When 47% of Americans pay too low of a Federal income tax, they're freeloaders. When wealthy people pay Clinton era taxes on income, poor people call for armed revolution. Is everyone complaining just to complain?

Posted by: Charles at August 20, 2010 09:56 AM

Blackstone delenda est.

Posted by: VJBinCT at August 20, 2010 10:35 AM

Does any know which non-profit Schwartzman was addressing when he let loose his latest rant?

Posted by: laura locido at August 21, 2010 05:46 PM