In Cantor, Hedge Funds And Private Equity Firms Have Voice At Debt Ceiling Negotiations
As the debt-ceiling talks tick down to the Aug. 2 deadline, leading the opposition to any deal that includes higher taxes is the new tribune of rank-and-file House Republicans: Majority Leader Eric Cantor of Virginia.
Cantor’s pivotal role marks a rapid rise for the 48-year-old from the Richmond suburbs. It also represents a major coup for sectors of the investment community that Cantor has been striving to assist for years — on the same tax issues that have been at stake this month. And so far, he has prevailed on those issues.
Among the White House’s top demands for new revenue are changes in the tax code affecting hedge funds, private equity firms and real estate partnerships, which would raise an estimated $20 billion over 10 years.
For the past four years, Cantor has taken the lead in the House on fighting the same changes. He also has been one of the top recipients of contributions from those industries — last year, his two fundraising committees took in nearly $2 million from securities and investment firms and real estate companies, more than double the figure for Boehner (R-Ohio).
The hedge fund and private equity proposals were at the center of Cantor’s decision to exit talks with Vice President Biden this month. Since then, the prospect for any immediate tax increases has declined, with the focus turning to spending cuts and broader tax reform postponed.
This dismays Democrats, in part because Cantor has cast his defense of the investment tax treatment as part of the broader tea party-fueled anti-tax orthodoxy. To Democrats, Cantor embodies the convergence of tea party and business interests, which is often obscured by the movement’s anti-Wall Street rhetoric.
“This [anti-tax stance] isn’t all coming up from the grass roots,” said Rep. Chris Van Hollen (D-Md.). “This goes to some longtime cozy relationships between House Republicans and hedge fund managers in the financial sector.”
A spokesman for Cantor noted that he always has opposed raising the investment taxes in question but declined to comment further.
Cantor has said repeatedly that Obama and other Democrats are exaggerating the value of closing tax loopholes for financiers. Although Cantor opposes closing them to raise revenue, he says he is open to doing so as part of broader tax reform that lowers overall rates.
“So I know it makes for good politics to throw the shiny ball out there . . . that somehow Republicans are wed to that kind of policy to sustain these preferences, when all along, in our budget and in our plan, we have said we’re for tax reform, we have said we’re for bringing down rates on everybody,” he said on the House floor last week.
Jennifer Thompson, a political science professor at Virginia Commonwealth University and former Republican campaign operative, said Cantor’s longtime opposition to the investment tax provisions is a sincere reflection of his conservatively inclined district.
“Eric Cantor is a Virginian and you can’t separate too much from that fact,” she said. “His constituents are very much aligned with the no taxes and being back in the black and that’s what Eric Cantor represents.”
Lawmakers from both parties have cultivated the investment community, but Cantor, whose wife is a former Goldman Sachs vice president, has had particularly strong connections. In 2006, his campaign committee and his leadership PAC, established to support other Republicans, collected $682,500 from securities and investment and real estate firms, far more than any other Republican on the Ways and Means Committee and nearly double the take of then-Chairman Charles B. Rangel (D-N.Y.).
Cantor sprang into action in 2007, when Democrats proposed the two major tax code changes that have been at the center of the debt talks. He formed the Coalition for the Freedom of American Investors and Retirees and invited several dozen industry groups to the opening meeting.
One of the changes revolves around “carried interest” — the pay managers receive for gains they produce for investors — which is taxed at the long-term capital gains rate of 15 percent. Many tax experts argue that it should be taxed at the 35 percent rate for ordinary income because it is the managers’ compensation for services performed, not the result of their own capital investment.
Another proposal would tax profits from the sale of hedge funds as ordinary income.
Since 2007, Cantor has railed against the proposals, saying that the carried interest proposal would “raise taxes on innovation and opportunity in America” and harm “mom and pop” businesses.
Democrats dismiss that argument. “There is virtually no evidence that having these people pay ordinary income would inhibit business development,” said Rep. Sander M. Levin (Mich.).
The proposals passed the House, which was then under Democratic control, but fell short of a filibuster-proof majority in the Senate last year.
Cantor’s support from the industries soared. Contributions to his two campaign committees from the real estate and securities and investment sectors jumped to $916,307 in 2008 and doubled to $1.85 million in 2010, according to the Center for Responsive Politics.
The top 10 contributors to Cantor’s two committees in 2010 included three investment firms: employees at SAC Capitol Advisers, the hedge fund founded by Steven Cohen, gave $64,964; those at the private equity firm KKR gave $52,600; and those at Elliott Management, the hedge fund founded by Paul Singer, gave $44,198. The Blackstone Group, the hedge fund run by Steve Schwarzman, and its employees gave $26,100.
The main private equity and hedge fund trade groups have ramped up their lobbying amid the debt talks, spending $4.2 million this year.
By: Alec MacGillis, The Washington Post, July 25, 2011
Michele Bachmann’s Views, Not Her Headaches, Make Her Unfit
There is no doubt that Michele Bachmann gives many of us a headache. But to attack her, as Tim Pawlenty has done in such a sexist way, as unfit to be president because of migraines is absurd.
Many of our presidents have had health problems much more serious than headaches—Roosevelt, Kennedy, Taft, to name a few.
The problem with Michele Bachmann is not her migraines, it’s what is in her head. It’s her ideas that matter.
Just as Republicans who pay attention to politics were terrified of a possible Sarah Palin nomination, they are equally petrified that Bachmann might catch on in Iowa, South Carolina, and among the Tea Party wing. Could she, in fact, squeak by and actually win the nomination? Most think not, but they are nevertheless nervous when they watch her poll numbers rise, her bank account fatten, and the attention she is getting from the “lame stream media” increase.
There is no question about her misstatements and problems with facts (John Wayne’s birthplace, associating Jimmy Carter with swine flu, Founding Fathers working “tirelessly” to end slavery, maintaining that Obama issued “one oil drilling permit” when he issued 200, etc., etc.). Check out the Pulitzer Prize winning website Politifact for a disturbing list.
The real problems we should be focusing on are her outlandish and dangerous views on the issues.
Some are becoming very well known. Her views on gay and lesbian rights, for example. She believes gays and lesbians are “part of Satan.” She and her husband have mounted campaigns against gays and lesbians, beginning in Minnesota and now on the campaign trail.
She was against TARP and proudly proclaimed her opposition in the New Hampshire debate. Most economists believe that this saved the American economy from complete meltdown and a severe depression. Plus, most of the money is being paid back, and we have a strong American auto industry because of the actions of President Bush and President Obama.
She believes we should not only abolish the entire tax code, but we should abolish the Environmental Protection Agency, the Department of Education, the Department of Energy and the Department of Commerce. (Politico 4/18/2011, among numerous other sites) This is irresponsible, shortsighted, and destructive to the United States.
I find it extraordinary that Michele Bachmann should be even considered for the office of the presidency. Her views, her lack of competence and experience, and her minimal leadership skills all are much more worrisome than her headaches. Actually, just watching her out there makes my head spin.
By: Peter Fenn, U. S. News and World Report, July 25, 2011
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