Obama's Rhetoric

While it would be a mistake to take the President's political rhetoric more seriously than it ought be, two observations from his address last night.

The President appears fond of his professor moments. He likes saying things like "I won’t bore you with the details of every plan or proposal, but basically, the debate has centered around..." and "something known as the debt ceiling -- a term that most people outside of Washington have probably never heard of before." He even felt the need to explain that should we default, "we would not have enough money to pay all of our bills" One imagines that liberals find such rhetoric smugly self-affirming whereas conservatives bristle.

He also repeated his now oft-used line about asking "hedge fund managers to stop paying taxes at a lower rate than their secretaries." This argument is somewhat ambiguous.

The term "Hedge Fund Managers" can refer to the companies that manage hedge funds. A big portion of their revenue is proportional to the returns they generate and allowed to be taxed as capital gains (~15%), rather than ordinary income (~35%). While there are good arguments for taxing this revenue at the higher rate, doing so will certainly reduce employee compensation, including for secretaries. In other words, raising taxes on fund management firms will indirectly, but surely, raise taxes on those firm's secretaries.

"Hedge Fund Manager" may also refer to the fund's principles, many of whom earn staggering figures by investing their own money. This return is absolutely investment income and taxed appropriately. An attempt to better discriminate, to have different classes of investors pay wildly divergent tax rates would very much appear confiscatory.