Because price fixing means the government sets the policy of what a company can charge. If a company wants to charge one customer more and one customer less, and a third party says they can’t do that, that is called “price fixing” But of course, it is not that simple – because in this case the entity doing the price fixing is a customer (sort of) because of the complexity of Medicare and Medicaid… But then some of the prices listed when sold to Medicare and Medicaid are not what is actually paid because there are significant discounts negotiated from there, which is why I made the point yesterday that not using NET pricing is utterly disingenuous. I believe different companies have different reasons, different competitive factors, and different barriers and complexities and so forth and so on in all sorts of different markets and countries with all sorts of different drugs and treatments. And I think market forces should set prices, always. And while I am critical of the system proposed yesterday by the executive order, I certainly do not believe the system we have now is optimal, either. I just don’t like taking a bad system and making it worse. When I see a bad system that needs change, my bias is to try and make it better. And price mandates, controls, and fixes all go the wrong way.
~ David L. Bahnsen, May 13, 2025

Well, in fairness to the people on the right and the left who support getting rid of capital gain tax treatment on carried interest, while it is true that the revenue we are talking about is virtually nothing ($13 billion over ten years), it is certainly reasonable to evaluate tax policy for its fairness or unfairness, even apart from meaningful revenue generation. That said, a few things need to be clarified:

a) It is untrue that GPs and hedge funds do not typically invest in their own funds. In all my years of analyzing alternative investments, I am not sure I have come across a single one, ever, where the underlying manager did not have his or her own money in the investment being analyzed. Private Equity GPs now generally have a small amount of cap table money because of massive LP demand, but there is always co-investment. The issue is that the compensation paid and held as “carried interest” is, indeed, compensation for the work on a deal, and therefore has some claim to being ordinary income and not capital gain.

b) Hedge funds do not even belong in the conversation. To get carried interest tax treatment, the investment has to have been held for three years. I would love to know hedge funds holding investments for three years (some hold for three minutes), and have the compensation tied to the carried interest of such an investment. To say that is an outlier in the hedge fund world is putting it mildly. The issue is primarily in the private equity space.

I think the issue just needs to be understood better. The argument for the so-called carried-interest loophole is that it creates alignment between managers and investors, and since those managers have to take a long-term investment approach to get the favorable tax treatment, it should be aligned with the same tax treatment as long-term investment. Those in favor of this also argue, with some merit, that the carried interest is only for the capital gain of an investment, which has its tax rates set by law. That the managers received their interest from sweat equity vs. capital contribution is immaterial (or so the argument goes).

The arguments against the loophole are pretty straightforward, regardless of conjecture about impact on GDP growth and tax revenue: One is working, doing labor, and paying a reduced tax rate from what those dollars would be taxed if the rate were straight labor.

It is generally presented as a pretty black and white issue when the reality (especially for more objectively honest non-partisan types) is that there is an argument to be made on both sides of this issue. To me, it would be a strikingly easier issue to adjudicate if we were not talking about whether or not a more favorable rate should exist for carried interest, but rather how to get the labor and investment tax to the same level. That kind of “flattish-ness” in the tax code would almost make this conversation obsolete, but sadly, it is not anywhere near ready for political prime time.

I should note that, as the House bill’s first draft was released just before press time, no change in carried interest was part of the bill.
~ David L. Bahnsen, May 12, 2025

We have discussions about the potential for a recession, and yes, tariffs may raise prices in the short term - they may not fully come to pass, or they may come to pass in a reduced way that is partially absorbed in profit margins versus 100% being passed through in end prices.  I suspect we’ll end up with a combination of these and land somewhere in the middle.  

However, if the economy contracts, I would not expect meaningfully weaker Treasury prices (meaning higher rates).  The opposite would occur in a recession framework, and as demand decreases in the economy, so would inflation and interest rates.  The USD in that environment could weaken from its elevated level, but I don't find that meaningful in this calculus at this time.  

As far as US equities are concerned, I would agree starting point valuations on broad indices are less than ideal.  However, since none of this will play out in a vacuum and all asset classes are tied together (FX, equities, bonds etc.), the answer isn’t a 0% weighting to equities either, but an asset allocation to hedge the unknowns.  High free cash flow businesses that are reasonably priced with growing dividends are attractive both now and through whatever good or bad outcome will come to pass.
~ Brian T. Szytel, May 8, 2025

There are asset prices that go higher from a weaker dollar and asset prices that go lower, but it is a very different conversation for a U.S. investor not exchanging into a foreign currency (it is nearly irrelevant). The issue about asset prices, then, removed from forex, becomes, “What is causing relative dollar weakness?” Generally speaking, risk assets have performed well in America during strong dollar and weak dollar periods, unless profits and real wages are declining.
~ David L. Bahnsen, May 7, 2025