This morning, in the Cash Room of the Treasury Department, the Goldman Sachs chief executive-turned-Treasury secretary, Henry Paulson, will convene a conference on “Business Taxation and Global Competitiveness.” Alan Greenspan will be there, as will some of the nation’s top economists, including Martin Feldstein of Harvard and Michael Boskin of Stanford. Missing from the announced program are Senators Grassley, Schumer, and Baucus, and Congressmen Rangel and Levin. It’s too bad, because were they to swing by they might get a glimpse of a Bush administration that is trying to help American business as opposed to a Congress that is determined to hamper it.

It’s already the talk of Washington how Mr. Paulson tried earnestly to convince Mr. Baucus, chairman of the finance committee, that raising taxes on hedge fund and private equity managers was, in respect of tax policy, a bad idea on the merits. Mr. Baucus is said to have shrugged and said, never mind the merits, my leadership told me they need me to find $10 billion. No wonder the president of the Partnership for New York City, Kathryn Wylde, is, she told us yesterday, concerned that Washington is looking at this as an issue of revenue, where it should be a matter of international competitiveness. “Washington is not as sensitive to the fact that we now have to defend our jobs, business operations, and investments; this isn’t just a matter of offshore call centers, we are talking about front office jobs,” she said.

None of the bills raising taxes on the financial industry — a business as central to New York City as steel was in Pittsburgh and citrus is in Florida — has yet been “scored” by the Congressional Budget Office. An honest scoring would confront the likelihood that the tax increases wouldn’t generate much revenue. Steven Kaplan, a University of Chicago professor who also sits on the advisory board of the private-equity firm Sterling Capital Partners, wrote this week in the Wall Street Journal that “Even if tax law is changed, it should be possible to structure new private-equity funds to retain the capital-gains treatment. For example, University of Chicago Law School’s David Weisbach suggests that if private-equity funds financed their investments using debt from their investors rather than through a partnership, they would receive capital gains treatment — true for anyone who borrows money to buy an asset or buys a stock on margin.”

One can have a long debate over whether “carried interest” of fund managers — often 20% of profits — should be taxed as income or as capital gains. There’s a good argument that they should be treated as capital gains, which is rooted not only in the concept of sweat equity but in the history, since they’ve been treated that way for decades. But it’s hard to see why there should be any debate at all on the common-sense marker that Mr. Schumer laid down at a meeting of the finance committee earlier this month, when he said, “I will not stand for treating financial-services partnerships one way, while all the other partnerships are treated another way.” He added “we should treat everyone fairly and everyone equally. … If we are going to change how we tax financial partnerships, we should treat oil and gas and venture capital and real estate and everything else the same.”

Why are hedge funds and private equity being singled out as opposed to real estate or oil and gas? If real estate were targeted, one might see New York’s civic leadership more up in arms, especially given the billion-dollar gains that are being racked up these days on sales of Midtown office buildings. As it is, the Partnership for New York City is not taking a formal position on the proposals to raise taxes on private equity firms. “Our members are not unanimous, there are some who feel carried interest should be taxed as ordinary income,” Ms. Wylde said.

Our own sense is that it has something to do with the ugly backlash against the new rich that is boiling up in the public prints and is of a piece with the harping on the details of the Blackstone Group’s Stephen Schwarzman’s extravagant birthday party, an event that even the Wall Street Journal editorial page characterized as “garish.” Certainly there is starting to be a foul wind blowing. Now that we are a generation removed from the stagflation of the 1970s, economic populism, and the tax-and-spend policies that go with it, is once again finding buyers.

Here in New York City, which is enjoying a remarkable moment of prosperity, it’s hard to miss the cultural vibrance and philanthropy that go hand-in-hand with capitalism, which has virtues in its own right. The fight in the Congress will be a test of Mr. Schumer’s mettle. Already, other leading members of his party, like Senators Obama, Clinton, and Edwards, have signed up for singling out money managers for higher taxes, as has the New York Times. So Mr. Schumer will have to do more than posture or duck. He’ll need actually to work with the Bush administration and his allies among the Democrats to block a tax increase that would hurt American competitiveness, erode our jobs base, and attack a key industry in his home town.