This is not a comment for or against the carried interest debate. From an outsider perspective - I am a Canadian - I thought it worth affirming your opinion on how a strong VC community drives much of the US innovation economy and the economy in general.

Innovation funding needs to come from some place - public or private? Here in Canada we have a weak VC community but continue to produce a high rate of quality innovation because the government supports early stage R&D through a very attractive Income Tax Credit (42% of expenditures are returned up to $2 million annually with no other project or company limitations) and an excellent public education system.

Thats good. However...without a risk taking equity driven culture, once a company goes from R&D to commercialization, there is very little support. Most Canadian innovations fail commercially or are gobbled up by US firms. I believe that intellectual property is your most significant exportable asset. Its not labour, not energy, not automobiles, etc. I am fairly certain that, beyond innovation that is driven by defence budgets (your government R&D program), without a strong VC community, the US economy would lose its entire foundation.

Better to reward it than to punish it. I think this is your argument Seth, and I agree.