Ben Stein is generally seen as a fiscally conservative Republican (something about writing speeches for Richard Nixon ...), but even he thinks the insanely favorable tax treatment that hedge funds receive is outrageous. Referring to the extraordinary compensation many hedge fund managers receive:

Somehow, by some alchemy of brilliant tax lawyers, these people are paying long-term capital gains rates of 15 percent on their compensation (even though much of their pay is tied to trades with holding periods that last seconds). Doctors and lawyers and writers and actors pay about two times that amount.

That's it. End of discussion. Why should private equity and hedge fund managers receive such special treatment when they are making such an enormous amount of money. In the words of Johnnie Cochran, "It does not make sense!"

Stein then makes another brilliant proposal:

Why don't we just have a tax holiday for people who are fighting in Iraq and Afghanistan for five years after they get back? ...

Let's keep it real: Congress can take notice of a mammoth inequity in taxation during wartime and make the tax on private equity and hedge funds approximate the treatment of other highly paid people - or it can continue down the road to the Bastille.

Brilliant as usual, Mr. Stein. Why isn't this guy running for office? Oh wait, he actually makes sense.

More from Ben Stein:
Ben Stein blasts Supreme Court for failing to protect shareholders
Ben Stein outlines his perfect portfolio and gives more sage advice
Ben Stein: Sit back, relax, and enjoy the dips

Kohlberg Kravis Roberts & Co., reportedly has BCE Inc. (NYSE:BCE), the owner of Bell Canada, in its sights.

A deal for the telecom company would be worth about CAD$30 billion (over USD$25 billion), making it the largest acquisition in Canadian history and one of the largest buyouts ever, according to the Globe and Mail newspaper. KKR is looking for Canadian partners such as the Ontario Teachers' Fund since foreign firms are prohibited from owning more than 46% of a telecom company's voting shares.

Shares of BCE were up 12% pre-market trading. They have dropped about 4% this year.

KKR already has its hands full:

The New York-based buyout firm is part of the $45 billion TXU Corp. (NYSE: TXU) deal, the largest buyout ever. KKR also is among the companies in the hunt for Australian retailer Coles Group Ltd. Last month, it agreed to buy Dollar General Stores Corp. (NYSE: DG).

Apparently, there's no limit to the number of multi-billion acquisitions that KKR can juggle at the same time.

Anyone following business news lately knows that private equity is pretty controversial right now. The industry has formed its own Private Equity Council to defend itself from media attacks and government regulation, and lawmakers are looking for ways to take a bigger tax-bite out of the firms' profits. Leading economic thinker John Kay chimed in with his own editorial with the headline "Arguments for private equity are not always convincing."

In his piece, Kay is skeptical about whether many of the private equity deals being done actually create value: "If management and business operations remain much the same, as does the underlying ownership structure once you drill down through the layers of fee-collecting intermediaries, it is hard to see where value is being added."

Kay makes a valid point. Historically it seems, the point of leveraged buyouts was to improve operations or the capital structure in such a way as to increase the value of the business. The book Barbarians at the Gate (About the RJR Nabisco buyout) provides an excellent description of the leveraged buyout mania of the 1980's, which may be a precursor to the current popularity of private equity. Much of the money being "earned" is coming in the form of fees to investment bankers. When looking at these deals, investors and regulators might do well to ask: Just what exactly is the point of all these deals? Is anything being built? Are operations being made more efficient?