James Saft is a Reuters columnist. The opinions expressed are his own.

The move to reform taxation of billions of dollars in so-called carried interest paid to hedge fund and private equity executives is dead and prominent among the mourners should be investors in U.S. debt.

A country that can’t even get it together to ensure that some of its highest paid people pay as much proportionally in tax as their secretaries and personal trainers is a country with very little hope of effecting meaningful budgetary reform.

Suffice to say that the long bond didn’t sell off on news that U.S. Senate Finance Committee Chairman Max Baucus has dropped a higher carried interest provision from his since-defeated tax bill, a sign that the Democrats have effectively given up hope of the measure. The news should, however, make holders of U.S. debt even more willing to sell to the Federal Reserve, currently buying Treasuries often and in size. The script has been written for tax and spending reform over the next two years and for lenders to the U.S. the story does not end happily.

As it stands private equity and other investment managers pay the lower capital gains rate on “carried interest,” their share of the takings when a holding such as a start-up or turnaround is sold at a profit. That means many pay taxes for the bulk of their compensation for their labor at a lower rate than many middle-class earners, an injustice so patent as to be seemingly unarguable.

Arguable of course it was, and the private equity industry mounted a lobbying campaign that has had a return on investment most of us can only dream of, painting the proposed reforms as an attack on funding for innovative job-creating start-up businesses and even, unbelievably, as against the best interests of pension savers. And while I am sure that the anti-carried-interest lobby is talented, well funded and smart, I doubt very much that they are that much better than the lobbies that will work against most other tax rises or spending cuts over the next two years.