President Obama hasn’t broken his campaign promise, just deferred it. To fold the Bush tax cuts into another grab-bag of unfocused short-term stimulus is eventually to sound the death knell of the tax cuts, and immediately to sound the death knell of the unattained purpose of the tax cuts: that is, to slash overall rates on income and capital permanently so that people could make sound long-term decisions.
The right would have done better to focus on safeguarding indefinitely the best parts of the tax cuts from the perspective of long-term investment: the lower rates on capital gains and dividends. However, we still have plenty of time — bond markets willing — to chip away at the tax code’s politically driven tax breaks, so that we can have some hope of keeping these rates low(ish) in the future.
But, as the Irish might say, we would not start from here.
– Nicole Gelinas is contributing editor to the Manhattan Institute’s City Journal.