December 6, 2010
The New York Times

The Tax Cut Endgame

President Obama’s deal with the Republicans to extend all the Bush-era income tax cuts is a win for the Republicans and their strategy of obstructionism and a disappointing retreat by the White House.

We suppose it could have been worse. The deal could help to stimulate the weak economy. And if the Republicans had blocked an extension of unemployment benefits, as they were threatening to, millions of Americans would have suffered greatly.

But the country can’t afford to continue tax cuts for the rich indefinitely. And by kicking the issue down the road to 2012 — a presidential election year — it all but guarantees more craven politicking then.

Speaking on Monday evening, the president said that the deal would extend for two years all of the tax cuts, both those from the Bush years and those for low-income workers from last year’s stimulus law. Recently expired benefits for the long-term unemployed would also be extended for another 13 months.

In addition, the agreement includes a one-year cut in payroll taxes that will put a relatively modest, but much needed, $120 billion in workers’ pockets, and a year of bolstered write-offs for business investments.

On a decidedly sour note, Mr. Obama also said he had agreed to cut estate taxes even more than in the last year of the Bush administration. That is not compromise. It is capitulation.

The Republicans gave up very little except for their unconscionable stance of holding up all other Congressional action until they ensured that the richest Americans keep their tax cuts.

The tax cuts were not affordable when they were passed and are even less affordable now — with unpaid-for wars, with a weak economy crying out for recovery efforts, with the nation’s infrastructure and education system increasingly decrepit, and with retiring baby boomers inexorably driving up health costs and the budget deficit in the decades to come.

A thoughtful approach — not broached by either side — would have been to extend the tax cuts for most Americans for another year or so, letting the high-end tax breaks expire as scheduled this year and using the money to help pay for policies that would do more than income tax cuts to generate growth. In the meantime, lawmakers and the administration could have undertaken tax reform to bring revenues in line with spending.

Mr. Obama and the country should not wait for two years to begin reforming taxes.

Until Monday night, both sides were silent on the fate of one of the biggest high-end tax cuts of all — the estate tax on multimillionaires and billionaires. Now Mr. Obama seems to have given in to largely Republican demands on it.

Perhaps he wanted to placate the main proponent of gutting the estate tax further, Senator Jon Kyl of Arizona, who has also been working to block a vote on the New Start arms control treaty. Yes, the Republicans were also holding the nation’s security hostage to their relentless drive for tax cuts for the wealthy.

All of this only validates the Republican strategy of obstruction, and invites more. Senator Mitch McConnell, the Republican leader, has never wavered in his stance that all Bush tax cuts should be extended. Mr. McConnell and the Republicans will undoubtedly now push to make the cuts permanent.

Mr. Obama said on Monday night that he still believed extending the Bush tax cuts for the wealthy was a bad idea. He predicted that it would be undone in two years when it becomes apparent to everyone that the country can’t afford it. The president needs to ask himself why he couldn’t make that case now — and how he plans to change his approach to governing so he doesn’t get trapped this way again.

Mr. Obama also said that “we cannot play politics at a time when the American people are looking for us to solve problems.” Unfortunately, the Republicans felt no such compunction. He should have fought harder.