Finance Column » Your Money This Week » A taxing process to watch

A taxing process to watch

By Gregg Fields ·
Tuesday, December 14, 2010
Posted 9 am ET

Following the legislative process in Washington can be quite taxing.

Particularly when the subject is taxes.

In the last week there have been hundreds, perhaps thousands, of articles written about whether tax cuts enacted during the George W. Bush administration would be extended.

This much is clear: It is possible to have read each of those articles and still not know the answer.

As the owner of a meatpacking plant once said: "There are two things you don't want to see created. One is sausages, and the other is law."

The tax gridlock last week was especially striking because it occurred in a lame duck session of Congress, when legislators have the luxury of knowing the next election is a couple years off. Furthermore, both chambers of Congress are still technically controlled by the same party that occupies the White House.

And yet -- no decision could be reached?

It will be interesting to see what happens when power is officially redistributed on Capitol Hill in January. Like putting the brakes on continental drift.

Clearly, there is a problem with economic policy in Washington. The proof is that tiny detail known as the federal deficit, which was $1.3 trillion in fiscal 2010. The good news, if you can call it that, is that the Congressional Budget Office believes it will drop to about $1 trillion in fiscal 2011. Washington seems to view deficits the way residents of mythical Atlantis probably felt about water: Why worry about rising seas?

To address the issue, Washington did what it often does: It created a commission to study the problem. The deficit reduction commission's report was released recently, entitled "The Moment of Truth." Lest you forget: In Washington, it's a tradition to start with a joke.

The humor continued in the report, which contained statements like "restore fiscal discipline," "live within our means" and "hold government accountable." Reading it could make you laugh until you cry -- literally.

Not to knock the goals, which are good ones. "We have a patriotic duty to come together on a plan that will make America better off tomorrow than it is today," the report begins. Hard to argue. But "come together"? When it comes to solidarity, America at the moment could give the former Yugoslavia a run for the money.

Nevertheless, this week, in a telling measure of where the economy is headed, we'll get some updated information on how many people decked the malls when the holiday shopping season started. November retail sales come out Tuesday, which of course will include Black Friday, Cyber Monday and the Tuesday afterward.

On Friday, the Conference Board released its index of leading indicators. The leading indicators are, admittedly, a compendium of news that has already been released. Nevertheless, they have a reputation for predicting economic turning points.

Not perfectly, however. As an economist once joked, the leading indicators have predicted 10 of the last six recessions

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