Decisions, decisions

Nothing is more difficult, and therefore more precious, than to be able to decide.__Napoleon Bonaparte

The lead article in today's "Washington Post" was Congress' forthcoming battle to extend the Bush-era tax cuts or not.  This has been in the news for at least a year.  A tax bill was introduced last December, 2009--H.R. 4213--with President Obama's proposal to extend some of the tax cuts, apply more credits and leave the built-in tax increases on high-income taxpayers.  This bill has gone back and forth between the House of Representatives and the Senate ever since.  It has been sitting in the Senate since before the July 4th recess with no action.

The article focused on the political battle of raising taxes just before an election (all Representatives are up for re-election this November and 1/3 of the Senate).  Then again, keeping the tax cuts will add trillions of dollars over the next few years to the national debt.  We have two wars going and have a slow recovery out of a major recession--can we afford to keep the tax cuts?  But will raising taxes slow the economy further?

A year ago some optimists (myself among them) believed that the issue of the tax cuts, or a replacement, would be resolved, at the latest, by early 2010. Now we're coming down to the last six months before they are nixed and nothing has been decided. 

It's not as though our lawmakers didn't know this was coming.  The sunset for these tax cuts was built into the laws that created them back in 2001.  Instead of continuing a screed about how lax Congress is in its duties, I'm going to write about why we need to have this settled, now.

In order for businesses and individuals to save and invest, they need to know what their disposable income will be.  One significant factor in that income is what is the amount of tax that will be paid on it.  If one doesn't know, one hoards all resources until one does know.  This hoarding is not the best thing for a fragile economy, as we have now.  All indications are that the economy is recovering from the recession and will continue to do so.  But there is a segment of the population of both individuals and businesses that are playing the "wait and see" game.  One doesn't know and can't estimate what taxes will be next year, so why do anything?

This "wait and see" and hoarding will only prolong the slow recovery because there is not the correct level of new investment into our economy.  New investment will create jobs. Jobs will create purchasing power and more savings.  More savings will create new investment. A continuous circle, or spiral.  A spiral that we want to go up. Isn't this all basic economics?

So, because of a lack of decision in Congress, the whole economy is not deciding.  And new investments are not being made.  Make a decision, please.