. . . And why it is beyond reforming.

In their Communist Manifesto of 1848, Marx and Engels called for “a heavy progressive or graduated income tax.” They were neither the first nor the last to favor such a tax.

We mention Marx and Engels as early proponents of the income tax only because the notion of an income tax is in keeping with so much else of Marxism. As the collapse of communism has amply demonstrated,
the use of naming with a strong intuitive appeal (such terms as “surplus value,” “exploitation,” “the bourgeoisie,” etc., come to mind) does not ensure that the names can be easily or usefully applied to practical situations and problems. Marxist thinking, for the most part, has been discredited by experience. Yet nearly every country of the world has some sort of income tax on its books. Why?

For one, and somewhat perversely, the income tax did not play a very big role in the functioning of communist economies. Since virtually everyone was paid by the state, there was little reliance on explicit income taxation. Thus, it was not seen as something to be discarded when the system collapsed. More to the point, the notion that those with more should pay more continues to have a visceral appeal.

Modest changes in the jobs picture and high scores for our leaders point to recovery. But for many people, the road ahead remains hard.

This month, for the first time in almost six years, 100 percent of the leading indicators with a discernible trend are expanding, and the cyclical score of the leaders has increased to 77 from 70. The coinciders also continue to strengthen—75 percent of them are expanding, up from 67 last month. Their cyclical score has increased to 65 from 54. With all of these indexes, a number above 50 indicates that economic expansion is likely.

Positive signs in employment bolster our view that a recovery is underway. In addition, many of the signs of weakness seen in last month’s leaders appear to have been transitory.

It was a little over five years ago that Terri Schiavo’s short life came to an end. Her death followed a prolonged court battle to determine what steps should or should not be taken to keep her alive after she had suffered irreversible brain damage that left her in a permanent vegetative state.

The public was strongly divided on the Schiavo case. But one thing upon which just about everyone agreed was that this situation would have been far simpler if Terri Schiavo had prepared an advance care directive. This would have stated her wishes for the type of care she desired in the event that she was unable to make her wishes known. Today only around 25 percent of Americans have prepared these documents.

Target-date funds can go up as well as down. That’s why you also need a safe, easily accessible “buffer fund” to pay for ordinary living expenses upon retirement.

Sooner or later, most investors learn that asset allocation is the single biggest factor in success or failure. Put everything you have into a single stock and you could make a fortune, or be wiped out. Bonds are usually safer, but aren’t
very generous. The key to any longterm strategy is balance—finding a combination of various types of stocks and bonds likely to produce enough growth without too much risk.

But in real life doing this is so much work that many investors don’t bother. Even if you carefully set the allocations at the start, the numbers are sure to drift off course in a matter of months. You could begin the year with 60 percent stocks and 40 percent bonds and end it at 70-30, if stocks do well and bonds do not.

Then, in theory, you should “rebalance,” selling some stocks and buying bonds to get back on target. But who has time for that? How many people know just which stocks sell and which bonds to buy?

The federal budget has soared not only because of government spending on stimulus packages and bailouts, but because of an historic drop in tax revenue.

Most of the debate over the rapid rise in the federal budget deficit—expected to be $1.6 trillion this year—has focused on the unprecedented surge in government spending. But developments on the other side of the budget ledger have been equally notable. Tax revenue plummeted during this recession— by some measures, to the lowest level in 60 years.

Federal receipts have been falling since 2007. That is not unexpected during a recession, but this time the decline was much steeper than usual. Receipts have fallen at a faster pace than at any time since the Great Depression. As the chart shows, the low point was reached about a year ago, when receipts fell by 30 percent compared with their level a year earlier.