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Service sector continues to improve

The ISM's index of business activity in the service sector has been 50 or above since last August, and that is consistent with a modest improvement. Nothing to write home about, but I would note that conditions today are about the same as they were in March and April of 2003, just a few months before the Bush tax cuts were enacted and the economy subsequently took off like a rocket in the second half of the year. Miracles can happen: what if Congress refused to allow the Bush tax cuts to expire? Since almost everyone expects tax rates on income and capital to rise beginning in 2010, it would be very bullish for the markets if they were instead held steady.

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