WASHINGTON — With economists eyeing the holiday shopping season as a key indicator of the health of the American economy, the Obama administration estimated that congressional failure to act on the “fiscal cliff” would cut $200 billion off consumer spending in 2013.
The report from the National Economic Council and the Council of Economic Advisers released early Monday — “Cyber Monday” — is designed to increase pressure on Congress to reach an agreement on the looming spending and taxing issues, as well as raise public awareness of the upcoming decisions to the same end.
Failure to maintain lower tax rates for the middle class and failing to patch the Alternative Minimum Tax (AMT) could cut the slash of real consumer spending by 1.7 percentage points in 2013, according to the report. That change would result in a 1.4 percentage point cut in real GDP — the difference between steady growth and stagnation, or worse.
A more immediate fear is the impact of the negotiations on consumer confidence. The White House report highlights the sharp decline in sentiment during the debt-ceiling negotiations last summer, and a similar effect at this time of year could have brutal effects on the nation’s retailers.
In the report, the White House repeats President Barack Obama’s call for the immediate passage of middle class tax relief — which administration officials privately concede is a public relations ploy. Any congressional solution will almost surely require broader action to forestall the automatic spending cuts that were put in place when a “super committee” failed to reach bipartisan agreement on a range of budget issues.
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The thing that bothers me about this (from a British point of view… i’m unsure of how often US news coverage made mention of it) but during the anticipation of the election, we heard absolutely NOTHING about this oncoming fiscal cliff, and I say this as someone quite interested in politics and the presidential race in general. However, as soon as Obama was elected, newsreaders started making mention of the fiscal cliff, talking about it like the plot of Bond theme with Obama in the title role. “Obama MUST negotiate these issues or humanity is DOOMED!” I mean, they didn’t quite stoop to that but it was ridiculously close.