his first press conference as the newly re-elected commander in chief, president Barack Obama implored Congressional Republicans to raise taxes on families making $250,000 and above, which would offer middle and lower income Americans some tax relief, tamp down fears of the dreaded fiscal cliff, and grant consumers the peace of mind they need to shop the nation’s retail stores holiday season, he said.
If Republicans — long opposed to letting the Bush-era tax cuts expire — fail to acquiesce, thereby thwarting the swift creation of a plan to avert the fiscal cliff, “that’s going to be a pretty rude shock for [middle-income families] and I suspect will have a big impact on the holiday shopping season,” the president said.
Indeed, the leader of the free world has a little more than a month to stave off the fiscal cliff, which would plunge the economy into another recession, economists predict: It would result in higher taxes on the entire population and drastic spending cuts to federal agencies come Dec. 31. That’s when tax cuts enacted under former president George W. Bush expire.
But do most everyday consumers understand what the fiscal cliff actually means? And whether they do or don’t, did the president’s speech on Wednesday cast a new cloud of doubt over their holiday-spending impulses? Or were fiscal-cliff-informed doubts already there?
Michael Niemira, an economist with the International Council of Shopping Centers, noted the results of a USA Today/Gallup poll released this week: Americans are not only aware of the fiscal cliff, but believe it’s imperative that the president and Congress hash out a deficit reduction deal fast to prevent massive tax hikes and spending cuts, the poll revealed.
According to its findings, “71% of Americans are following the news of the fiscal cliff very or somewhat closely,” Niemira said. “So, I would say most shoppers are aware.”
And “more perceived friction [between the president and Congress] will accentuate the worry,” he said.
The president’s warning that political stonewalling will hurt seasonal retail sales echoes the International Council of Shopping Center’s holiday sales report.
“Maybe the White House was reading our [The ICSC's] forecast,” Niemira said.
Indeed, if Americans are forced to endure a political standoff over the fiscal cliff, “there could be dire consequence for holiday spending,” he said.
“As the negotiations progress, and if it doesn’t look positive, [and looks as though discussions are] breaking down and no deal seems to be working out, the financial markets will likely react quite negatively, and that reaction will spill over to high-end spending first, and then will ripple quite fast throughout the rest of the consumer segments.”
A recent Pew Research poll revealed that Americans doubt the president and Congress will cut a deal in time to prevent the fiscal cliff.
Nonetheless, Ira Kalish, director of global economics at Deloitte Research, suspects the fiscal cliff is not on most people’s radars. “I doubt that most consumers have any idea about this – at least not yet,” he told Forbes.
“For now, I don’t expect much impact. Usually following an election, there is a surge of good feeling for a president. Obama’s approval rating has risen since the election,” Kalish said. ”If anything, I expect that the end of the campaign will boost confidence – at least temporarily.”
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