Spending Will Decline Unless Congress Averts Fiscal Cliff
November 26, 2012
It was a blockbuster weekend for retailers, as Americans took advantage
of big discounts to ring in the holiday shopping season. But you
wouldn't know it from the reaction on Wall Street. Financial markets
were sharply lower Monday after White House economists warned that
consumers could put the brakes on spending if Congress allows the
country to fall off a so-called "fiscal cliff."
A new poll shows a whopping 247 million shoppers visited stores and
websites over the Thanksgiving weekend.
Black Friday - the unofficial start to the holiday shopping season -
easily exceeded expectations, living up to its name as the day retailers
finally get out of the red and start making a profit.
The National Retail Federation says holiday shoppers spent about $423
per person, pushing the haul for the 4-day shopping weekend to nearly
$60 billion - up nearly 13 percent for the same time last year.
Retail analyst Marshal Cohen calls it a good start.
"Black Friday ,good or bad, isn't the indication of how retail will fare
for the whole year, but it is a good sign that the consumer has shown
up," said Cohen.
Consumer spending is critical to the U.S. economy, accounting for about
70 percent of total economic activity.
But Monday, the White House warned that failure by Congress to reach a
budget deal by the end of the year could put a serious crimp on consumer
Key indexes on the New York Stock Exchange fell sharply.
Ryan Alexander at Taxpayers for Common Sense explains. "The markets are
jittery because they don't see a way forward. The economy is fragile
because we're still in a recovery period and it's time for the President
and the speaker and all of Congress to kind of step up, make some
difficult choices and step back from the cliff," said Alexander.
a deal, the non-partisan Congressional Budget Office says the
combination of automatic year-end tax increases and spending cuts which
constitute the fiscal cliff - could nudge the U.S. economy back into
Budget expert and former Republican Congressman Bill Frenzel says time
is running out.
"The president's going to have to give a little, the Senate's going to
have to give a little, the House is going to have to give a little bit
more. And I believe that because the consequences are so bad, they are
going to come to agreement," said Franzel.
The White House says failure by Congress to reach a budget deal could
reduce consumer spending by nearly $200 billion next year and cut
economic growth by 1.5 percent.