Despite the report of record "Black Friday" and weekend sales to kick off the holiday shopping season, the White House Council of Economic Advisors warned Monday that the tax hikes due to take effect on January 1 could slow the holiday shopping spree unless Congress and the president agree on a way to avoid going over the much anticipated "fiscal cliff."
Retailers nationwide amassed a record $59.1 billion in sales from Thanksgiving Day through Sunday, a nearly $7-billion increase over the $52.4 billion of a year ago, according to estimates from the National Retail Federation. But the report of the White House panel, consistent with forecasts from the non-partisan Congressional Budget Office and many private economists, is that the anticipated tax hikes may yet cast a pall over the remainder of the shopping season and have the potential to cut consumer spending by about $200 billion throughout 2013. Overall economic growth would likely be reduced by 1.4 percent, according to the report, a significant drop in an economy that has been growing by barely two percent since the less-than-robust recovery began in the middle of 2009. Recent modest increases in housing prices and jobs growth have contributed to renewed optimism on the part of consumers, the report said, while warning that "the hard-earned rise in consumer confidence will be at risk if the middle-class tax cuts are not soon extended with a minimum of political drama."
The "political drama" refers to the standoff thus far between President Obama and congressional Republicans over tax policy. Republicans favor extending the lower rates for all income levels, while Obama is insisting on a rate increase for household incomes of $250,000 or more and individual incomes of $200,000 or more. Recent remarks by some key Republicans have indicated a softening of their anti-tax stand, however, citing a need to raise revenue as well as make adjustments to entitlement programs in order to stem a tide of red ink that has produced annual deficits exceeding $1 trillion in recent years and pushed the official national debt above $16 trillion.
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