Americans cut spending amid fiscal cliff drama
People are aware of the dire consequences of the fiscal cliff, including the potential for the US economy to wind up in another recession.
A third of the public has cut back on personal spending because of worries about the $600 billion in government expenses and tax increases set to kick in at the end of the year if Congress fails to act, according to a survey released Wednesday by Bankrate.com. In a related development, the site's Financial Security Index fell to a low of 95.6 in December.
As I reported Tuesday, experts are optimistic about President Barack Obama and House Speaker John Boehner reaching a fiscal cliff deal, in part because both men are making concessions that have angered their respective political bases. Of course, things could still fall apart. Washington always seems to find ways to make things worse.
Bankrate's survey of 1,001 adults was conducted Dec. 6 through Dec. 9, so the recent developments in the talks are not reflected in the discussions. Nonetheless, they show that people are aware of the dire consequences of the fiscal cliff including the potential for the U.S. economy to wind up in another recession.
"It's problematic. It's alarming," said Greg McBride, Bankrate.com senior financial analyst, in an interview. "We have got a slow growth muddle along economy to begin with that is dependent on consumer spending."
Indeed, consumers are not spending with the same abandon that they did before the Great Recession. FedEx (FDX) Wednesday issued disappointing corporate earnings and gave a forecast for the current quarter that was below Wall Street estimates. Most pundits are expecting gains in holiday sales to be less robust than last year even though many retailers are unveiling some creative promotions. Macy's (M), for one, is planning to remain open for 48 hours straight to attract holiday shoppers. The fiscal cliff, though, continues to loom large in the minds of many people.
"Initially, it was an abstract concept," McBride said. "There is a certain awareness there now that there wasn't a few months ago."
Not surprisingly, Bankrate's found that consumers with incomes under $30,000 per year and those over age 65 were the most likely to have cut back spending. Those under 30 were the least likely. Bankrate found Americans are less comfortable with their savings now versus a year ago by a margin of more than 3-to-1, its highest level since November 2011. Americans are also increasingly worried about their debt levels, a trend seen over the last two months, according to Bankrate.
Recent events in Washington probably will do little to soothe the frayed nerves of cash-strapped Americans.
Boehner, a Republican from Ohio, Tuesday announced he was pushing a "backup plan" in case talks with the White House fail that would extend the Bush era tax cuts to incomes up to $1 million, which is higher than $400,000 advocated by Obama and the $250,000 position the president advocated in his reelection bid. The White House has rejected this idea.
Many pundits have recently been arguing that the fiscal cliff is more like a slope and that the economy would survive if its leap lasted for only a few days. Let's hope that the politicians in Washington will ignore such talk and do the jobs that the American people elected them to do.
--Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter @jdberr. Corrects story at 1:44 p.m. to show that people under the 30 were the least likely to cut spending, not the most.
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Responsible US Citizens have only changed from willing consumers to un-willing consumers. Irresponsible people continue to run up debt they can't pay and live in houses they don't make monthly payments on. The tax paying responsible citizen pays through QE devaluation, inflation, no interest earnings on savings, erosion of home values, etc. etc.
"Americans are scared of the fiscal cliff and closing their wallets as a result"
So they are doing what the government is supposed to be doing but instead plays games. Dems and Repubs both out to lunch. Fire the lot of em!
From the article: " Washington always seems to find ways to make things worse."
Amen to that!
wait until we start reading headlines of senior citizens dying in the streets because of cut backs to S.S. and medicare. Then the middle and lower class are going to really panic and then the Greatest Depression we have been in will turn into a total economic meltdown.
Things are going to get very very very bad folks.
This is a useless article.Most Americans can`t say no to anything.Just like the Government
we put everything on the credit card and worry about paying it later.
WATCHING THESE CLOWNS IN WASH. IS GETTING TO BE A REAL JOKE, WHAT IS THIS JR HIGH SCHOOL, CMON YOU LITTLE IMMATURE CHILDREN GROW UP ALL OF YOU NOW!!!!!!!!!!!!!!
Stick with restoring the old tax rates for people making over $250K/year. They can afford it. They did just fine with old tax rates before Bush lowered them.
Wealth in this country is created by all of us - not just the capitalistic entrepreneur. If we allow our social infrastructure (education, health care, assistance for the disadvantaged) to continue to decay, we will become a 3rd World country with a relative few filthy rich at the top and the rest of us living at or near poverty. The "middle class" will only exist in history books.
Conservatives call public schools, public health care, public police and fire protection a path to communism. Conservatives just can't keep up with the times. Don't they realize that communism just isn't trendy anymore? It's so "last century". A compassionate government is not a communist government! Duh!
That's just about what it is - drama. Instead of leaders we get egomaniacal drama kings who conduct business as though they were in a flea market. Shame on the whole bunch of them. We would be better off with a computer program prepared by some mathematicians. Feed the data into the computer program and figure out who has to pay what so we can all live.
Capitalism is about doing the most good for the largest number of people and it's about having a strong middle class with little or no poverty. Capitalism is not about a few people with talent and connections exploiting the masses to everyone's detriment. What's sad is that I think the majority of Americans would be better off if China or Russia took us over, shaped us up, and ran things.
There's a game continually in play, to take our Rights away, and a lobby to bribe the slime with pay!
It's beginning to look a lot more gift-less, no hope for our future without dough...
Not a single crook in jail, banks continually getting bailed, and America gets perpetually assailed!
It's not supposed to exactly rhyme, just be truthful. Can ANYONE in Boehner's home turf tell us why he's still in DC? What's the matter with you... can't spell IMPEACHMENT?
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