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.

By Jonathan Berr Dec 19, 2012 11:05AM
Image: Man holding out empty pockets. ( Dougal Waters/Photodisc/Getty Images)Americans are scared of the fiscal cliff and are closing their wallets as a result.

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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32Comments
Dec 19, 2012 11:22AM
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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.

Dec 19, 2012 12:45PM
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"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!

Dec 19, 2012 11:17AM
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To bad our politicians on both sides don't understand that spending needs to be cut.
Dec 19, 2012 12:30PM
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We are never going to get anywhere having rich politicians funded by rich inheritors haggling about tax hikes on the rich and inheritors.
Dec 19, 2012 12:51PM
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From the article: " Washington always seems to find ways to make things worse."

=================================================================

Amen to that!

Dec 19, 2012 2:11PM
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Drama Queens.  It isn't satisying enough for these actors to pride themselves in conducting the citizens business.  They need constant attention and hate supervision, in other words DRAMA QUEENS.  These are just jobs people.  The aura of politicians if put into smells would reak of you know what.  Yet voters allow it, reelect it, and allow them to steal, corrupt, and denegrate the citizens.  I have no clue except we need massive hunger in this country to motivate citizens to become citizens.  If a normal employee acted and did the stuff on the job it would be bye bye.  The airing of this drama and "cliff" nonsense is all part of their act.  They all eat at the same trough and tell the same lies.  I can't say here what we all know needs to be done but each and every citizen should take a class in Public School on what sociopaths do to innocent peope. They spent us into oblivion and now they are attempting to convince us they have a way out and we have to pay for it.  Is this a bad dream?
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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.

Dec 19, 2012 12:46PM
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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.

Dec 19, 2012 1:21PM
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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!!!!!!!!!!!!!!

Dec 19, 2012 1:26PM
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Taxpayers carrying the load are in a minority. Dem dead beats continue to vote tax increases on the top 25% while receiving more handouts in return. The top 25% of taxpayers pay 88% of the total income taxes, yet the the bottom 75% have been convinced that they are carrying the load. Liberal math and dumbed down education. A 2 income family of 4 can make $50,000 and pay zero income taxes.
Dec 19, 2012 12:18PM
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Obamanomics will cause economic collapse.  You cannot Tax, Spend, Borrow and Print your way to prosperity, no matter what the lazy, arrogant, corrupt Imbecile Obama keeps telling you.

We need to slash all 850 billion in his new special interest spending.  We need to slash 200 billion from defense.  Then we need to raise taxes 200 billion, across the board (i.e. the 47% deadbeat class needs to start paying and the rich also).

That balances the budget.  Then we can figure out how to pay off Obama's massive debt of 6 trillion.  We could simply raise taxes $5000/family for 20 years or we could reduce spending further.

Obama and the democrats (read socialists) are destroying our economic future.  
Dec 19, 2012 3:33PM
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Cliff is irrelevant.  Crash is coming. As it always does. There is no free lunch. Accounting tricks will keep things going only for so long. Printing money is not the sign of a healthy economy. It is the sign of a dying economy. This is how the Romans came and went. Prepare for the crash. Google  CONQUER THE CRASH KONDRATIEFF WAVE to understand why the economy is doomed.
Dec 20, 2012 7:20PM
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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!

Dec 20, 2012 3:37PM
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I'm not spending less!  I'm spending more.  My health care insurance went up $100 per month last year and is going up another $100 per month this year.  I recon it goin to do the same thing next year.  Thus, I'm either going to spend over $3600 more a year next year than I spent last year unless I spend $3600 dollars less on food next year.   Of course, that's not possible because I only spend $300 a month on groceries anyway.  How can I cut that bill by $3600 a year and survive?  I also have copays and deductibles to satisfy as well as prescriptions to fill.  Let me see:  1) my health care insurance is $13,200 a year, 2) my home owners insurance is $4880 a year, and my auto insurance is $1068 a year.  That's now $19,000 plus that I no longer spend in the local community but instead send off to big insurance companies every year.  How much of this money goes into the CEO's pocket and then his bank account is hard to say but I have to believe quite a lot, otherwise, it wouldn't look like I the consumer am spending less because I'm spending more a year now than I ever have before and have even less to show for it!  I want what ever it is this guy is smoking!  I seldom smoke...but when I do... I prefer Acapulco Gold with my Dos Equis!  Stay high my friends and don't forget to share your joint with the ladies!
Dec 19, 2012 2:10PM
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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.

Dec 19, 2012 12:24PM
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It's beginning to look a lot like shiftless, described every Republican we know,
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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