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WASHINGTON — The White House and congressional Republicans remained far apart on a plan for avoiding the automatic tax increases and spending cuts known as the “fiscal cliff” earlier this month, even as the consequences of not coming to an agreement came into sharper focus.
A White House report, “The Middle-Class Tax Cut’s Impact on Consumer Spending & Retailers,” detailed the effect the fiscal cliff would have on retailers and the economy.
The report states that allowing middle-class tax rates to rise and failing to adjust the Alternative Minimum Tax could cut the growth of real consumer spending by 1.7 percentage points in 2013, and slow the growth of real GDP by 1.4 percentage points.
“Faced with these tax hikes, the Council of Economic Advisors estimates that consumers could spend nearly $200 billion less than they otherwise would have in 2013 just because of higher taxes,” the report says. “This reduction of $200 billion is approximately four times the total amount that 226 million shoppers spent on Black Friday weekend last year.”
That reduction would likely be spread across all areas of consumer spending. Retailers and retail trade groups agreed that the stakes for their businesses, and the economy as a whole, are high.
“As we all know, resolving the federal revenue and spending issues to avoid the fiscal cliff is critical to our nation, our economy and further recovery, as well as America’s future global competitiveness,” said Walgreens president and chief executive officer Greg Wasson in a statement. “We understand that the decisions necessary to avoid the fiscal cliff are far from easy. But these important fiscal decisions are critical to families across America, like the customers and patients who depend on Walgreens for their consumer and health care needs. It is absolutely clear that we need to protect their jobs, health and economic future by avoiding the fiscal cliff, curbing the federal debt and bringing our nation to long-term, sustainable fiscal health.
“Tough decisions in Washington to avoid the cliff, balancing both revenue and spending considerations including entitlement reform, are also vital to America’s businesses like Walgreens that will benefit from federal fiscal clarity to make investments that ultimately advance jobs, growth and prosperity for all.”
National Retail Federation president and CEO Matthew Shay said it “is encouraging to see the administration’s acknowledgement that retailers and their customers will be among the hardest hit if our elected officials fail to address ongoing economic uncertainty,” but argued that an agreement that avoids reforms and maintains the status quo would also badly serve consumers and retailers.
“If brinkmanship overtakes bipartisanship, we will continue to see less capital investment by retailers large and small, stifled job creation, and dampened consumer confidence, which will ultimately lead to lower retail sales and potentially another recession.”
