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NEW YORK — Chain drug retailers are awaiting the implications of President Barack Obama’s re-election for the looming fiscal cliff, while gearing up for the now certain rollout of the health care reform law.
The law’s expansion of the rolls of people with health insurance by upwards of 32 million promises a significant increase in business for pharmacies.
But the fiscal cliff threatens a return to recession and higher unemployment. Without a deficit reduction agreement, January will mean the start of $7 trillion worth of tax increases and spending cuts over a decade — the precipice that the president and Congress are desperate to avoid.
Going over the cliff means reductions in defense and nondefense spending, the expiration of the Bush tax cuts, the end of a payroll tax holiday and extended unemployment benefits, and the onset of Medicare reimbursement cuts. It would result in the largest one-year drop in the annual deficit as a percent of the economy since 1969, but it would plunge the country back into a recession next year, based on the loss of more than $500 billion from the economy. It would also raise the unemployment rate to 9.1%, according to the nonpartisan Congressional Budget Office.
While there is agreement on the need for an alternative, continued legislative gridlock is also possible, given that Republicans maintained their hold on the House of Representatives.
The White House has said Obama will refuse a package that just maintains defense spending, which Republicans want. And administration officials said the president would veto any legislation that extends the Bush tax cuts for the wealthy, a key G.O.P. demand.
“The bottom line is that this looks like a status quo election,” Dean Maki, chief U.S. economist at Barclays, was quoted as saying in The New York Times. “The problem with that is that it doesn’t resolve some of the main sources of uncertainty that are hanging over the economy.”
More optimism emerged in Congress, however, as legislators from both sides of the aisle called for putting aside politics to avoid the fiscal cliff. Sen. Bob Corker (R., Tenn.) circulated a plan to overhaul the tax code and entitlements, meeting with 25 senators from both parties.
Lame duck Maine Republican Sen. Olympia Snowe said she would push for a deal to avoid the precipice and address the deficit.
Sen. Charles Schumer (D., N.Y.), expressed a willingness to compromise, saying he could accept a tax plan leaving the top rate at 35%, provided that loopholes would be closed for the affluent without hurting the middle class. He had demanded a restoration of the top tax rate of Bill Clinton’s presidency, 39.6%.
Lowering the top rate would complicate matters, he was quoted as saying in the Times, "but obviously there is push and pull, and there are going to be compromises.”
The National Retail Federation pledged to work with Obama to speed the economic recovery.
“The U.S. needs public policy that encourages economic growth and removes barriers to job creation,” said NRF president and chief executive officer Matthew Shay. “Issues affecting the retail industry are the same critical issues facing policy makers in Washington. On behalf of retailers, their employees and their customers, we want to see health care reform that actually reduces costs instead of imposing mandates, tax reform that makes U.S. businesses more competitive, sales tax fairness that puts Main Street and online retailers on a level playing field, neutral labor policy that doesn’t favor either employers or unions over the other, credit and debit card swipe fees based on transparency and competition rather than monopolies, and removal of trade barriers that drive up consumer prices.”
