White House issues new warning on ‘fiscal cliff’

WASHINGTON — On the heels of record sales over the Black Friday weekend, the White House warned that automatic federal tax increases set for next year could hurt the rest of the holiday shopping season and would likely crimp consumer spending by about $200 billion in 2013.

The report released Monday projects that if Congress fails to act and middle-income taxes rise, consumer spending growth could be sliced by 1.7 percentage points and economic growth overall would probably be cut by 1.4 percentage points in 2013. Those are not small numbers given that consumer spending drives about two-thirds of U.S. economic activity and that the American economy has been growing by just a little more than 2 percent since the recovery began in mid-2009.

The report from the White House Council of Economic Advisors looked only at the impending income tax hikes for taxpayers, including a higher alternative minimum tax. These tax increases are part of the so-called fiscal cliff – a combination of mandated fiscal spending cuts and higher taxes that are slated to kick in next year and that on the whole would hit the economy by more than $500 billion and likely send the country back into recession into 2013.

ADVERTISEMENT
0 seconds of 0 secondsVolume 0%
Press shift question mark to access a list of keyboard shortcuts
00:00
00:00
00:00
 

The report is broadly consistent with forecasts by the Congressional Budget Office and leading private economists, and it comes after retailers amassed a record $59.1 billion in sales from Thanksgiving day through Sunday, up from $52.4 billion a year earlier, according to estimates from the National Retail Federation.

The encouraging start of the holiday shopping season reflects the recent strengthening of consumer confidence, which is at a five-year high. Consumers lately have been feeling better as housing prices have begun to rise and job growth has picked up slightly.

But the White House report warned 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.”

A loss of $200 billion in consumer spending is roughly the amount American families spent on all the new cars and trucks sold in the U.S. in the last year, the report said. And the pain would be felt by producers of goods and services across the board, with $36 billion less spent next year for housing and utilities, for example, and $32 billion less health care and $26 billion less for groceries and at restaurants.

—-

&Copy;2012 Tribune Co.

Visit Tribune Co. at www.latimes.com

Distributed by MCT Information Services

Talk to us

> Give us your news tips.

> Send us a letter to the editor.

> More Herald contact information.

More in Local News

Aaron Weinstock uses an x-ray machine toy inside the Imagine Children Museum on Tuesday, Dec. 3, 2024 in Everett, Washington. (Olivia Vanni / The Herald)
Imagine Children’s Museum $250k grant reinstated following federal court order

The federal grant supports a program that brings free science lessons to children throughout rural Snohomish County.

Snohomish County 911 Executive Director Kurt Mills talks about the improvements made in the new call center space during a tour of the building on Tuesday, May 20, 2025 in Everett, Washington. (Olivia Vanni / The Herald)
New 911 center in Everett built to survive disaster

The $67.5 million facility brings all emergency staff under one roof with seismic upgrades, wellness features and space to expand.

Everett
Five arrested in connection with Everett toddler’s 2024 overdose death

More than a year after 13-month-old died, Everett police make arrests in overdose case.

Madison Family Shelter Family Support Specialist Dan Blizard talks about one of the pallet homes on Monday, May 19, 2025 in Everett, Washington. (Olivia Vanni / The Herald)
Madison Family Shelter reopens after hiatus

The Pallet shelter village, formerly Faith Family Village, provides housing for up to eight families for 90 days.

Helion's 6th fusion prototype, Trenta, on display on Tuesday, July 9, 2024 in Everett, Washington. (Olivia Vanni / The Herald)
Helion celebrates smoother path to fusion energy site approval

Helion CEO applauds legislation signed by Gov. Bob Ferguson expected to streamline site selection process.

Everett Historic Theater owner Curtis Shriner inside the theater on Tuesday, May 13, 2025 in Everett, Washington. (Olivia Vanni / The Herald)
Historic Everett Theatre sale on horizon, future uncertain

With expected new ownership, events for July and August will be canceled. The schedule for the fall and beyond is unclear.

Traffic moves across the US 2 trestle between Everett and Lake Stevens on Wednesday, Oct. 9, 2024. (Olivia Vanni / The Herald)
Washington climate goals jeopardized by U.S. Senate vote

The U.S. Senate revoked waivers allowing Washington to mandate strict vehicle emission standards

The Everett City Council on Wednesday, April 16, 2025 in Everett, Washington. (Olivia Vanni / The Herald)
Everett City Council approves apprenticeship ordinance

The new ordinance builds upon state law, requiring many city public works contracts to use at least 15% apprentice labor.

Logo for news use featuring the municipality of Stanwood in Snohomish County, Washington. 220118
Stanwood nears completion of deployable floodwall

The new floodwall will provide quick protection to the downtown area during flood conditions.

Cars drive along Cathcart Way next to the site of the proposed Eastview Village development that borders Little Cedars Elementary on Wednesday, May 7, 2025 in Everett, Washington. (Olivia Vanni / The Herald)
Former engineer: Snohomish County rushed plans for Eastview development

David Irwin cited red flags from the developers. After he resigned, the county approved the development that’s now stalled with an appeal

Steven M. Falk / The Philadelphia Inquirer / Tribune News Service
James Taylor plays Sunday and Monday at Chateau Ste. Michelle in Woodinville.
A&E Calendar for May 22

Send calendar submissions for print and online to features@heraldnet.com. To ensure your… Continue reading

Members of Washington State patrol salute the casket of slain trooper Chris Gadd during a memorial cremony on Tuesday, March 12, 2024, at Angel of the Winds Arena in Everett, Washington. (Ryan Berry / The Herald)
Opening statements begin in trial of man charged in crash of WSP trooper

Deputy prosecutor described to jurors what began as a routine patrol for Christopher Gadd — “until it wasn’t.”

Support local journalism

If you value local news, make a gift now to support the trusted journalism you get in The Daily Herald. Donations processed in this system are not tax deductible.