While holiday shoppers got the season off to a hot start, a warning Monday from the White House that the approaching Fiscal Cliff could cause Americans to hang onto their money, and concerns over next year's taxes could put a crimp in the rest of the holiday spending season.
"But truthfully it is unlikely that that would start to happen during the holiday season," said St Michael's College Economics Professor Patrick Walsh. "It wouldn't be until January or February where people start looking at their paychecks and start saying, 'oh my gosh I am making less money, I need to cut back.' So I don't think it would have that much impact on the holiday season. It could potentially have a large impact on the overall economy next year."
While he is not a political scientist, Walsh guesses Congress and the President will let the tax cuts expire and spending cuts go into place, but then work out a deal a few days later. "They can swoop in and change some of those taxes, postpone some of those spending cuts because this Congress wants to look like the heroes who saved the situation," he said. "So it maybe politically easier for them to let us go over the cliff and pull us back."
While holiday shopping may continue on its current track this year, next year could be a completely different story, depending on how soon Congress and the President can come up with a budget deal.
Walsh said it is more people's employers and businesses who are focused a lot more on what's going on in Washington, and they may start taking steps to pull back on new hires or production.
Tuesday, March 11 2014 7:56 PM EDT2014-03-11 23:56:46 GMT
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