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White House Woos Reluctant Retailers

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The White House report cited consumer confidence as an important factor underpinning economic recovery, pointing to recent reports from The Conference Board and Thomson Reuters/University of Michigan showing that consumer sentiment reached a five-year high in November.

But there were some clouds behind those figures, suggesting concerns over taxes were hitting households. The Michigan index, for instance, rose only slightly from the month before, showing some trepidation even as consumers opened their wallets.

“We know that uncertainty about the fiscal outlook and its impact on middle-class families can dampen consumer optimism,” the White House said in its report, noting consumer sentiment fell to the lowest levels last year since the recession as congressional Democrats and Republicans battled over raising the debt ceiling.

The report details specific levels of consumer spending that would be affected by expiration of the tax cuts for the middle class, including $36 billion less spending on housing and utilities, $32 billion less on health care and $15 billion less on groceries.

But the report was also interesting in what it left out. The White House did not detail, for instance, the effect of the expiration of the payroll tax cut, which is scheduled to revert to 6.2 percent from the current 4.2 percent in 2013. The measure is worth an estimated $95 billion in federal revenue next year, according to the Congressional Budget Office, and economists estimate that allowing the rate to return to its earlier level will cost the average household about $1,000 annually.

Retailers say they simply do not want to make choices between such tax provisions.

“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,” Shay said.

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