Fear of fiscal unknown paralyzes consumers
Anyone who has anxiously awaited a medical diagnosis can attest that not knowing is a particular kind of hell. Once the test results are in, decisions, plans and preparations can begin, but until that point, there’s little to do but wait and worry.
So it goes with uncertainty over delayed policy decisions that will affect both the U.S. economy and Americans’ personal spending decisions. Most people want to know, at least, what’s going to go wrong.
Will the payroll tax cut be extended? If not, American worker will pay 2 percent more of their income to the federal government starting in January.
Will the Bush-era tax cuts be allowed to expire?
Will anyone get tax cuts? Where will the cutoff line be?
Will trillion-dollar automatic spending cuts really be allowed to kick in?
What will happen to interest rates?
Will the debt ceiling be raised?
Will the Affordable Care Act go forward or not? How much will it really cost American families?
Will Congress pass a Farm Bill?
Fear echoes loudly through the economy. Because 2012 is an election year, neither party (of the two that could move on these issues) wants to cooperate with the other to get something done until after Nov. 6. Progress is stalled.
Congress will then do something to avoid the upcoming ‘fiscal cliff,’ because no politician wants to be responsible for sending the economy back into a recession. Exactly what that might be depends on the results of the election. Even then, forward progress seems less likely than action to handicap political opponents. None of this zigzagging from left to right is movement down the road.
Is it any wonder, then, that Americans are reluctant to spend money? They don’t know how much they’ll have to spend in the future. Even if their paychecks remain safe, they can only guess at the bite the federal government will take out of them. It’s difficult to be confident that they’ll be able to afford a mortgage or car payment, a tuition bill, or even groceries made more costly by the drought.
When consumers are afraid to spend and businesses are afraid to invest, the economy — already faltering — stalls, with a continued high unemployment rate as the most obvious indicator. Election Day won’t provide an instant fix. Allowing or even prompting the country to spiral toward economic paralysis is not a moral strategy for political positioning. What’s best for incumbent candidates is not necessarily what’s best for the nation.
This is one of the reasons Americans don’t trust their political leaders and don’t have faith that the two-party system, now a system of gridlock, is an effective way to govern. The bottom line is that this behavior harms the economy and its smaller participants, who can’t influence it in any meaningful way and whose pockets are not plump enough to finance a long vacation while waiting for our representatives to trot back to Washington and do what they were elected to do.