This morning the Obama administration's "National Economic Council & Council of Economic Advisers" jointly released "The Middle-Class Tax Cuts' Impact on Consumer Spending & Retailers." Among the howlers in this non-economic political document: "Independent Economic Analysis Clearly Demonstrates Why We Need to Extend the 2001/2003/2010 Tax Cuts for the Middle-class." But not everyone else? Don't high income-earners spend money too?
The primary thrust of the administration's release is that, in regards to negotiations to avoid the "fiscal cliff," is the predictable class warfare clarion call, complete with kidnapping-related rhetoric: "There is no reason to hold the middle-class hostage while we debate tax cuts for the highest income earners." The word "hostage" appears three times in the first two pages of the document. The subtext, of course, is that the hostage-holders are the Republicans in Congress, particularly the House of Representatives. At the Politico, Byron Tau ignored this classless, tasteless partisan tack by supposed professionals:
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White House: Fiscal cliff standoff could slow holiday sales
In a Monday report, the White House warned that failure to resolve the impasse over a tax and deficit deal could undermine consumer confidence this holiday season.
A new report from the National Economic Council and the Council of Economic Advisers timed to the online shopping holiday "cyber Monday" estimated that consumers could spend close to $200 billion less, while GDP growth could slow by 1.4 percentage points in 2013.
The report also warns that the psychological impact of a looming middle class tax hike could put a huge dent in retail sales over the holidays — traditionally the most important retail period of the year.
This past Black Friday weekend, as reported by the Associated Press, American consumers, including those middle-class fiscal cliff "hostages," spent, well, quite freely: "Total spending over the four-day weekend totaled $59.1 billion, up 12.8 percent from 2011." Much of that was probably due to extended hours stretching back into Thanksgiving Day at many retailers (too extended, in my opinion, but that's a subject for another time), but it was a strong performance nonetheless. The point is that thus far, with the fiscal cliff looming, spending has not been negatively affected.
Continuing with the Politico report:
Congressional Republicans insist that tax rates should not climb, while Obama and Democrats want upper earners to pay more.
The report calls on Congress to extend the middle class portions of the Bush tax cuts immediately, while continuing the debate over the upper brackets.
Avoiding the brinksmanship of the 2011 debt-ceiling fight, the report concludes, is important for consumer sentiment.
If the threat to the economy is so great, the obvious thing to do would be to expeditiously extend the current tax system for a year and have it out next year over "tax hikes for the wealthy" without it directly threatening an immediate recession. Since the House is the starting point for tax and fiscal legislation, it will make the first move. Regardless of perception (and yes, I know perceptions will be altered, particularly with timely employment -- and reporting -- of "hostage"-oriented rhetoric), it will be the fault of Harry Reid's Senate and/or the President if anything the House passes fails to become law.
I strongly doubt that Byron Tau and the rest of the press would ignore similar language coming from an economic advisers' report in a Republican or conservative administration.
Graphic is a portion of a larger one found here and credited to "Colin Anderson."
Cross-posted at BizzyBlog.com.