This morning the White House released a new report (PDF) fanning the flames of panic that surround the looming expiration of the fiscal cliff—the roughly $500 billion in tax increases and spending cuts that will take effect on Jan. 1 unless Congress acts to stop them. The message of this new report: Don’t wait until next year to panic! You can panic right now!
The seasonally appropriate theme of the analysis by the White House’s Council of Economic Advisers is consumer spending. The CEA estimates that it will drop by 1.7 percentage points, or about $200 billion, next year if we go over the cliff—that number is, the authors helpfully note, about four times as much as consumers spent on Black Friday last year. And it would come as consumer confidence has reached its highest point in five years.
But the fiscal cliff’s threat to the economy isn’t really news. What’s news in the report—or what is, more accurately, a clever new spin on the news—is that the specter of the cliff, if not soon resolved, will dampen consumer spending during THIS holiday season. In other words, Congress, like the Grinch, could ruin Christmas if it doesn’t get its act together in a hurry.
The CEOs of big retailers like Wal-Mart (WMT) have been echoing this worry. As Wal-Mart’s CEO Mike Duke put it earlier this month, “Wal-Mart’s customers are at the center of this debate. They are middle-class Americans and those aspiring to join the middle class. Our customers are working hard to adapt to the ‘new normal,’ but their confidence is still very fragile. They are shopping for Christmas now and they don’t need uncertainty over a tax increase.”
According to the White House report, the fix for all this is easy: “While the President is committed to working with Congress to reach compromises on areas of disagreement, there is no reason to delay acting where everyone agrees: extending tax cuts for the middle-class. There is no reason to hold the middle-class hostage while we debate tax cuts for the highest income earners.” That simply repeats what has been the Democratic position all along.
What the report doesn’t say—but what the White House is keenly aware of—is that Republicans will probably get blamed if Congress goes over the cliff. A Nov. 13 Pew Research Center-Washington Post poll showed that a majority of Americans (53 percent) would blame the GOP, vs. 29 percent who would blame the president. The real purpose of the report is to increase pressure on Republicans and up the ante even further: By forcing the country to go over the fiscal cliff, the White House is saying, the GOP wouldn’t just wreck the economy—they’d wreck Christmas, too.