WASHINGTON: The White House warned Monday that American consumers will spend $200bn less in 2013 if the looming fiscal cliff is not averted and automatic tax hikes are triggered across the board.
The fresh warning came as US lawmakers return to work after the week-long Thanksgiving holiday with time running out to strike an ever-elusive budget deal that will require painful compromises from Republicans and Democrats.
Several leading Republicans have indicated a willingness in recent days to accept a deal that includes more revenue from ending tax loopholes in return for significant funding cuts in social welfare programs beloved by Democrats. If no deal is reached before the end of the year, a poison pill of tax hikes and massive spending cuts, including slashes to the military, comes into effect with potentially catastrophic effects for the fragile US economy.
Independent economists predict the overall economy would take a hit of more than $500bn, probably sending the country tumbling back into recession. The White House yesterday added more gloom to the doomsday scenario, highlighting the devastating impact that plunging off the fiscal cliff would have on consumer spending through the holiday season and into next year.AFP