We have no say in the matter – 2012’s Black Friday is approaching. The stage is set with sales promo messages posing as real news. Retailers have already “leaked” their best sale prices. Store hours are being tightly dovetailed with Thanksgiving after-dinner dishwashing. And a tempest in a teapot is being acted out on the morality of store clerk hours. Big box stores have done what they can to swaddle their offerings in great-price, convenience, excitement and emotion.
Viewed from consumers’ side of Black Friday, we have grave misgivings about spending on discretionary items during this holiday season. After all, 23 million of us are still unemployed or underemployed. Those with a job have the Fiscal Cliff risk that will yield less take home pay than it does today. That’s a troubling prospect as we contemplate avoidable spending.
All employed households face a 2% hit as the payroll tax holiday expires – that’ll cost us a week’s pay next year, and it’s especially troubling to low income families. Higher income families face bigger percentage shocks on wages (tax up 4.6% points plus 0.9% points extra for Medicare tax), plus as much as 24.6% points extra on dividends (a vicious hit on seniors), and another 5% points on capital gains. These tax hikes can easily total more than $10,000 – down payment on a new Cadillac.
On top of the tax burden, the Dow dropped about 1,000 points in the latest two weeks – that’s capital gains swirling the drain. Although October’s consumer price increase is a low 0.1% and banks are pushing credit cards again, that isn’t enough to drag us to the stores. Hurricane Sandy pushed sales down last month, but some of the consumer funk is likely Fiscal Cliff-driven.
Most well-to-do react carefully to big ticket items like tax increases and market corrections – it makes sense to hold back on spending until Washington makes up its mind. With the Grinch in pursuit, this year we might not shop ‘til we drop.
Alan Daley is a retired businessman living in Florida and writes for the American Consumer Institute, a nonprofit educational and research organization.