Businesses are getting nervous about Washington again.
A congressional “supercommittee” tasked with finding at least $1.2 trillion in deficit reductions by Thanksgiving has made little apparent progress thus far, and could add a layer of uncertainty during the crucial holiday shopping period. Combined with continuing trouble in Europe and volatile financial markets, it is a confluence of risks at a time of already fragile confidence among businesspeople and consumers.
If Congress can’t come up with a way to cut $1.2 trillion over the next 10 years, the Budget Act will do it for them unless some sort of postponement is worked out. A look at the deadlines that must be met and what happens if they’re not:
A who’s who of the debt supercommittee.
The ‘fiscal cliff’ in graphs and GIFs
The risks to the economy from the supercommittee appear to be less severe than those accompanying the standoff in late July and early August over raising the federal debt ceiling; unlike then, there is no threat of a government debt default, but rather a series of automatic — and unpalatable — spending cuts that would occur if the committee cannot agree.
If the panel misses its Thanksgiving deadline, the deliberations could cast a cloud over the holiday shopping season, which accounts for as much as 40 percent of sales for some businesses. As the nation hovered on the brink of default over the summer, consumer confidence plunged to recessionary levels, with double-digit declines in measures of Americans’ economic views by the Conference Board and the University of Michigan.
It rattled consumers, said Shelly Sun, chief executive of Brightstar Care, which has about 6,000 home health-care workers at 225 franchises nationwide.
“Consumers felt like they had less money because of the stock market drop, and also less confidence in where the country’s going,” she said.
Still, those fears did not appear to trickle down to shoppers’ wallets. Retail sales in August, during the heat of the debate, rose a steady 0.3 percent compared with the previous month and have been increasing ever since. The Commerce Department said Tuesday that retail sales rose 0.3 percent in October, or 0.2 percent when gasoline and automobiles are excluded.
Matt Shay, head of the National Retail Federation trade group, said many retailers are assuming that federal spending will fall over time and that taxes could rise, pinching consumer spending.
As for the summer debt standoff, “I really think it affected business confidence and household confidence,” said Joel Naroff of Naroff Economic Advisors. “It created disdain, distrust and disgust in both the public and the corporate communities toward Washington, and the feeling that nothing was ever going to get done. When you see the summer slowdown, I think you have to put some of the blame on the whole debate.”
John Engler, president of the Business Roundtable, an association of top corporate executives, said he is optimistic that the supercommittee will be able to strike a deal, although he expects the members will work up until the deadline.
Still, corporate executives in various industries have grown weary of the seemingly constant brinkmanship by congressional leaders that this year has brought the government to within hours of a shutdown and led to a downgrade of federal debt after the debt ceiling debate. They hunger for a crisper, more orderly type of policymaking.
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