If the fiscal cliff is a crossroads for consumer confidence, consumer spending, job creation and business expansion, many Americans still remain unconcerned. That may be why holiday shopping numbers have stayed strong, unemployment has slipped below 8% and sales of expensive products like cars remain strong.
A new poll from Gallup shows the unexpected:
Americans’ economic confidence held steady last week as U.S. lawmakers continued to negotiate how to avoid the so-called “fiscal cliff.”
The measure remains close to its highest level in 2012.
There are a very limited number of reasons the data could be so strong. The first is that many Americans believe that politicians could not be so audacious as to allow a financial catastrophe at year’s end. How could Congress and the White House wreck what has been a halting but mostly positive set of improvements in the economy? How could they risk what the Congressional Budget Office says probably will be a recession in the first half of the year, if the budget and tax issues are not settled?
On a more naïve basis, Americans may think that higher taxes and budget cuts will have only the most muted effect on the economy. The increases in taxes may be modest enough so that individuals, with much less debt than they had during the recession, will not cut spending. Confidence also may have gotten better because the housing crisis could have drawn to a close. Businesses, similarly, have found greater demand for products and services, some from overseas and some from a rise in consumer confidence. A sort of virtuous cycle has been created as the overall global economy, outside Europe of course, has begun to tick higher.
Like most experts, Gallup expects an explosion of economic activity, if a compromised between Congress and the White House can be reached. But that compromise may not be good for consumers or businesses, in which case the weight of confidence will move in a negative direction.
Methodology: Results are based on telephone interviews conducted as part of the Gallup Daily tracking survey Dec. 10 to 16, 2012, with a random sample of 3,437 adults, aged 18 and older, living in all 50 U.S. states and the District of Columbia, selected using random-digit-dial sampling.
Douglas A. McIntyre