Economy Watch: Fiscal Cliff Deal?
- Dec 18, 2012
Over the weekend and into Monday, there were rumors from Washington that hinted at the possibility of a deal on the fiscal cliff. They were vague murmurs, but enough to catch the attention of the chattering classes and investors.
Reportedly House Republican leaders were willing to allow tax increases on incomes of $1 million or more, which would be a major change in position for the party. Meanwhile, President Obama is supposedly still holding out for a tax increase on incomes of $250,000 or more—or maybe $400,000, according to published reports citing anonymous sources.
According to the latest Pew Research Center national survey on the matter (1,503 adults, on Dec. 5-9), nearly three-quarters (74 percent) of respondents say the best way to reduce the deficit is by both cutting major programs and increasing taxes, up from 69 percent in September and just 60 percent in July 2011, when the nation’s attention was focused on raising the debt ceiling. Just 11 percent say the focus should mostly be on program cuts, while 7 percent say the focus should be mostly on tax increases.
With the usual inconsistency people tend to show in these matters, however, the idea of cutting federal spending is approved in the abstract more than for particular programs. A majority of those surveyed opposed cuts to education (77 percent disapprove), roads and transportation (67 percent), programs to aid low-income Americans (58 percent) and military spending (55 percent).
Holiday travel predicted to increase
AAA predicted late last week that more than one in four Americans would take a road trip this holiday season, an increase that reflects a somewhat better economy and lower gas prices. According to the organization, year-end holiday travelers will total 93.3 million this year, an increase of 1.6 percent from the 91.8 million who traveled last year.
Year-end holiday travel, per AAA definition, happens between Dec. 22 and Jan. 1, 2013, and involves trips of more than 50 miles from home. Ninety percent of travelers (84.4 million) will travel by automobile, representing 26.7 percent of the total U.S. population. Median spending during these sojourns is expected to increase almost 6 percent to $759, compared to $718 in 2011, with transportation costs eating up about 29 cents of every travel dollar.
AAA estimates the national average price of gasoline will slowly drop through the end of the year and average between $3.20 and $3.40 a gallon by New Year’s Day. On average, gas prices dropped about 50 cents a gallon from September through early December, but remain at record highs for this time of year. AAA doesn’t expect gas prices to have a major impact on travel volume, but consumers could have more money to spend on holiday shopping, dining, entertainment and other yuletide frivolity if prices drop through December as expected.
Empire State Survey says NY manufacturing contracting
According to the New York Fed’s December 2012 Empire State Manufacturing Survey on Friday, business conditions for New York manufacturers are continuing to decline at a modest pace. For instance, the general business conditions index was negative for the fifth month in a row, falling three points to –8.1.
The survey’s new orders index dropped to –3.7, while the shipments index declined six points to 8.8. The employment indexes pointed to weaker labor market conditions, with the indexes for both number of employees and the average workweek posting values below zero for a second consecutive month (–9.7 and –10.8, respectively).
Wall Street bounced upward on Monday on rumors of fiscal-cliff avoidance, with the Dow Jones Industrial Average up 100.38 points, or 0.76 percent. The S&P 500 advanced 1.19 percent and the Nasdaq gained 1.32 percent.