Seizing on one of the biggest shopping days of the year, the White House tried to exert pressure on Republican lawmakers Monday by warning that consumer spending could drop by nearly $200 billion in 2013 if Congress fails to approve an extension of tax cuts for the middle class by the end of next month.
The White House released a report from the National Economic Council and the Council of Economic Advisers analyzing the impact on retailers if taxes go up on Jan. 1 for families earning less than $250,000 per year. The report said that allowing middle-class tax rates to rise and failing to pay for a short-term "patch" of the Alternative Minimum Tax could cut the growth of consumer spending by 1.7 percentage points in 2013.
"The president believes Democrats and Republicans should come together to renew middle-class tax cuts so families and businesses have more certainty at this critical time for our economy," the White House said in a statement.
The CEA estimated that consumers could spend nearly $200 billion less next year just because of higher taxes, about four times the amount that shoppers spent during the "Black Friday" weekend in 2011. The administration timed the release of the report for "Cyber Monday," the biggest online shopping day of the year, when retailers offer heavy discounts for shoppers on the Web, particularly on electronics.
The administration's release of the report seemed a calculated effort to build support for President Obama's position in negotiations with Congress to avert the so-called "fiscal cliff," a mix of tax increases and automatic spending cuts due to take effect in January. Mr. Obama is urging lawmakers first to approve an extension of tax cuts for the middle class and to address tax rates for wealthier families later. That approach could mean an automatic tax increase on Jan. 1 for households earning more than $250,000.
"While the president is committed to working with Congress to reach compromises on areas of disagreement, there is no reason to delay acting where everyone agrees: extending tax cuts for the middle-class," said a statement from the office of White House press secretary Jay Carney. "There is no reason to hold the middle-class hostage while we debate tax cuts for the highest income earners."
Lawmakers in both parties said Sunday that they expect to reach at least a stopgap deal with the White House before the end of the year.
"I think it's likely that there will be a solution — not a final solution by any means, and not a big solution — but will get us through the end of the year into next year with a plan for trying to deal with these issues long-term over the course of the next Congress," Sen. Jon Kyl, Arizona Republican, said in an interview broadcast Sunday on CNN. "That will require compromise."
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