Analysis: Americans to face tougher 2013 on rising prices, taxes

Consumers will have to dig deeper into their pockets next year to pay for costlier healthcare, more expensive grocery bills and higher taxes, an extra drag on the country's already slow-moving economy.

The additional outlays look set to test the resilience of consumers, whose spending accounts for around two-thirds of the U.S. economy.

"We think it's going to be a difficult six to nine months," said Scott Hoyt, senior director of consumer economics for Moody's Analytics. "If anything, conditions are likely to get worse, particularly at the start of the year."

The strength of consumer spending has surprised some economists, given unemployment near 8 percent and anemic wage growth. Consumer spending has cushioned the blow to the United States from slower foreign demand for its goods.

Seniors on fixed incomes are couponing for the first time in their lives, you can tell a newbie by all the bewildered looks at the coupons in their hands and the products on the shelves. Which tells this senior that they are struggling to make ends meet each month of the OBAMA DEPRESSION!

To think our Founding Fathers went to war with the Brits over a few pence tax on tea, we STUPID Americans let combined county, state and Feds take 50% or more of our income in TAXES or FEES which is another name for a tax, with just a few grumbles.

Sad thing is this, (assuming I’m reading the economic tea leaves correctly); if Romeny wins, he won’t be sworn in until after January 1, 2013; the tax cuts expire January 1, 2013 and between November 6, 2012 and January 1, 2013, Obama will be a lame duck president; he won’t do anything to stop the plunge off the fiscal cliff and couldn’t get Congress to agree to anything if he wanted to, which he won’t because he’ll be just as happy to see the plunge take place.

So its off the cliff we go if Romney is elected and then there’s the question.........what can he do about it. The answer is simply, not a whole lot. The Dems in the Senate will block anything and everything if it doesn’t include huge tax increases for the wealthy, (anyone making more than $200,000.00). Worse, most the House Republicans have signed onto the “no higher taxes” pledge. Stalemate as the clock ticks on and the Obamacare tax bite hits.

But wait, there’s more! The funding agreement ends and there’s no budget so we’ll see another stalemate on that and the country’s credit will be downgraded.......again.

What this means is that 3% will be shaved off the GDP in a country where GDP is running at 2.5% a year. Two back to back quarters of negative GDP is the definition of a recession.

Big layoffs are already in the offing; Dupont, American Airlines, FedEx and a host of other big names have already announced plans for big layoffs. Why? In case you haven’t noticed, its been a terrible earnings reporting season. This a.m. P&G missed; they’ll be announcing layoffs. And the reason for the bad earnings/layoffs is that in a slowing global economy, the only way to improve earnings is to cut costs and labor is the biggest cost.

As the spiral steepens after January 1, 2013, and the higher taxes go into effect, there will be another weird happening. The dollar will get more valuable; yes, that’s right, taxes will suck bucks outa the economy and the end result.......a Deflationary death spiral. Oh, to be sure the Fed may keep interest rates at zero and pump billions into the market, but those billions never see the light of day because the velocity (turnover) of money will grind to near halt and the credit markets will seize up again.

Of course, if Obama wins all of the above is a given.

Weird really, when you think about it; if he wins, Romney may well go down in history as the next Herbert Hoover!

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.