Lawmakers Can Address Consumer Ills (Craig Douglass On Consumers)

by Craig Douglass  on Monday, Mar. 4, 2013 12:00 am  

Craig Douglass

The Wall Street Journal reported it. Wal-Mart and other retailers are preparing for it. And consumers are feeling it. “It” is the expiration in January of the payroll tax cut, which is now shaving 2 percent off the top of most consumers’ take-home pay. That’s real money coming out of the pockets of consumers every month, at a time when a sluggish economy is attempting a snail’s-pace recovery, an economy that can improve through consumer spending.

As part of the compromise to avoid the fiscal cliff, the president and Congress agreed on allowing the Bush-era tax cuts to expire, ostensibly on the wealthy, but also on payroll taxes, which affect all working Arkansans and their paychecks. The result is a $1,300 reduction in annual income for a $65,000-a-year household. The total amount of cash out of consumers’ hands in 2013 alone is estimated at $110 billion.

Trading Down, Delaying Purchases

Economic uncertainty coupled with less disposable income, which has been exacerbated by higher gas prices means consumers have been trading down to lower-price retailers. For instance, more affluent consumers have been trading down to discounters like Wal-Mart, while discount customers have been moving from Wal-Mart to the dollar stores.

Likewise in the fast-food or “quick-service restaurant” category, where value or dollar menus are now the focus of marketing and advertising messages, rather than higher-priced sandwiches, drinks and specialty items.

Planned purchases of higher-cost items, such as electronics and appliances, are also being delayed until family budgets can better adjust to the new reality of less money in the checking account at month’s end.

Tax Refunds No Help

The National Retail Federation reported at the end of February that it recent survey of tax filers — sampling some 5,100 consumers — revealed over a third had already filed their taxes. When asked how those who expect a refund would spend the refund, 37.2 percent said they would use the money to pay down debt, 44 percent will put it into savings, and 29.7 percent plan to use it for everyday expenses.

Pay Attention to the Consumer

All of this points to the need for greater attention by lawmakers to consumer needs. While social issues are important to many, the ability to provide food, clothing, medical care, everyday household items and occasional discretionary spending on special purchases are a concern of all.

While Congress lurches from one self-made crisis to another, our own Arkansas Legislature is in session crafting bills that tend so far to be addressing non-economic issues, save the 500 or so jobs that may be created by a new Mississippi County steel mill.

Grow the Economy

 

 

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