Collins The Trend Tracker
by Mike Collins
January 7th, 2013

From One Cliff to Another

The recent resolution of the first fiscal cliff likely did little to affect consumers’ ability to buy doors and windows. The payroll tax increase will be felt by the middle class but not nearly as much as would have the expiration of the Bush tax cuts. The wealthiest 0.5 percent of the country saw a tax increase, but not one that will likely slow the already recovering luxury housing market. All in all, the most significant bullet dodged by this industry was the continuing reduced tax burden on the middle class, the market on which most door and window companies are focused. The industry will likely suffer more from Congress’ failure to enact Sandy aid prior to the break than any aspects of the first fiscal cliff resolution.

I emphasize that this was the “first” fiscal cliff because there are actually three more such cliffs looming. The first is the need to raise the $16.4 trillion debt ceiling by late February or early March. The second is a concept known as the sequester. This is a series of “doomsday” cuts that, unless otherwise dealt with, will lead to a budget decrease of 8-10 percent for almost all federal agencies, programs and projects. The important work that some of these programs and agencies accomplish notwithstanding, I feel for the heads of these agencies. After all, why should they have to trim their budgets in recognition that we’re in a tough economic period? If they wanted that kind of pressure, they’d get jobs running door or window manufacturing companies. The third cliff is the need to address the fact that the federal government is currently operating without an officially enacted budget. It has done so since the budget was due on October 1 and for a number of years prior to that. The government applies a band-aid measure each time it fails to enact a budget and another such measure is due on March 27.

The first two of these cliffs probably have the ability to do the most damage. You’ll remember that the last time the government engaged in political brinksmanship over the raising of the debt ceiling, we saw our national debt downgraded. That increases the government’s borrowing costs, sends signals to the rest of the world that perhaps we shouldn’t be seen as the leading superpower and creates unneeded economic uncertainty. Hopefully, this time around, the need for a stronger fiscal position for our country will triumph over partisanship and the economic recovery can continue unhindered.

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