The polling firm Gallup just released evidence that the fiscal cliff is putting a real dent in the economy: Daily spending by upper-income households has plunged by 38 percent over the past four weeks.
“There is no better illustration of the real world impact of current policy debates than the way self-reported upper-income consumer spending has plummeted during recent weeks,” Gallup chief economist Dennis Jacobe explained in a Monday afternoon blog post.
A typical household earning more than $90,000 a year was spending $132 a day in the week leading up to Halloween, Gallup found in its rolling survey of consumer expenditures. The figure plunged steadily to $82 by the middle of November as talks to address the automatic tax hikes and spending cuts in the fiscal cliff took over the Washington spotlight.
[block:tft_general:newsletter]That same degree of pullback isn’t seen among average U.S. households. Their spending continues to be $68 a day, down from a recent high of $86 but well within the band of the past three months.
Jacobe ventures that some of the hesitancy by wealthier households may stem from taxes. President Obama’s re-election locked in the likelihood of the lower tax rates first introduced by George W. Bush expiring for families earning more than $250,000 a year.
While many of the households contained in Gallup’s upper-income bracket would be unaffected, the sudden drop-off in spending speaks to recognition of what awaits.
“While many upper-income Americans may not know a lot about the fiscal cliff, it is hard for them to ignore at least one general post-election consensus: federal income taxes on those with higher incomes are going to increase in the year ahead,” Jacobe wrote. “For all upper-income Americans, this means less after-tax take home pay and, very likely, the deferral of major purchases.”