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The fiscal cliff is a combination of tax cuts expiring at the end of the year along side of a reduction in government spending. It was brought on by Washington’s inability to compromise during last year’s debt ceiling standoff. It is also the cause of numerous debates and political rhetoric. However, as recent reports show, Americans are already dealing with a fiscal cliff.
Consumer spending, which accounts for about two-thirds of the economy, declined in October for the first time in five months. According to the Commerce Department, personal consumption expenditures fell 0.2 percent, compared to a 0.8 percent gain in September. When inflation is factored, consumer spending dropped 0.3 percent, despite increasing 0.4 percent in September. Some analysts and economists blamed Sandy for the decrease in spending, but the superstorm hit during the final days of October and many consumers in the northeast rushed to the stores to stock-up on goods ahead of impact.
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“What this is showing is the economy, broadly, is slowing in the fourth quarter and it is concern on the part of businesses and consumers with respect to the fiscal cliff,” said David Berson, chief economist at Nationwide Insurance, according to Reuters.
Wages are failing to keep pace with inflation…
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