â¿¿ Though the economists favor reducing the government's budget deficit, nearly all prefer doing so over the long run rather than immediately.
One consequence of the Washington budget battles was a deal between the White House and Congress to let a cut in Social Security taxes expire Jan. 1. That tax increase cost a typical household with $50,000 in income about $1,000. Retail sales slowed last month as a result. And some big retailers, notably Wal-Mart, blamed the Social Security tax increase for a darker outlook for sales in coming months.
But when asked to choose the biggest reasons the economy isn't growing faster, barely one in five economists cite consumers' reluctance to spend.
Why the lack of concern?Many economists think the damage from higher Social Security taxes will prove temporary. Most think consumer spending will slow in the first three months of this year but then pick up as companies add jobs. Some employers are even willing to pay more: After stagnating since the recession ended, hourly pay has been rising faster than inflation the past three months. Analysts also generally think consumers' finances have recovered from the excesses of the housing bubble, when many piled up debt and bought larger houses than they could afford. As Americans repaid debts, they spent less. But now, home values are up. Stocks have roughly doubled since June 2009. Americans who feel wealthier are typically more likely to spend. After years of delaying big purchases of autos, appliances and other items, consumers are spending more for them. Auto sales in January were the best for that month in five years. "It's been nearly four years since the recession ended," says Beth Ann Bovino, deputy chief economist at Standard & Poor's. Consumers "have been saving more, and they've put more money in the bank, and I think they're ready to spend more. There's a lot of pent-up demand."