While overfed politicians slug it out with platitudes in the run-up to the November election, nothing specific has been proposed on how to end the gridlock and the supposed Fiscal Cliff we are hurtling toward courtesy of a dysfunctional “do nothing” Congress in Washington.
Fitch Ratings now claims that optimism about the recovering U.S. auto industry should be tempered because “meaningful near-term risk remains.” Any, even casual, observer of the tawdry cast of political characters living in a socialist paradise in Washington courtesy of tax payers, knows that as long as the Republicans refuse to work with the Democrats that the economy remains in peril.
Without question improving consumer confidence, pent-up demand, and widespread availability of less expensive financing as the U.S. Treasury runs the printing press non-stop have helped increase U.S. car and truck sales recently, but the party’s over next year with pending tax increases and spending cuts that are written into existing law. (See Toyota, Honda Post Huge September Sales Gains as Nissan Stalls or Chrysler Group Reports September 2012 U.S. Sales Increase of 12%)
In Fitch’s most recent “Global Economic Outlook,” it projected that the unresolved fiscal cliff would push the U.S. economy into another recession (I didn’t know we were out of the Great Recession) and lead to a 3% cumulative loss of output by 2014.
“Tax increases would cause an immediate hit to a majority of American incomes, forcing consumers to practice spending restraint that would only be magnified when considering big-ticket items like cars and trucks,” Fitch claims.
“In addition, a tapering off in consumer confidence and an increase in unemployment would likely lead to further demand concerns for auto manufacturers, who would likely increase incentives in an attempt to prop up demand,” the rating agency noted.
Nevertheless, in keeping with Harry Truman’s failed search for a one-handed economist, the rating agency hedged its prediction. “Regarding the fiscal cliff, in our opinion, it is likely that all or some of the tax increases and spending cuts will be resolved or at least temporarily deferred,” Fitch backpedaled, in the same report.
