Optimism about our personal finances is failing, according to a Creighton University survey, and consumers are again becoming hesitant to spend. Based on the monthly poll, Creighton economist Ernie Goss says the economies in Nebraska and in the Midwest are continuing to show signs of a solid recovery. However, he says inaction by Congress to extend Bush-era tax cuts could put us back on the road to ruin.
“Gridlock, in this case, is not good,” Goss says. “We have gridlock, we’re talking about a massive tax increase going into effect January 1 and that will slow the economy. That has the potential to pull down growth significantly and even potentially to push us back into a recession.”
Goss says the September survey of nearly 700 business leaders in Nebraska and eight other states finds Nebraska’s economy growing — for the 13th straight month. That could quickly change, he says, if our elected leaders in Washington D-C fail to move on the tax issue.
“I’m crossing my fingers that the Congress comes back after the elections in early November and continues at least a large share of those tax cuts,” Goss says. “We’ll have to wait and see.”
Among the sticking points in Congress, Democrats say the tax cuts should only be extended to “middle class” Americans, those making under $250,000 a year. Republicans want the tax cuts fully extended, arguing, many of the higher wage earners run small businesses which are key to creating jobs and helping the nation’s economy recover.
Politics aside, Goss says a threatened tax hike will keep people from spending, which is critical as we head into the key holiday sales months. Goss says, “It’s a massive, mammoth tax increase and that’s affecting how businesses see the outlook and, of course, even though I’m saying this economy is looking much better, it’s still a fragile economy and it’s still not the time to be raising taxes.”
According to Goss, Nebraska lost more than 21,000 jobs during the official national recession, and since the recession officially ended in June of 2009, the state regained four-thousand of the lost jobs. “In terms of jobs,” Goss says, “I expect the state to return to pre-recession levels in the second half of 2011.”