This article reports the unexpected decline in consumer confidence in September due to the concern that US personal income taxes will increase next year. It hints that the biggest part of the economy will struggle to pick up.
The University of Michigan reported that the preliminary index of consumer sentiment dropped to a one-year low of 66.6 The decrease due to a rise in pessimism was among households with incomes above $75,000 and at the same time, the Fed showed household wealth declined 2.8 percent in the second quarter as stock prices fell.
The government has been spending in bulk and with the tax cuts prolonging, the government will unable to spend more with a low budget. Lawmakers said they plan to extend the tax cuts for middle class but not sure whether they should do the same for wealthier Americans. Although the tax raise - if applied for wealthier American - will affect only a small percent of the population (just those who are really rich), it will affect the buying plans and prospects for the economy. For instance, wealthy class will reduce spending in investment, some of them are bonds, stocks, some are in business. Thus, it will gradually affect the economy.
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