The vast majority of retirees say the economy will improve after the general election, but what about that fiscal cliff we're approaching?
The United States may be headed toward a “fiscal cliff” at the end of 2012, but the vast majority of retirees expect the economy to start looking up after the general election, according to a Millionaire Corner survey of more than 990 investors conducted in April.
This positive outlook was expressed by nearly 75 percent of retirees participating in our survey who agreed with the statement, “I believe the United States economy will improve after the 2012 national elections.”
Expectations that the job market will improve appear to be the most significant factor contributing to this upbeat sentiment. More than half – 55 percent - of the optimistic retirees based their opinion on expectations that the job market would strengthen.
The positive outlook also stems from the belief that consumer confidence will improve after the election, a belief held by nearly 48 percent of these retirees. A significant share – 43 percent - believe the end to uncertainty about who will lead the country will boost the economy. Greater confidence in American leadership will cause the stock market to go up, according to more than 42 percent of the retirees, and 36 percent believe the political climate will be better.
Few of the optimistic retirees believe the elections will lead to a more harmonious Congress, fewer regulations for small businesses, an improvement in the U.S. credit rating, greater confidence in the U.S. from foreign countries or a reduction in taxes.
Just over one-fourth of retirees participating in our April survey expect the economy to get worse after the election. Nearly 57 percent of these more pessimistic retirees believe the unemployment situation will stagnate or decline and 53 percent believe the stock market will go down due to a lack of confidence in American leadership. More than half - 52 percent - say the political climate will worsen and more than 58 percent predict consumer confidence will plummet, causing a drop in purchasing and investing. About 57 percent believe Congress will be more divisive, 55 percent predict an increase in taxes and more than half say foreign countries will have less confidence in the U.S.
This pessimistic view appears to resonate with economists and analysts who point to the expiration of roughly $7 trillion in federal income tax breaks at the end of 2012 and the likelihood the nation will once again hit the legal debt limit in the late Fall. A sharp increase in taxes could derail the nation’s moderate recovery, while the growing federal deficit could hobble economic growth and development for decades to come.
“Policymakers face difficult tradeoffs in deciding how quickly to implement policies to reduce budget deficits, “according to today’s blog from the nonpartisan Congressional Budget Office. “On the one hand, immediate spending cuts or tax increases would represent an added drag on the weak economic expansion.”
On the other hand, slowly phasing in spending cuts and taxes would cause the deficit to rise, said the blog, and might increase uncertainty about long-term policies to reduce the deficit. Most retirees who predict the economy to deteriorate following the election expect the worst of both worlds – an increase in both taxes and uncertainty about the nation’s political direction.