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Retailers Fear the Fiscal Cliff Might Steal Christmas

The retail industry is running scared . / Credit: Fiscal cliff image via Shutterstock

If President Barack Obama and Congress wait until the New Year's Eve deadline to devise a plan to keep Americans from hurling over the "fiscal cliff," it will be too late to salvage the holiday shopping season, retail experts say.

Many retailers make a fourth or more of their annual sales during the critical November-December holiday shopping window. They fear that uncertainty over the impending combination of tax hikes and spending cuts will undermine consumer confidence and unleash the Grinch on Whoville.

And it's got the retail industry running scared. So scared, in fact, that the head of the world's largest retail trade association sent a letter today (Nov. 15) urging the president and all members of the House and Senate to get their legislative acts together and defuse this issue by Thanksgiving to avert a retail disaster.

"Although most economists have focused on the impact to the economy in 2013, more immediate economic consequences could occur over the next few weeks if consumers lose confidence in the ability of policymakers to work together to solve tough problems," Matthew Shay, president and CEO of the National Retail Federation, wrote. "Any disruption to consumer confidence and spending during this season could prompt a crisis for retailers and the millions of U.S. jobs the industry supports."

New Year's Eve is when the so-called Bush tax cuts expire and spending cuts under the Budget Control Act of 2011 are to be implemented.

"Rather than setting New Year's Eve as its deadline, Washington needs to act quickly to set in place a framework for resolving this situation, preferably before Thanksgiving," Shay wrote. "Demonstrating the ability to work in a bipartisan manner will ease consumers' worries and avoid severe economic consequences during the single most crucial spending season of the entire year."

In a recent NRF survey, about two-thirds of shoppers said the fiscal cliff and other economic concerns would affect their holiday spending. The fiscal cliff notwithstanding, though, the NRF is forecasting that holiday sales will increase 4.1 percent to $586.1 billion this year.

Holiday sales are especially important for small retailers, Shay said. Although large chains dominate the retail landscape, 96 percent of U.S. retailers are small businesses with a single location, and 26 percent of NRF members have less than $1 million in annual sales.

"Many small business owners report their business income on their personal income tax returns and will be critically impacted by the outcome of this debate," Shay wrote.

Reach BusinessNewsDaily senior writer Ned Smith at nsmith@techmedianetwork.com. Follow him on Twitter @nedbsmith.We're also on Facebook & Google+.

Ned Smith

Ned was senior writer at Sweeney Vesty, an international consulting firm, and was Vice President of communications for iQuest Analytics. Before that, he has been a web editor and managed the Internet and intranet sites for Citizens Communications. He began his journalism career as a police reporter with the Roanoke (Va.) Times, and was managing editor of American Way magazine and senior editor of Us. He was a Captain in the U.S. Air Force and has a masters in journalism from the University of Arizona.