In what was probably the most unsurprising story from last week, Reuters noted on Wednesday that retail sales had slowed in January. Why? Because of President Barack Obama’s tax hikes and rising gas prices:
Retail sales barely rose in January as tax increases and higher gasoline prices restrained spending, setting up the economy for only modest growth in the first quarter.
The Commerce Department said on Wednesday retail sales edged up 0.1 percent after a 0.5 percent rise in December.
The small increase suggested the expiration of a 2 percent payroll tax cut on January 1 and higher tax rates for wealthier Americans were hurting the economy.
While some economists were encouraged that consumers had maintained purchases despite a reduction in their disposable incomes, they cautioned sales could remain weak over the next months.
“By no means are we completely out of the woods when it comes to the impact of higher taxes,” said Michael Feroli, an economist at JPMorgan in New York. “Evidence from past episodes suggests it could take up to two quarters for spending to fully adjust to new tax realities.”
The tax hikes that went into effect at the beginning of the year hit 77% of American households. That doesn’t include the $1 trillion in new taxes that went into effect this year thanks to ObamaCare. The tax hikes are also expected to slow job growth at a time when the economy is contracting.