The addition of Paul Ryan to the Romney presidential ticket is going to greatly increase the political focus on Medicare, Social Security, the federal budget deficit, and the fiscal cliff. In turn, just the intensity of these important national debates could have the unintended consequence of bringing today's slowing economy to a halt in the months ahead.
For example, 71% of U.S. investors think concerns about the fiscal cliff will force consumers and businesses to pull back on spending and investing -- slowing the economy in the second half of 2012 according to the July Wells Fargo/Gallup Investment and Retirement Optimism Index poll.
Fifty-four percent of U.S. investors say they are paying "a great deal" or "quite a lot" of attention to the fiscal cliff -- defined as "the automatic elimination of the Bush and other tax cuts and the automatic decrease in spending at the end of this year." Further, 61% think that if Congress doesn't act to deal with the fiscal cliff, the economy will go into recession next year.
Similarly, 58% of investors say they are extremely or very worried about the impact of potential changes in Medicare on older Americans, while 56% say the same about potential changes in Social Security.
If investors are right, the existence of the fiscal cliff is already slowing the U.S. economy. No matter the merits, a major political battle over the fiscal cliff, entitlements, and the federal budget deficit is likely to only increase today's very high level of economic uncertainty, and thus bring the already-slow U.S. economy to a halt.
Survey results are based on telephone interviews with investors having $10,000 or more of investable assets conducted June 30 through July 11, 2012.