When people talk what the fiscal cliff could do to America, they’re usually talking about Wall Street. Higher taxes on companies and workers, dramatic spending cuts, uncertainty about the debt ceiling…all bad news for big firms and their management.
But it turns out that Main Street—and in particular, poor people—could take the biggest hit if austerity measures kick in at the end of the year. Tax hikes and benefit cuts would account for a larger share of these people’s total spending than for the better-off. And that could hurt companies like dollar stores and Wal-Mart, which depend upon budget customers.
Credit Suisse analysts led by Michael Exstein took a detailed look at how the expiration of certain policies it calls “unlikely to survive 2013″ will affect people with the lowest incomes, in particular those that spend 100% of what they earn:
Unlike the slightly more prosperous, who can exercise more flexibility in their finances, the poorest consumers will have to cut back to make ends meet if these policies go into effect. They, not the banks and big companies, will feel most of the pain—thought that will also translate into trouble for the retailers that serve them. Exstein concludes that these cuts—or even just the expectation of them—could decrease sales at Wal-Mart and dollar stores by as much as 3%-5% in the short term.