Caution: Fiscal Cliff Ahead

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The aftermath of U.S. presidential election was filled with apocalyptic visions from the right-wing of the Republican Party and justifiably celebratory orations from the Democratic Party. The national news media, however, quickly turned their attention to the looming battle to take place over the holidays as the year 2012 comes to a close: The Fiscal Cliff.

The Fiscal Cliff, that fun-to-say term that cleverly describes the disastrous economic impact of the various U.S. federal tax increases and spending cuts that will take effect at the end of the year, is occupying the mind of those Senators, Congressmen and Congresswomen both wrapping up or gearing up for their terms in office.

They know that the Bush-era Tax Cuts are coming to an end, that the Social Security Payroll Tax will increase, and that other provisions including the Affordable Care Act Tax (referring to the Obamacare-required taxes on high-income individuals) will all go up or go into effect.

These tax increases are buddied up with a mind-numbing series of spending cuts that reduce government-driven stimulus spending, which gives us a one-two economic punch that economists fear will have the United States down for the count.

Several voices are chiming in to echo what leading economists have been saying: The Fiscal Cliff could lead to a double dip recession. Jamie Dimon, the once savior and now slightly tarnished CEO and Chairman of JPMorgan Chase, shared with CNBC that the uncertaintyaround what Congress will do is causing business executives to be reserved, to sit on cash, and not invest.


The Wall Street Journal reports that the Fiscal Cliff, if not addressed straightaway, could lead the United States right back into a recession and raise umemployment to 9.1 percent by the end of 2013, all of this according to the government’s own Congressional Budget Office.

Marketers and business executives, who are required to sell more to existing customers or acquire new ones to deliver the ever-important revenue budget, will have to face this stark reality: How can a company continue to sell, grow, and achieve their best laid plans for success when the economic situation is uncertain and the American consumer continues to change before their eyes?

Much has been made about the GOP’s recent defeat and the Monday morning quarterbacking that concluded Mitt Romney’s campaign did not adequately segment and target the right demographic groups. Marketers cannot fall into the same trap. The Fiscal Cliff will change the consumer landscape, a landscape that is considerably different than the one we saw just five years ago.

Case in point: The famed American Middle Class, much beleaguered for its shrinking size, took a body blow to the chest during this most recent recession when its collective net worth dropped precipitously off its own fiscal cliff.According to the Pew Research Center, median net worth dropped nearly 40% from 2006 to 2010 and nearly all Middle Class families – 85% – now say it’s more difficult to maintain their standard of living. And, compared to the other decades that preceded it, no Middle Class in the past 60 years has experienced more of a decrease in annual income than Middle Class families in 2000-2010.

Another sea change is how Millennials will react and then act in the hangover following the plunge down the Fiscal Cliff. Millennials, that generational cohert that followed Generation X and is approximately between the ages of 13 and 34, have known little but boom and bust, tough job markets, and a life driven by heavy doses of technology.  They are the most highly educated generation ever, but currently 37% of them are unemployed or out of the workforce. They describe themselves as “overeducated” and “struggling,” which instantly changes how marketers approach them. See the below video on what they’re saying on the streets of American cities.

The Fiscal Cliff, then, is more than an interesting debate to be played out on Capitol Hill in the waning months of 2012. Rather, it’s watershed moment for how people will react and behave financially. Marketers would do well to monitor these changes and leverage intelligence to allocate their sales and marketing dollars to those consumers or businesses most likely to buy, most likely to grow, and most likely to still demand your product after the smoke clears.

Do not take the chance of tumbling down the Fiscal Cliff by ignoring the painful lessons the Romney Campaign and the GOP is debating post-mortem right now, which is the demographic landscape is shifting, and these changes can bring opportunity and can bring risk. Understand these changes and their opportunities and risks, and you’ll see your light at the end of the tunnel. Choose to not understand these changes, and you may end up parodied on The Daily Show With Jon Stewart, which aptly points out the silliness of being surprised by changes in the consumer landscape. Enjoy this clip!

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