Setting Sale

As the economy gets tough, consumers still won't go shopping.

If you're reading this on the day after Christmas (the day it was written), shame on you. If you're reading this at work on the day after Christmas, double the shame. If you're reading this after winning the third-largest Powerball jackpot in history, triple the shame (though if the winner, unknown as a press time, is actually from West Virginia, we understand your confusion).

Why all the shame? Simply because you're wasting time that could be better spent getting big, big savings as a result of the worst Christmas retail season in 30 years. Due to sluggish sales over the past several weeks, stores are slashing prices so much, why they're practically giving it all away, to paraphrase once-ubiquitous pitchman-cum-felon "Crazy Eddy" Antar.

Yet it's unclear that such tactics will be particularly effective. "No matter what the stores do, they still seem to not be able to stimulate spending," Burt Flickinger III, managing director of consulting company Reach Marketing, told USA Today. The one bright side is that shoppers are in a better mood, at least as indicated by the University of Michigan's monthly consumer sentiment index, which bumped up 2.5 points in December to 86.7.

Alas, such self-esteem hasn't put much oomph into the U.S. economy, which saw orders for durable goods unexpectedly slide in November. And then there were these recent heartening words from the Jackie Wilson of economics, Federal Reserve Chairman Alan Greenspan: "The labor market has remained subdued, as businesses apparently have been reluctant to add to payrolls. The manufacturing sector remains especially damped, and nonresidential construction has trended lower. By all reports, state and local governments continue to struggle with deterioration in their fiscal conditions. Oil prices have recently risen and, not least, the economies of most of our major trading partners have shown little vigor." The result is what's been dubbed "recession lite," a slow but increasingly troubling drift in an economy that by most indicators is muddling along.

All this is likely to spur support for President George W. Bush's tax-cut stimulus package, expected to be introduced early in the new year. Bush's package reportedly will include an end to double taxation of dividend income, greater deductions for capital spending, and an acceleration of personal income cuts built into earlier legislation.

Tax cuts—even ones that are unlikely to have any immediate effect—are all to the good. Economic actors big and small may not be cartoonishly "rational ," but it's clear that they're all waiting on "a fading of geopolitical uncertainties," as one market consultant quoted in the Washington Post euphemistically put it. All the tax cuts—and all the day-after-Christmas sales—in the world take a back seat to knowing what comes next with Iraq and Al Qaeda.