Wall Street Journal (12/28/12)

The Obama administration and Congress took small steps toward breaking the budget impasse Thursday, but all sides grew increasingly concerned that they will not be able to avert the tax increases and spending cuts known as the fiscal cliff. President Obama invited congressional leaders to the White House on Friday afternoon for a last-ditch effort to broker a deal, as the Senate returned to Washington on Thursday. House Republican leaders reported that the House will reconvene Sunday evening.

Any resolution at this point would be a scaled-back version of the package Obama and congressional leaders had anticipated passing after the November election. The White House is pressing for the Senate to extend current tax rates for income up to $250,000, extend unemployment benefits, keep the alternative minimum tax from hitting millions of additional taxpayers, and delay spending cuts set to take effect in January. Senate Majority Leader Harry Reid (D-NV) says the prospects for passage of a bill before the last day of the year are fading rapidly. “I have to be very honest,” he says. “I don’t know time-wise how it can happen now.”

Wall Street Journal (12/28/12) Shelly Banjo

In a move following protests, fines, and lawsuits over poor worker treatment at warehouses, Walmart will begin to police its subcontractors’ warehouses in a similar way to how it polices its suppliers’ factories throughout the world. Walmart, and many other big box retailers, use warehouses to store merchandise before it is delivered to stores for consumer purchase. In many cases these warehouses are subcontracted, and during the holiday season when demand peaks these subcontractors often hire temporary workers through staffing firms. Claims of poor working conditions and undelivered wages have plagued major warehouses in Illinois, New Jersey, and California, leading to protests by workers and criticism by regulators and labor activists.

“It’s not an accident that the more levels of subcontracting, the worse the violations we find,” says California labor commissioner Julie Su. She adds that the subcontracting system creates “an underground economy where it’s hard to determine who is responsible for the welfare of workers.” Walmart has meanwhile blamed many of the warehouse allegations on the companies with which it contracts, which the retailer says are responsible for making sure staffing firms comply with labor laws.

Wall Street Journal (12/28/12) Josh Mitchell

The Conference Board reported on Dec. 27 its consumer confidence index fell six percentage points in December from a month earlier to 65.1, its lowest level since August. That came just days after another gauge, the Thomson Reuters/University of Michigan consumer sentiment index, also declined significantly. The reports suggest American consumers have begun focusing on possible tax increases and government spending cuts in the new year.

Consumers surveyed by the Conference Board generally were more upbeat about the current state of the economy than they were in November, but their expectations for the coming six months fell sharply, dragging down the overall index. Lynn Franco, director of economic indicators and surveys at the Conference Board, says, “The sudden turnaround in expectations was most likely caused by uncertainty surrounding the oncoming fiscal cliff,” the $500 billion in combined tax increases and sweeping spending cuts scheduled to go into effect next week unless lawmakers find a way to avoid them. Franco points out that consumer confidence fell similarly in August 2011 after a protracted Washington battle over raising the government’s borrowing limit.