Good Afternoon
Good Afternoon
Long Island

LIers brace themselves for 'fiscal cliff'

Long Islanders are getting ready to tighten their belts and pay more to Uncle Sam next year as the clock ticks down before the country falls off the "fiscal cliff."

With lawmakers thus far unable to reach a deal on taxes and spending, local residents will begin feeling a pinch in their wallets on Jan. 1 as virtually every tax cut enacted since 2001 is set to expire.

Almost 90 percent of U.S. taxpayers would see a hike, with the average American household paying nearly $3,500 annually more to the federal government, according to the Tax Policy Center, a nonpartisan Washington, D.C., think tank. In addition, cuts in Pentagon spending could affect local employees in the defense technology sector and extended unemployment benefits would come to an end Jan. 1.

Many Long Islanders are skeptical a deal between Congress and the White House can be reached by New Year's Eve and are bracing for the worst.

Martin Espinola, 50, of East Islip, said tax hikes could cause him to pre-emptively sell off some stocks. He said Congress is shirking its duties and may reach a deal only if the stock market crashes: "The only thing that can make them fix something is fear of impending doom."

Robert Perkins, 59, of Huntington, who runs Otto-Tees, an online T-shirt retailer, said the stalemate could affect his bottom line. "If it sends the economy back into a recession, it's going to affect me and everybody else," he said.

Some members of New York's congressional delegation believe a deal can be reached. Sen. Charles Schumer (D-N.Y.) said in a statement Thursday: "The speaker and the president are only a small amount apart on both revenues and spending cuts. They were so close to a grand bargain that I am still hopeful, even with so few days left, that they can get an agreement."

Added Rep. Peter King (R-Seaford): "The fact is Democrats won the White House and won the Senate, and Republicans won the House. There should be compromise, and there's a path to reasonable compromise."

Rep. Steve Israel (D-Huntington) faulted House Republicans who so far are unwilling "to resist their tea party fringe."

"They have to quit playing a game of chicken with our economy -- especially because they keep running themselves over," Israel said.

Pearl Kamer, chief economist for the Long Island Association, the region's largest business group, expects an agreement will eventually be reached -- either later this week or in early January -- to preserve many of the low- and middle-income tax breaks.

But if a deal is not imminent in two to four weeks, businesses could begin laying off workers, consumers may reduce their purchases and a sell-off in the stock market is possible, she said. "It could spark another recession," Kamer said. "The potential is unthinkable."

Gregg Christoffersen, of Virginia Beach, Va., who works in commercial real estate and was in Huntington visiting family, said both parties were to blame for the mess.

"Democracy is supposed to be a good thing," he said. "But the politicians are not acting in anyone's interest."

With Paul LaRocco

Latest Long Island News