What Exactly is the “Cliff”?
There has been so much talk lately on the fiscal cliff, but what is it and how will affect us? Basically, the fiscal cliff is a term used to explain that several tax cuts are set to expire on January 1. Fiscal cliff simply is illustrating that consumers will have less money in their ‘pockets’ to spend so there is a good chance that we could fall back into a recession or fall off the ‘fiscal cliff.’ Some of the tax cuts set to expire are the payroll tax cut, many tax deductions for business, changes to the alternative minimum tax, rolling tax rates back to pre-2001, and deep spending cuts that were part of the debt ceiling deal last year.
Our politicians are playing a high stakes game and no one wants to ‘blink’ first. No politician wants to appear weak to their constituents, and therefore, the politicians appear ready to make no deal, which will turn out to be a bad deal for our economy. It’s akin to the old saying, ‘It’s better to make a bad decision than no decision at all.’ The logic behind this is uncertainty causes more challenges than making a decision.
From talking to many remodelers and home improvement companies, the chance of falling off the fiscal cliff is having a year-end effect on business. Many remodelers are trying to get windows ordered and installed before the end of the year because of the uncertainty of changes in the tax rates and tax exemptions. Many dealers have stressed their concerns about prospects and customers having less money to spend on many things including door and window projects. Homeowners are also prioritizing their home improvement needs now. They are weighing their cost versus benefit and are determining which projects need to be done first.
To this, I am seeing many home improvement companies getting back to their strong talents of marketing. It is no longer about promoting an energy tax credit or a specific U-value to achieve tax credit status, it is more about showing homeowners why replacement windows should be the number one project or priority. There are many different ways window dealers are accomplishing this. Between using thermal imaging to show where the heat and cold loss are occurring on windows to partnering with energy audit companies, window and door companies are showing homeowners that windows are a need not a want.
At the end of the day, there will be some compromise that happens in D.C. Whether it happens before the deadline or after, this still remains to be seen. Regardless, it’s fair to say the economic climate will change in 2013 and how we position our products to our prospects and customers will determine our how successful we will be.