SOURCE: Paragon Financial Limited

Paragon Financial Limited

November 27, 2012 08:20 ET

White House Economists Warn Tax Hikes From the Upcoming Fiscal Cliff Could Cause a Steep Drop in Consumer Spending in 2013

The Paragon Report Provides Stock Research on Caterpillar and Deere & Company

NEW YORK, NY--(Marketwire - Nov 27, 2012) - U.S. markets slumped Monday as White House economists warned the uncertainty of tax hikes, a result of the upcoming "fiscal cliff," for middle class taxpayers could cause a steep drop in consumer spending in 2013. On Monday, 9 of the 10 groups in the S&P Index fell. The Paragon Report examines investing opportunities in the S&P 500 Index and provides equity research on Caterpillar Inc. (NYSE: CAT) and Deere & Company (NYSE: DE).

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According to a study by President Barack Obama's National Economic Council and his Council of Economic Advisers a sudden tax increase for middle-income taxpayers could see consumer spending drop by nearly $200 billion next year. Data from the study showed a typical family of four (a married couple with two children) earning between $50,000 and $85,000 would pay an extra $2,200 in taxes. The Congressional Budget Office has recently stated that if the U.S. is unable to avoid the fiscal cliff it could face a recession and see the unemployment rate rise to roughly 9 percent.

"There's the backdrop of what's going on in the European Union with the bailouts and recapitalizing the banks. On top of that, we have issues in the U.S. with regard to our fiscal policy. That's just enough reason at this point in time to take risk off the table and wait for more insight and clarity," said Peter Sorrentino of Huntington Asset Advisors.

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Caterpillar currently offers investors an annual dividend of $2.08 per share for a yield of roughly 2.5 percent. The company has recently agreed to sell part of its Bucyrus equipment distribution and support business to Whayne Supply and Walker Machinery. Shares of Caterpillar have fallen 6.5 percent year-to-date.

Deere & Company currently offers investors an annual dividend of $1.84 per share for a yield of approximately 2.2 percent. Shares of the company fell sharply last week despite posting an increase in fourth quarter earnings. The company has stated that it expects agricultural sales in North America to be flat for the year.

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