Congressional Impasse Could Stymie Economic Recovery

John Grgurich, The Motley Fool
Updated

What's happening in the headlines can affect you as an investor. Here's what's going on, what you need to know, and what you can do.

The cold, hard facts
The New York Times is reporting that 3 million people could lose their unemployment pay by Jan. 1 if Congress doesn't pass a bill to extend benefits. Also in the bill is language to extend the payroll-tax cut, also set to expire on Jan. 1.

Some context
Passed by an overwhelming, bipartisan majority in the Senate, the bill seemed such a lock in the House of Representatives that majority leader Harry Reid sent Senate members home on their holiday break. To everyone's surprise, however, the House voted the measure down, largely along party lines.

What's next
With millions set to lose their unemployment benefits on Jan. 1, and millions more set to see their paychecks decrease as the payroll-tax cut also expires on Jan. 1, it's not inconceivable to think that the oh-so-fragile recovery the country seems to be experiencing could come to a halt.

Unemployment benefits are a back-door method of economic stimulus. So is the payroll-tax cut. Money that's not leaving, or money that flows back to, the federal government is money that's not circulating through the economy and boosting growth. Look for big, consumer-facing companies -- companies that depend on extra spending money in people's pockets -- to potentially take the biggest hits, e.g., Starbucks (NAS: SBUX) , McDonald's (NYS: MCD) , Ford (NYS: F) , Apple, and Amazon.com.

In the meantime, keep your fingers crossed for a congressional Christmas miracle.

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At the time thisarticle was published Fool contributorJohn Grgurichloves the smell of newsprint in the morning, but he owns no shares of any of the companies mentioned in this column. The Motley Fool owns shares of Starbucks, Ford, Apple, and Amazon.com.Motley Fool newsletter serviceshave recommended buying shares of McDonald's, Apple, Amazon.com, Starbucks, and Ford and creating a bull call spread position in Apple. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has a scintillatingdisclosure policy.

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