Consumer spending will decline unless Congress averts fiscal cliff

It was a blockbuster weekend for retailers, as Americans took advantage of big discounts to ring in the holiday shopping season. But you wouldn't know it from the reaction on Wall Street. Financial markets were sharply lower Monday after White House economists warned that consumers could put the brakes on spending if Congress allows the country to fall off a so-called "fiscal cliff."

A new poll shows a whopping 247 million shoppers visited stores and websites over the Thanksgiving weekend.

Black Friday - the unofficial start to the holiday shopping season - easily exceeded expectations, living up to its name as the day retailers finally get out of the red and start making a profit.

The National Retail Federation says holiday shoppers spent about $423 per person, pushing the haul for the 4-day shopping weekend to nearly $60 billion - up nearly 13 percent for the same time last year.

Retail analyst Marshal Cohen calls it a good start.

"Black Friday ,good or bad, isn't the indication of how retail will fare for the whole year, but it is a good sign that the consumer has shown up," said Cohen.

Consumer spending is critical to the U.S. economy, accounting for about 70 percent of total economic activity.

But Monday, the White House warned that failure by Congress to reach a budget deal by the end of the year could put a serious crimp on consumer spending.

Key indexes on the New York Stock Exchange fell sharply.

Ryan Alexander at Taxpayers for Common Sense explains. "The markets are jittery because they don't see a way forward. The economy is fragile because we're still in a recovery period and it's time for the President and the speaker and all of Congress to kind of step up, make some difficult choices and step back from the cliff," said Alexander.

Without a deal, the non-partisan Congressional Budget Office says the combination of automatic year-end tax increases and spending cuts which constitute the fiscal cliff - could nudge the U.S. economy back into recession.

Budget expert and former Republican Congressman Bill Frenzel says time is running out.

"The president's going to have to give a little, the Senate's going to have to give a little, the House is going to have to give a little bit more. And I believe that because the consequences are so bad, they are going to come to agreement," said Franzel.

The White House says failure by Congress to reach a budget deal could reduce consumer spending by nearly $200 billion next year and cut economic growth by 1.5 percent.