10 states to boost minimum wage

Workers in Rhode Island will see their paychecks grow the most -- by an average of $510 a year for the average worker, according to the National Employment Law Project.

NEW YORK (CNNMoney)

Workers in Rhode Island will see their paychecks grow the most -- by an average of $510 a year for the average worker, according to the National Employment Law Project, a nonprofit advocacy group. The state enacted a law in June raising its minimum wage 35 cents to $7.75 an hour.

In nine other states -- Arizona, Colorado, Florida, Missouri, Montana, Ohio, Oregon, Vermont and Washington -- the minimum wage will jump between 10 and 15 cents an hour, translating to an extra $190 to $410 per year on average, according to NELP. The increases in these states are the result of state "indexing" laws that require automatic annual adjustments to keep pace with rising living costs.

"If you don't do this, the lowest wage earners are going backwards," said Jen Kern, NELP's minimum wage campaign coordinator.

Related: 2013 minimum wage, state by state

An estimated 855,000 workers will be directly affected by the wage changes, while another 140,000 are projected to be indirectly affected by the changes as employers readjust their pay scales to accommodate the new minimum, according to analysis by the Economic Policy Institute.

The new hourly rates will range between $7.35 in Missouri and $9.19 in Washington state, which has the highest minimum wage in the nation.

Workers may not notice much of a change in their paychecks, though, if lawmakers do not extend the payroll tax cut first enacted in 2010. Without the tax cut in place, workers would pay 6.2% instead of 4.2% -- an amount that could wipe out most of the wage boost.

States must pay at least the same as the federal minimum wage, which has been set at $7.25 an hour since 2009 and is not indexed to inflation. That works out to an annual income of about $15,000 -- thousands of dollars below the poverty level for a family of four.

In 2013, 19 states and the District of Columbia will have rates above the federal level.

Related: What happens if the payroll tax cut expires

The increases come at a time when a growing percentage of Americans are employed in low-wage jobs. While the Great Recession saw widespread mid-wage job losses, the majority of jobs created during the economic recovery have been low-wage positions that pay $13.83 an hour or less, according to a NELP report released in August.

Some 72% of the employees set to be affected by the wage increases are adults 20 years or older, according to a NELP analysis.

"That makes it harder to dismiss the minimum wage as some marginal labor standard," Kern said. "In fact, it's a key component of economic recovery because so many of the jobs that are now characterizing our economy are impacted by minimum wage."

Wage advocates like Kern say that increasing minimum wage rates nationwide would stimulate the economy since low-income workers are more likely to spend the extra cash. Business groups counter that increases could create new job losses.

First Published: December 31, 2012: 5:31 AM ET

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Merkel warns Europe crisis far from over

German chancellor warns 2013 will be tougher and says reforms must continue

LONDON (CNNMoney)

But the region's most powerful political leader warns that the economic environment will be tougher in 2013.

In an address to mark the New Year, German Chancellor Angela Merkel said Monday that the sovereign debt crisis which threatened to tear the eurozone apart shows how important it is to strike a balance between prosperity and solidarity.

"The reforms that we've introduced are beginning to have an impact," she said. "But we still need a lot of patience. The crisis is far from over."

"I know that many people are naturally concerned going into the new year," Merkel added. "And in fact economic conditions will be more difficult rather than easier next year. But we shouldn't let that discourage us; on the contrary, it should spur us on."

As Europe's biggest economy, Germany has shouldered much of the cost of bailing out weaker eurozone nations such as Greece, and establishing the region's permanent rescue fund, the European Stability Mechanism.

Together with the European Central Bank's plan to buy the bonds of ailing eurozone nations, if they request an ESM bailout, Europe has given itself the tools to ward off collapse in the single currency zone for now. It has also taken the first steps toward closer integration with a single banking supervisor.

Related: Greece may remain in euro after all

In return, highly indebted eurozone states have committed themselves to spending cuts and tax increases. But the austerity drive has already helped tip the eurozone back into recession, and German growth has all but disappeared as a consequence.

Economists warn that the 17-nation eurozone could contract further in 2013 as deficit-cutting measures bite deeper. Rising unemployment and falling tax receipts would make it harder for governments in countries such as Italy, Spain, Greece and even France to meet their budget targets.

That could unsettle financial markets again, particularly in countries where political instability is adding to the uncertainty. Italy has elections in February, and the outcome will determine whether Europe's second most heavily indebted nation after Greece will continue with reforms started by outgoing Prime Minister Mario Monti.

Related: Investors back Italy despite political turmoil

In a report this month, the International Monetary Fund said it was expecting France to miss its 2013 target to keep debt at 3% of GDP, down from 4.5% in 2012, because of a more conservative growth forecast. It said the target was crucial to preserving market confidence and advised that "contingency measures" be prepared.

Merkel faces an election in September. The cost of European bailouts and slowing growth worry many Germans, but she has won support for steering Europe through its most challenging crisis in 60 years and her party has a clear lead in opinion polls.

However, a third term in office might depend on whether there's a flare up in the eurozone crisis that presents Germany with another bill, a risk that some analysts say hasn't gone away because weaker states won't be able to cut their way back to prosperity.

"They will be living on a drip-feed, life-support system of bailouts for as long as the euro system continues in its present form," wrote Tim Morgan of brokerage firm Tullet Prebon earlier this month.

First Published: December 31, 2012: 8:35 AM ET

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Stocks: Investors brace for the cliff

NEW YORK (CNNMoney)

U.S. stocks opened lower Monday as investors continue to dial back expectations that officials in Washington will prevent tax hikes and spending cuts from kicking in on Tuesday.

The Dow Jones Industrial average fell 0.3%, the S&P 500 was down 0.2% and the Nasdaq declined 0.1%. U.S. stocks sold off Friday, ending the week down 2%, as investors brace for the fiscal cliff reckoning.

European markets were holding steady in an abbreviated session. But Asian stocks got a boost from strong manufacturing data out of China. The Shanghai Composite, one of the world's worst performing indexes, managed to eke out a 3% gain for the year and the Nikkei, which was closed Monday, ended the year with a 20% gain.

Investors are hoping that leaders will reach some sort of deal that will postpone at least some of the automatic tax hikes and spending cuts due to take effect on Jan. 1.

Related: Fear & Greed Index

Congressional negotiators were at work Sunday, but went home without a deal. Senate Majority Leader Harry Reid said Sunday there is "still significant distance between the two sides." Talks will continue Monday.

While a deal on the fiscal cliff is still theoretically possible, the ideological divide in Washington makes it unlikely that any substantial progress will be made on the nation's debt problems anytime soon, said Steven Ricchiuto, chief economist Mizuho Securities USA.

"Even a small deal has been and will remain elusive," said Ricchiuto. "It is still a high probability event that at the 11th hour they will simply kick the can down the road for a few weeks to allow for continued pointless discussion."

Despite all the uncertainty, stocks have overall had a pretty good year, with all three indexes up between 6% and 14%. By comparison, stocks ended 2011 almost exactly where prices were at the start of the year, although there was a lot of up and down in between.

Related: S&P 500 winners and losers 2012

On the last day of 2012, there is little news to distract investors from the fiscal cliff talks. There are no economic reports on tap, and not much in the way of company news.

An exception was a $665 million deal announced late Sunday to buy investment banking firm Duff & Phelps (DUF) by a joint venture led by the Carlyle Group (CG). The offer price represented a 19% premium over Duff & Phelps' stock close Friday.

U.S. stocks closed lower for the fifth straight day Friday, ending the week down nearly 2%.

Meanwhile, oil prices eased and gold prices edged higher. The yield on the 10-year U.S. Treasury note rose to 1.72%. The U.S. dollar gained versus the euro and the yen, but fell against the British pound.

First Published: December 31, 2012: 9:37 AM ET

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Fiscal cliff could put your tax refund on hold

Tax refunds could be delayed.

NEW YORK (CNNMoney)

Congressional dithering over a fiscal cliff fix could force the Internal Revenue Service to delay the start of the filing season. So those expecting to file their returns in mid-January, when the agency usually begins accepting them, may have to wait several weeks.

If Congress doesn't approve a patch for the alternative minimum tax in the next few days, then up to 100 million taxpayers will not be able to file their returns -- or collect refunds, if owed -- until late March, said Steven Miller, the agency's acting commissioner. (The AMT itself would hit nearly 30 million filers with higher tax bills, and returns of the others would be held up while the IRS reprograms its systems.)

Filing and refunds would also be put on hold by the uncertain fate of a dozen other provisions, including the deduction for state and local sales taxes and the $250 tax break for teachers who buy their own school supplies.

This isn't the first time the IRS has had to deal with this. Two years ago, it took until mid-December for President Obama and lawmakers to reach an agreement on many of the same issues. That delayed the opening of the tax season by four weeks to mid-February, affecting some 9 million taxpayers.

Most of them were likely owed refunds, since that's who files early, said John Lieberman, managing director of Perelson Weiner, an accounting firm in New York. They are often folks whose income is just from wages and who take the standard deduction, making their returns fairly simple. Many are low-income families who file for the earned income tax credit.

"They need that money back to pay Christmas bills, for a downpayment on a car or a security deposit on an apartment," said Lieberman.

Related: Fiscal cliff confusion on Form 1040

This year, the situation is even more dire since we are only days away from the start of 2013.

While the IRS has published the Form 1040 for 2012, several lines are listed as "reserved." The designation is a "placeholder" for provisions that have yet to be passed, an agency spokesman said. The IRS has yet to publish an instruction booklet for filling out the tax forms, leaving tax preparers in a holding pattern.

"How they are going to handle this?" said John Roth, senior federal tax analyst for CCH, a tax services company. "We are in virgin territory."

The IRS spokesman declined to answer questions on how the Congressional delay will affect taxpayers, but said more information would be available shortly.

First Published: December 28, 2012: 4:44 PM ET

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S&P says fiscal cliff impasse won't spark downgrade

President Obama and congressional leaders met Friday at the White House in the latest round of fiscal cliff negotiations.

NEW YORK (CNNMoney)

S&P made headlines in August of 2011 by knocking the U.S. down from AAA status to to AA+ following the political wrangling over the debt ceiling. At the time, the rating agency said the affair showed "America's governance and policymaking becoming less stable, less effective, and less predictable."

More than a year later, S&P said Friday that this characterization "still holds."

Fellow rating agencies Moody's and Fitch still have the U.S. rated AAA, though with negative outlooks.

Fitch warned earlier this month that it may downgrade the U.S. should lawmakers fail to avoid the fiscal cliff and allow the debt ceiling to rise. Moody's has said it will strip the country's AAA rating should lawmakers fail to produce a long-term debt reduction plan.

President Obama and congressional leaders met Friday at the White House in the latest round of fiscal cliff negotiations.

Should lawmakers fail to avert the package of tax hikes and spending cuts that constitute the fiscal cliff, the U.S. economy is likely to contract by half a percent next year, with unemployment rising to 9% by 2014, S&P said. This contraction could mitigate the reduced spending and additional tax revenue that would come to the government.

Related: Fiscal cliff could put your tax refund on hold

On the other hand, should lawmakers reach a deal within the next few days, it's likely to be "insufficient to place the U.S. medium-term public finances on a sustainable footing," S&P said.

"Our existing negative outlook on the U.S. rating speaks to the risk of a deliberate further loosening of fiscal policy," the agency said.

Back in June, S&P warned that the United States could be in for another credit downgrade by 2014 if Congress doesn't come up with a plan to reduce the national debt. S&P spokesman John Piecuch said in an email Friday that the rating agency could make a downgrade decision before the end of that time frame.

First Published: December 28, 2012: 5:46 PM ET

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Stocks brace for fiscal cliff reckoning

The deadline to avert a looming fiscal crisis is fast approaching. Investors are hoping for the best, but bracing for the worst.

NEW YORK (CNNMoney)

For weeks, many have worried that no resolution to the fiscal cliff would lead to the kind of brutal sell-off that followed the voting down of the TARP bailout and the downgrade of America's credit rating.

Now, with the deadline fast approaching and no clear resolution in sight, strategists aren't so sure.

"I don't know how the market is going to react," said Ben Schwartz, chief market strategist at Lightspeed Financial. "But I do know that people are upset with what's going on in Washington."

The dysfunction in Washington has cast a pall over Wall Street since Election Day. But despite all the hand-wringing, stocks are currently trading at levels seen just before President Obama won a second term.

So, where do stocks go from here? Good question.

Much depends on what House lawmakers do Sunday, when they meet for a last-ditch round of budget talks. The hope is that a stopgap measure is put in place to prevent some of the tax hikes and spending cuts set to take effect on Jan. 1.

Related: Going over the cliff: What changes, what doesn't

Here are two possible outcomes:

Partial deal, modest sell-off

Like most Americans, investors view the budget impasse as an epic failure of leadership in Washington. But they still expect a deal, because doing nothing would be "political suicide" for members of both parties.

"We think they will reach some kind of agreement before the end of the year, but not until the very last minute. And it won't be much," said Kate Warne, chief investment strategist at Edward Jones.

While the details remain sketchy, investors are expecting a short-term extension of Bush-era tax breaks and a suspension of defense spending cuts, among other things.

Despite its name, many strategists say the fiscal cliff will not hit the economy right away. That could give lawmakers some time to continue negotiating, but it's unclear how long the market will tolerate such uncertainty.

Related: Real fiscal cliff deadline is inauguration

"Unlike the debt ceiling and government shutdowns in the past, not all that much changes on January first," Warne said. "But the tone will get more and more negative as time goes on."

Even with a stopgap deal, stocks could sell off, according to Peter Tuz, a portfolio manager at Chase Investment Counsel.

"It doesn't have to be sharp," he said. "A 20% drop would be astounding, but a modest drop would not be surprising."

No deal, more volatility:

Investors could be in for a rude awakening on New Year's day. Despite the political and economic stakes, it's not a given that Congress will act.

"I don't think investors have taken into account that nothing gets done," Warne said.

Wall Street vigilantes believe a sell-off may be necessary to force America's elected officials into action. But there is no guarantee that a riot in the stock market will inspire sound policymaking.

For example, the sell-off that followed the S&P downgrade did not result in a long-term solution to the debt ceiling problem, said Lawrence Creatura, a portfolio manager with Federated Clover Investment Advisors.

"The market can act as a disciplinarian, but that doesn't ensure that we get a clean and lasting solution," Creatura said. "We didn't get that last time, and it's probably not realistic to expect it this time either."

The fiscal cliff was designed to force Washington to deal with the nation's long-term debt problems, but hopes for a grand bargain have diminished as talks devolved into stalemate.

The lack of progress on structural issues, such as entitlement spending, means investors will be dealing with a certain degree of political risk long after the fiscal cliff deadline has passed.

"They're not dealing with the big issues," Tuz said. "They'll come up with a band aid approach that just delays the inevitable."

In the meantime, trading in the stock market could be volatile as investors monitor the blow-by-blow in Washington.

The market's fear gauge, the VIX (VIX)has jumped 14% over the past five days -- a sure sign that volatility is indeed on the rise.

"We're floating around here and no one has any real idea where we're going to go," Schwartz said. "That's why volatility has popped up."

First Published: December 29, 2012: 9:03 AM ET

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Fiscal cliff could put your tax refund on hold

Tax refunds could be delayed.

NEW YORK (CNNMoney)

Congressional dithering over a fiscal cliff fix could force the Internal Revenue Service to delay the start of the filing season. So those expecting to file their returns in mid-January, when the agency usually begins accepting them, may have to wait several weeks.

If Congress doesn't approve a patch for the alternative minimum tax in the next few days, then up to 100 million taxpayers will not be able to file their returns -- or collect refunds, if owed -- until late March, said Steven Miller, the agency's acting commissioner. (The AMT itself would hit nearly 30 million filers with higher tax bills, and returns of the others would be held up while the IRS reprograms its systems.)

Filing and refunds would also be put on hold by the uncertain fate of a dozen other provisions, including the deduction for state and local sales taxes and the $250 tax break for teachers who buy their own school supplies.

This isn't the first time the IRS has had to deal with this. Two years ago, it took until mid-December for President Obama and lawmakers to reach an agreement on many of the same issues. That delayed the opening of the tax season by four weeks to mid-February, affecting some 9 million taxpayers.

Most of them were likely owed refunds, since that's who files early, said John Lieberman, managing director of Perelson Weiner, an accounting firm in New York. They are often folks whose income is just from wages and who take the standard deduction, making their returns fairly simple. Many are low-income families who file for the earned income tax credit.

"They need that money back to pay Christmas bills, for a downpayment on a car or a security deposit on an apartment," said Lieberman.

Related: Fiscal cliff confusion on Form 1040

This year, the situation is even more dire since we are only days away from the start of 2013.

While the IRS has published the Form 1040 for 2012, several lines are listed as "reserved." The designation is a "placeholder" for provisions that have yet to be passed, an agency spokesman said. The IRS has yet to publish an instruction booklet for filling out the tax forms, leaving tax preparers in a holding pattern.

"How they are going to handle this?" said John Roth, senior federal tax analyst for CCH, a tax services company. "We are in virgin territory."

The IRS spokesman declined to answer questions on how the Congressional delay will affect taxpayers, but said more information would be available shortly.

First Published: December 28, 2012: 4:44 PM ET

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S&P says fiscal cliff impasse won't spark downgrade

President Obama and congressional leaders met Friday at the White House in the latest round of fiscal cliff negotiations.

NEW YORK (CNNMoney)

S&P made headlines in August of 2011 by knocking the U.S. down from AAA status to to AA+ following the political wrangling over the debt ceiling. At the time, the rating agency said the affair showed "America's governance and policymaking becoming less stable, less effective, and less predictable."

More than a year later, S&P said Friday that this characterization "still holds."

Fellow rating agencies Moody's and Fitch still have the U.S. rated AAA, though with negative outlooks.

Fitch warned earlier this month that it may downgrade the U.S. should lawmakers fail to avoid the fiscal cliff and allow the debt ceiling to rise. Moody's has said it will strip the country's AAA rating should lawmakers fail to produce a long-term debt reduction plan.

President Obama and congressional leaders met Friday at the White House in the latest round of fiscal cliff negotiations.

Should lawmakers fail to avert the package of tax hikes and spending cuts that constitute the fiscal cliff, the U.S. economy is likely to contract by half a percent next year, with unemployment rising to 9% by 2014, S&P said. This contraction could mitigate the reduced spending and additional tax revenue that would come to the government.

Related: Fiscal cliff could put your tax refund on hold

On the other hand, should lawmakers reach a deal within the next few days, it's likely to be "insufficient to place the U.S. medium-term public finances on a sustainable footing," S&P said.

"Our existing negative outlook on the U.S. rating speaks to the risk of a deliberate further loosening of fiscal policy," the agency said.

Back in June, S&P warned that the United States could be in for another credit downgrade by 2014 if Congress doesn't come up with a plan to reduce the national debt. S&P spokesman John Piecuch said in an email Friday that the rating agency could make a downgrade decision before the end of that time frame.

First Published: December 28, 2012: 5:46 PM ET

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Stocks brace for fiscal cliff reckoning

The deadline to avert a looming fiscal crisis is fast approaching. Investors are hoping for the best, but bracing for the worst.

NEW YORK (CNNMoney)

For weeks, many have worried that no resolution to the fiscal cliff would lead to the kind of brutal sell-off that followed the voting down of the TARP bailout and the downgrade of America's credit rating.

Now, with the deadline fast approaching and no clear resolution in sight, strategists aren't so sure.

"I don't know how the market is going to react," said Ben Schwartz, chief market strategist at Lightspeed Financial. "But I do know that people are upset with what's going on in Washington."

The dysfunction in Washington has cast a pall over Wall Street since Election Day. But despite all the hand-wringing, stocks are currently trading at levels seen just before President Obama won a second term.

So, where do stocks go from here? Good question.

Much depends on what House lawmakers do Sunday, when they meet for a last-ditch round of budget talks. The hope is that a stopgap measure is put in place to prevent some of the tax hikes and spending cuts set to take effect on Jan. 1.

Related: Going over the cliff: What changes, what doesn't

Here are two possible outcomes:

Partial deal, modest sell-off

Like most Americans, investors view the budget impasse as an epic failure of leadership in Washington. But they still expect a deal, because doing nothing would be "political suicide" for members of both parties.

"We think they will reach some kind of agreement before the end of the year, but not until the very last minute. And it won't be much," said Kate Warne, chief investment strategist at Edward Jones.

While the details remain sketchy, investors are expecting a short-term extension of Bush-era tax breaks and a suspension of defense spending cuts, among other things.

Despite its name, many strategists say the fiscal cliff will not hit the economy right away. That could give lawmakers some time to continue negotiating, but it's unclear how long the market will tolerate such uncertainty.

Related: Real fiscal cliff deadline is inauguration

"Unlike the debt ceiling and government shutdowns in the past, not all that much changes on January first," Warne said. "But the tone will get more and more negative as time goes on."

Even with a stopgap deal, stocks could sell off, according to Peter Tuz, a portfolio manager at Chase Investment Counsel.

"It doesn't have to be sharp," he said. "A 20% drop would be astounding, but a modest drop would not be surprising."

No deal, more volatility:

Investors could be in for a rude awakening on New Year's day. Despite the political and economic stakes, it's not a given that Congress will act.

"I don't think investors have taken into account that nothing gets done," Warne said.

Wall Street vigilantes believe a sell-off may be necessary to force America's elected officials into action. But there is no guarantee that a riot in the stock market will inspire sound policymaking.

For example, the sell-off that followed the S&P downgrade did not result in a long-term solution to the debt ceiling problem, said Lawrence Creatura, a portfolio manager with Federated Clover Investment Advisors.

"The market can act as a disciplinarian, but that doesn't ensure that we get a clean and lasting solution," Creatura said. "We didn't get that last time, and it's probably not realistic to expect it this time either."

The fiscal cliff was designed to force Washington to deal with the nation's long-term debt problems, but hopes for a grand bargain have diminished as talks devolved into stalemate.

The lack of progress on structural issues, such as entitlement spending, means investors will be dealing with a certain degree of political risk long after the fiscal cliff deadline has passed.

"They're not dealing with the big issues," Tuz said. "They'll come up with a band aid approach that just delays the inevitable."

In the meantime, trading in the stock market could be volatile as investors monitor the blow-by-blow in Washington.

The market's fear gauge, the VIX (VIX)has jumped 14% over the past five days -- a sure sign that volatility is indeed on the rise.

"We're floating around here and no one has any real idea where we're going to go," Schwartz said. "That's why volatility has popped up."

First Published: December 29, 2012: 9:03 AM ET

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Take control of your spending

NEW YORK (Money Magazine)

With 2012 winding down and 2013 fast approaching, now is an excellent time to focus on the single most effective way to build wealth and gain financial security for the long term: taking control of your spending so you can save on a regular basis.

And, indeed, Fidelity's fourth annual New Year Financial Resolutions Study shows that many people are planning to do just that in the coming year. According to Fido's survey of just over 1,000 adults, a record number, 46%, are considering financial resolutions for 2013, with saving more being the single most popular goal.

So how can you best achieve that worthy aim?

Truth is, there are a number of ways you can get a better handle on your spending and boost the amount you save. What's most important -- and most likely to lead to success -- is settling on a method that's most likely to work for you, given your temperament and your particular financial circumstances.

Some people, for example, find it convenient to use others' spending and savings habits as guideline for their own.

If you fall into that camp, you can get plenty of information about what percentage of their paychecks Americans devote to everything from their houses and cars to entertainment and gifts by going to the Bureau of Labor Statistics' Consumer Expenditures Survey, a compendium of the spending behavior of just over 122,000 U.S households. If you see that your outlays deviate markedly from those of your fellow citizens in particular areas, you can decide whether it makes sense to you're your spending in those categories.

Other people prefer to sift through their own spending, looking for places they might be able to eliminate some excesses.

Related: 12 ways you're wasting money

If that approach appeals to you, you can create your own budget using tips from our MONEY 101 lesson on budgeting, rev up a budgeting software program or go to an online site like Mint.com, which helps you create a budget based on your past spending habits.

Personally, I've never been a big fan of budgeting per se. I don't think it's especially important what percentage of your income you spend on, say, vacations versus car payments. What really matters is that you save.

So I've long advocated what I call the "Two-line Budget": On the first line you enter your gross income; on the second, put the percentage of that income you intend to save, at least initially. I'd say 10% to 15% is reasonable target, although you can tweak that later one. To make sure that percentage actually gets saved, have that amount automatically deducted from your paycheck via a 401(k) plan or a mutual fund's automatic investing plan.

The idea is that once a portion of your income is going toward savings before you can even get your hands on it, you'll be forced to live on what's left and adjust your lifestyle accordingly. How you do that -- whether you choose to spend more on a fancy car, a nicer wardrobe, whatever is really a matter of personal preference.

Related: Why high earners need to save more

There are other techniques you may want to incorporate into your overall spending and saving plan, such as using a "commitment device" to help you achieve a specific savings goal or giving yourself the added incentive of a treat for reaching that goal.

Or you may simply find it easiest to take a knife to big-ticket items in your budget on the theory that they naturally provide the biggest opportunities for significant cutbacks.

Bottom line: If you're really serious about achieving a balance between spending and saving that will improve your long-term financial prospects, I suggest that you find some approach, any approach, that works for you -- and then resolve to follow it in 2013 and beyond.

First Published: December 28, 2012: 5:46 AM ET

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Investors back Italy despite political turmoil

Italy finds demand for bonds as election raises questions about economic reforms

LONDON (CNNMoney)

Monti's technocrat government collapsed after former Prime Minister Silvio Berlusconi withdrew his support, throwing Italy into an election campaign that will determine whether the eurozone's second most indebted nation will continue to implement reforms launched over the past 12 months.

Italy auctioned €3 billion of 10-year bonds at a yield of 4.48%, little changed from the last auction in November. It also sold €2.9 billion of 5-year bonds at a steady yield of 3.26%.

Italy's government borrowing stands at about €2 trillion, equivalent to almost 130% of gross domestic product, and it needs to issue some €420 billion in bonds for 2013 to service that debt.

Only Greece, which has been bailed out by the European Union and IMF, has a higher debt-to-GDP ratio in the eurozone.

Related: Greece may remain in euro after all

Monti's commitment to reform has reassured investors and his eurozone partners. Bond yields edged up on news of his departure, but are still far below the 7% seen just over a year ago, when he was appointed head of an unelected government to rescue Italy from the debt crisis that was threatening to tear the eurozone apart.

Italy has also benefited this year from the as-yet untested commitment by the European Central Bank to buy the bonds of ailing eurozone states, provided they request a formal bailout and agree to the conditions attached.

"That Italy is able to sell 10-year paper at a yield of 4.5% eight weeks before a crucial parliamentary election says much about the dramatic shift in sentiment towards the eurozone," said Nicholas Spiro, managing director of Spiro Sovereign Strategy. "Yet the fact remains that complacency has seeped into Italy's bond market.

Related: EU strikes deal to bring banks under single supervisor

Italy faces a tough 2013. It has already been in recession for five consecutive quarters. The economy is expected to contract by 2.4% in 2012, and shrink again next year. Some private forecasters believe budget targets Monti set for 2013 were overly optimistic, and that further austerity measures will be needed to wipe out the structural budget deficit.

Opinion polls suggest the center-left Democratic Party led by Pier Luigi Bersani -- who supports much of Monti's program - will win the lower house elections due in late February, but he may need to build a coalition to gain a majority, and the election could become a referendum on austerity.

Monti, an economics professor and former European Commissioner, signaled earlier this week that he may be ready to lead Italy again if a party or coalition came forward with a program he could support. He has called for the next government to accelerate his reforms and open up Italy's labor markets.

Investors looking for continuity after the election would welcome a role for Monti in the new government but some analysts caution that the "Monti effect" could have unintended consequences.

"Although a Monti-led centrist alliance would draw votes away from both the center-left and center-right, it would also lead to a much more fragmented parliament and, quite possibly, an awkward coalition government with a questionable commitment to reform," said Spiro.

First Published: December 28, 2012: 7:46 AM ET

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Stocks fall under fiscal cliff pressure

NEW YORK (CNNMoney)

The S&P 500, the Dow, and the Nasdaq were down between 0.5% and 0.6%, as fears grow about the impact of no deal.

The uncertainty has taken a toll on markets. Stocks have sold off for four straight sessions as hopes for a substantial budget agreement have diminished, and all three indexes are on track to end December in the red.

President Obama and congressional leaders will discuss the impasse at the White House Friday afternoon, and the House of Representatives will return on Sunday. Investors worry that failure to reach a fiscal cliff deal could push the U.S. economy into recession.

Investors are hoping that leaders will at least be able to reach some sort of breakthrough that will postpone at least some of the automatic tax hikes and spending cuts due to take effect on Jan. 1.

"A lot of people are thinking about capital gains consequences and holding positions beyond this year," said Mark Helweg, founder of financial tech company MicroQuant..

Looming port strike could cost economy billions

Shares of Citigroup (C, Fortune 500), Wells Fargo (WFC, Fortune 500), Bank of America (BAC, Fortune 500) and JPMorgan Chase (JPM, Fortune 500) all declined in early trading. Bank stocks were among the biggest drags on the market Thursday.

Stocks ended slightly lower yesterday, as news that of Sunday's House meeting sparked a rebound in the last hour of trading, causing the Dow to recover from a 151-point loss.

Fear & Greed Index

While fiscal cliff talks will dominate investor attention, several other economic reports will also be in focus. Reports on the Chicago purchasing managers index and pending home sales are due out shortly after the markets open.

Shares of Hewlett-Packard (HPQ, Fortune 500) fell after the company announced that the Department of Justice is investigating possible accounting fraud at Autonomy. After acquiring Autonomy for $11 billion last year, HP took an $8 billion write-down related to the acquisition this year.

European markets edged higher in morning trade on hopes of a fiscal cliff deal. Meanwhile, Italy sold 3 billion euros in 10-year government bonds Friday morning.

Bank fines top $10 billion this year

Asian markets ended stronger. Japan's Nikkei, which will be closed on Monday, ended the year up more than 20%. The Nikkei's recent strong run comes as the yen has been weakening on the prospect of further monetary easing. The Shanghai Composite posted further gains and is poised to end the year in the black.

The U.S. dollar rose against the euro, but dropped against the British pound and the Japanese yen.

The yield on the 10-year Treasury note moved up slightly to 1.71%. Oil prices were modestly higher, while gold moved down more than 2%

First Published: December 28, 2012: 9:43 AM ET

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Baby recliners recalled after five deaths

Babies R Us, Amazon.com and other retailers are recalling the Nap Nanny recliner because of reports of infant deaths.

NEW YORK (CNNMoney)

Retailers Amazon.com (AMZN, Fortune 500), Buy Buy Baby and Toys R Us are recalling 150,000 Nap Nanny recliners.

The commission said the recliners have contributed to five infant deaths and contain defects in the design" that "pose a substantial risk of injury and death to infants." The recall applies to the Nap Nanny Generations One and Two and also the Chill model of infant recliners.

There have been 92 reports of infants "hanging or falling out over the side of the Nap Nanny, even though most of the infants had been placed in the harness," said the commission.

The recliners are made by Baby Matters, which is based in Berwyn, Pa. The commission said the company was "unable or unwilling to participate in the recall."

The commission filed a complaint against Baby Matters earlier this month. The product was originally recalled in 2010 after reports of one death.

Diapers.com and Babies R Us also participated in the recall.

Baby Matters was not available for comment.

The owner and founder of Nap Nanny, Leslie Gudel, said on its website that the commission filed an administrative complaint seeking legal authority to stop the sale of all Nap Nanny recliners "on the theory that the Nap Nanny is a hazardous product. We do not believe the complaint has merit and stand behind the safety of our product when used as instructed."

An email from CNNMoney was not immediately answered, and a call to the phone number listed on the web site led to a person claiming that it was a wrong number.

This is the most prominent recall of a baby-related product since August, when 4 million Bumbo Baby seats were recalled after 50 babies fell out of the seats, causing 19 of them to suffer skull fractures.

First Published: December 27, 2012: 10:00 AM ET

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Stocks in neutral as fiscal deadline looms

NEW YORK (CNNMoney)

The Dow Jones industrial average, the S&P 500 both hovered near the break-even point. The Nasdaq fell about 0.1%.

Less than a week remains for President Obama and Congress to agree to a plan that would avert tax hikes and spending cuts from kicking in automatically on Jan. 1.

Some investors are skeptical that lawmakers will resolve a self-inflicted crisis that could tip the economy into recession, while others are betting on a short-term compromise that prevents the worst and delays more difficult decisions to later in the year.

Either way, the possibility of a deal is keeping the bears at bay, according to Mark Helweg, founder of financial tech company MicroQuant.

"People are expecting some sort of compromise to save the day, so they're hesitant to short the market because news on that front will push the market higher," Helweg said.

Fear & Greed Index

Adding fuel to the fiscal fire, Treasury Secretary Tim Geithner sent a letter to Congress after the bell on Wednesday warning that government borrowing will hit the debt ceiling on Monday. As a result, the Treasury Department will soon start using what it calls "extraordinary measures" to prevent government borrowing from exceeding the legal limit.

Such measures include suspending the reinvestment of federal workers' retirement contributions in short-term government bonds.

Full coverage on America's Debt Challenge

In economic news, initial jobless claims came in at 350,000 for the week ending Dec. 22, falling 12,000 from the previous week.

Several economic reports on labor and housing markets, consumer confidence and manufacturing are due throughout the morning.

U.S. stocks faltered Wednesday as political wrangling over the fiscal cliff continued to dominate investor sentiment.

Amazon (AMZN, Fortune 500) shares slid after the company was blamed for a one-day Netflix Inc (NFLX) service disruption. Meanwhile, Marvell Technology Group (MRVL) shares tumbled, after a jury ruled against the chip maker in a $1.17 billion patent infringement case.

Overseas, European markets made narrow gains in the first trading session after the Christmas holiday. Asian markets ended mixed, with Japan's Nikkei posting the strongest gains. The index has risen nearly 10% in the past month on expectations of further monetary policy easing and new government measures to stimulate the economy.

The U.S. dollar fell versus the euro and British pound, but gained against the Japanese yen. The yield on the 10-year Treasury note nudged higher to 1.76%. Oil and gold prices were modestly lower.

First Published: December 27, 2012: 9:42 AM ET

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Fiscal cliff fears jolt consumer confidence

NEW YORK (CNNMoney)

The closely watched Consumer Confidence Index, which measures the American public's sentiments every month, sank six points to 65.1. That's a major turnaround since October, when it reached a four-year high of 73.1.

The report by The Conference Board, a business research firm, came in much lower than expected by economists surveyed by Briefing.com.

It's the biggest drop to consumer confidence since the nation's credit rating was lowered in August of last year.

Lynn Franco, the firm's director of economic indicators, blamed the continuing failure by the nation's leaders to reach a deal and avert tax hikes and spending cuts from kicking in automatically next week.

"The sudden turnaround in expectations was most likely caused by uncertainty surrounding the oncoming fiscal cliff," Franco said.

The job market outlook also took a hit, with a greater portion of people are expecting fewer jobs in the months ahead.

First Published: December 27, 2012: 10:07 AM ET

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Starbucks makes political push on fiscal cliff

Starbucks CEO Howard Schultz asks employees in D.C.-area stores to write 'Come Together' on coffee cups when serving customers.

NEW YORK (CNNMoney)

In a letter to Starbucks employees made public on Wednesday, Chief Executive Howard Schultz asked employees at its approximately 120 D.C.-area stores to write "Come Together" on coffee cups when serving customers on Thursday and Friday.

"Rather than be bystanders, you and your customers have an opportunity -- and I believe we all have a responsibility -- to send our elected officials a respectful but potent message, urging them to come together to find common ground," Schultz wrote.

Last week, Congress and President Obama broke for the Christmas holiday still far apart on a plan to address widespread tax increases and automatic government spending cuts starting next week. Both sides are due back by Thursday and have vowed to make a final attempt.

Schultz told CNN earlier this month that he believed the failure to reach a deal has created uncertainty among consumers and businesses and risks hurting the economy. "This single issue has a seismic effect on the rest of the world," he said.

The Congressional Budget Office has said the fiscal cliff could lead to another U.S. recession. And policymakers and investors around the world have raised concerns about its impact on the global economy.

Starbucks (SBUX, Fortune 500) plans to buy ads in the Washington Post and New York Times later in the week as part of its "Come Together" campaign.

In his letter to Starbucks employees, Schultz cites the Fix the Debt group, which has been lobbying for a deal that would avoid the fiscal cliff and put the country on a path toward a sustainable federal budget.

Fix the Debt, which has drawn the vocal participation of some high-profile CEOs, has been criticized by some on the left who say it overstates the risks of the fiscal cliff.

Schultz has not formally signed on to Fix the Debt but supports the group's efforts, according to a Starbucks spokesman.

The spokesman added that Schultz's request to write "Come Together" on coffee cups is voluntary and that employees are not required to participate if it makes them "uncomfortable."

This is not the first time Schultz has called out Washington over political gridlock. Last year, after the debt ceiling fiasco led to the downgrade of the U.S. credit rating, he said he would stop giving political donations and called on other CEOs to join him.

First Published: December 26, 2012: 7:00 AM ET

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Home prices post biggest annual jump in two years

NEW YORK (CNNMoney)

The index showed prices up 4.3% in October compared to a year earlier. That's the best improvement since May 2010. But that earlier increase was due to a temporary spike caused by a homebuyers' tax credit of up to $8,000 on homes purchased in late 2009 and early 2010.

This latest rise comes as the housing market has shown numerous other signs of recovery in recent months. A combination of near record-low mortgage rates, lower unemployment and a drop in foreclosures to a five-year low means there are more buyers interested in purchasing fewer available homes. That in turn has lifted prices.

October marked the fifth straight month that the index has been up on a year-over-year basis.

Related: 2013 housing outlook

The improvement in housing market fundamentals has helped to lift the pace of both home sales and home building. But even with the latest rise in prices, the index is still down 29% from the peak reached in June 2006.

The continued rebound in prices likely will be another positive for both purchases and construction in the year ahead. Higher prices give current homeowners a better chance to sell their home and get the down payment they need on their next home purchase. They also encourage buyers who may have been on the sidelines because of uncertainty about home prices' direction that now is the time to buy.

Of course, home builders benefit from higher prices and increased demand. Leading home builders such as PulteGroup (PHA), Lennar (LEN), KB Home (KBH), D.R. Horton, Inc. (DHI) and Toll Brothers (TOL) have all enjoyed better than a 50% rise in their stock price over the last 12 months, with PulteGroup's stock nearly tripling in value.

The increases in home values were widespread in this latest reading, with only two of the 20 cities tracked by index showing modest price declines from a year earlier. Prices were down a little more than 1% in Chicago and New York.

The biggest rise was in Phoenix, one of the cities hardest hit when the housing bubble burst. Prices in Phoenix were 21.7% higher than in October 2011.

First Published: December 26, 2012: 9:14 AM ET

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Stock subdued as wait for Washington continues

NEW YORK (CNNMoney)

The Dow Jones industrial average the S&P 500 both rose about 0.1%, while he Nasdaq was little changed. The tepid trading came as investors returned from the Christmas holiday. U.S. markets were closed Tuesday and Monday was an abbreviated trading day.

Market bulls have pulled in their horns as President Obama and Congress have been unable to agree on a plan to avert tax hikes and spending cuts from kicking in automatically on Jan. 1.

The bears have become increasingly convinced that Washington will fail to resolve a self-inflicted crisis that could tip the economy into recession.

As the talks continue, Obama is ending his vacation Wednesday to make a late bid to reach a deal before the year ends. The White House said he should be back in Washington Thursday, when House and Senate members are expected to reconvene.

With little else on the economic or corporate docket, the fiscal cliff is the sole focus for investors, said Ryan Larson, head of U.S. equity trading for RBC Global Asset Management. "Any kind of deal will be good for the market," he said. "Whether a full deal is reached or they kick the can down the road, the market will be happy."

Related: What will happen to stocks if we go over the cliff?

On the economic front, home prices rose at an annual rate of 4.3% in October, according to the S&P/Case-Shiller home price index. It was the biggest rise in home prices in more than 2 years and topped analysts' expectations.

The housing data came on the heels of weak retail sales during this holiday shopping season. MasterCard's (MA, Fortune 500) SpendingPulse reported that retail sales during the run-up to Christmas showed an increase of only 0.7% versus last year, and far below the expected 3% to 4%.

Fear & Greed Index

European markets were closed Wednesday for Boxing Day.

Japan's Nikkei index gained 1.5%, and the yen continued its recent slide against the dollar as the country's parliament elected Shinzo Abe as prime minister. Abe, who won a landslide election victory earlier this month, has promised aggressive stimulus measures to combat deflation and get the world's third-biggest economy growing again.

Markets in Hong Kong were closed, while the Shanghai Composite ended flat.

Oil and gold prices moved higher. The yield on the 10-year U.S. Treasury note was unchanged at 1.77%.

First Published: December 26, 2012: 9:38 AM ET

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Italy's Monti may lead again, reforms key

Monti says he may be a candidate for prime minister if asked by reformist parties

LONDON (CNNMoney)

Monti stood down, and parliament was dissolved Friday, after former Prime Minister Silvio Berlusconi withdrew his support for Monti's unelected government of technocrats, appointed a year ago to save Italy from the financial crisis then threatening to tear the eurozone apart.

Speaking on Sunday, Monti said he was more concerned that his policies survived than taking sides in the campaign but added he was ready to offer advice and leadership if a party or coalition came forward with a program he could support.

"I would be much more interested if the Monti agenda - and I apologise if my name appears here - would serve to provide clarity and perhaps help unite the forces," he said at a news conference.

Monti, an economics professor and former European Commissioner, has been credited with restoring confidence in Italy, as well as with its eurozone partners and investors, thanks to his commitment to reduce government borrowing and introduce economic and political reforms.

"While he may not have thrown his hat into the ring, Il Professore has become Il Politico whether he likes it or not," said Nicholas Spiro, managing director of London consulting firm Spiro Sovereign Strategy.

Related: Greece may remain in euro after all

Yields on 10-year Italian government bonds have risen recently on the renewed political instability but remain way below the 7% level Monti inherited a year ago, when he succeeded Berlusconi, who resigned under a cloud of scandal.

In a taste of a bitter election campaign to come, Berlusconi criticized Monti's lack of business experience and said his government had made too many errors

"Last night I had a nightmare, I woke up screaming. I dreamed of a government still with Mario Monti as president of the council," he said, according to the transcript of an interview posted on his website.

Fiscal tightening, weak confidence and tight credit supply have kept Italy deep in recession for the past five quarters. The economy is expected to shrink by about 2.4% this year, and continue to contract in 2013. Unemployment hit 11% in October and is forecast to rise even further next year.

Related: Europe needs new ideas - Vodafone CEO

Opinion polls suggest the center-left Democratic Party led by Pier Luigi Bersani will win the lower house elections, but may need to build a coalition to gain a majority.

Bersani said in a statement on his website that he had no reason to apologize for supporting Monti's program in government and would consider his policy proposals carefully.

Analysts at Nomura said a Bersani-led government including Monti in some capacity was the "best case" likely outcome for financial markets but cautioned that even such a government may struggle to implement reforms, particularly if it failed to win a majority in the upper house.

"Given all this political uncertainty, we see a non-negligible risk that markets will become unsettled over Italy again early in the new year," wrote Alastair Newton in a research note.

-- CNN's Alex Felton contributed to this article

First Published: December 24, 2012: 9:47 AM ET

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Last minute shoppers bring hope to stores

Shopping has ramped up as consumers rush to get last minute gifts, but experts say the late push may not be enough to save holiday retail sales.

NEW YORK (CNNMoney)

Estimates for the final shopping weekend aren't out yet, but there's evidence that more shoppers were coming into stores as the holidays drew near.

At North Point Mall in Alpharetta, Georgia, the parking lots were at capacity this past weekend, and it was standing room only at the food court, according to the mall's general manager Nick Nicolosi.

"By the amount of bags I saw, with people carrying four or five each, it's looking like a great season," he said.

A poll conducted by The NPD Group and CivicScience revealed that 42% of consumers were still shopping for the holidays last week, since many have been groomed to wait for better deals later in the season.

Related: Last minute deals at Wal-Mart, Target, Bloomingdales

The long holiday shopping calendar also played a role in why many customers waited, said Bill Martin, founder of ShopperTrak, which analyzes retail foot traffic.

"Many consumers delayed their Christmas shopping -- and with good reason," he said. "They saw 32 shopping days between Black Friday and Christmas."

Even if shopping ramped up during the final rush, experts are expecting disappointing numbers for the holiday season overall.

Superstorm Sandy forced many stores to close for days in October and early November. It also left many people in the Northeast without power for weeks, hurting their psyche. Looming worries over whether tax rates will go up from the fiscal cliff has also kept shoppers from going overboard with their holiday lists.

ShopperTrak lowered its holiday sales forecast for the months of November and December. It now predicts that sales will increase 2.5% over last year, down from the 3.3% it initially projected in September.

Retailers were pulling out all the stops at the last minute to lure in late shoppers.

Toys R Us stores were staying open open for 88 consecutive hours until 10 p.m. on Christmas Eve. Macy's (M, Fortune 500) stores were open for more than 48 hours straight.

Other retailers are handing cash back to customers. For every $50 spent at Kohl's (KSS, Fortune 500), the department store gave out a $10 store coupon. Target (TGT, Fortune 500) handed out gift cards worth up to $130 to shoppers who bought certain Dyson vacuums. And Wal-Mart (WMT, Fortune 500)slashed prices on iPhones and iPads.

Trae Bodge, senior editor of RetailMeNot.com Insider, said that these discounts are a sign that retailers want to get stale inventory moving, since shopping so far this season has been slow.

First Published: December 24, 2012: 12:02 PM ET

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Stocks tumble as fiscal cliff deadline nears

Click for more market data.

NEW YORK (CNNMoney)

The Dow Jones industrial average fell 0.4%. The S&P 500 and the Nasdaq both lost about 0.3%. U.S. markets closed at 1 p.m. ET and will remain dark Tuesday for the Christmas holiday.

With time running out, investors are increasingly concerned about the lack of progress in talks over tax hikes and spending cuts set to kick in automatically on Jan. 1, known as the fiscal cliff.

Stocks fell 1% on Friday after a plan by Speaker John Boehner to avert the fiscal cliff failed to get enough support in the House late Thursday. President Obama spoke about the negotiations Friday evening before leaving for the holiday, urging a scaled-back deal that would stop taxes from rising on 98% of Americans -- something both sides say they want.

No one expects progress on a deal Monday, with members of Congress having left Washington for their homes to celebrate the Christmas holiday.

Related: What happens to stocks if we go over fiscal cliff?

But investors are still holding out hope for a temporary fix before the end of the year, said Mark Luschini, chief investment strategist at financial advisory firm Janney Montgomery Scott. Such a deal would only forestall the immediate crisis and delay more difficult decisions until later next month, he added.

"If they can avert the worst, the market will find some support," said Luschini. "Absent that, we will definitely see some pressure on equities."

Fear & Greed Index

Most federal offices and many businesses were closed on Monday. There are no economic reports or corporate news scheduled for release.

European markets ended a holiday-shortened day mixed, with markets in Germany closed. Italy's Mario Monti said this weekend he may consider a second term as prime minister if asked by parties committed to the economic reforms he began over the past 12 months.

Asian markets ended slightly higher, while markets in Japan were closed.

The U.S. dollar rose versus the euro, British pound and Japanese yen. In the bond market, U.S. Treasuries were lower, with the 10-year note yielding 1.78%. Oil prices fell while gold prices edged higher.

First Published: December 24, 2012: 9:41 AM ET

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EPA study supports more natural gas

NEW YORK (CNNMoney)

"As the administration and EPA has made clear, natural gas has a central role to play in our energy future," the agency said in a press release. "The administration continues to work to expand production of this important domestic resource safely and responsibly."

EPA outlined several steps it's taking to assess the impacts fracking -- short for hydraulic fracturing -- has on the nation's water supply, as directed by Congress in 2009.

Steps include:

-- Analyzing existing data from natural gas companies on chemicals and practices used

-- Modeling how discharging waste might impact the water

-- Lab testing on water discharge

-- Testing fracking chemicals for toxicity

-- Testing groundwater in five regions near drilling activity

As expected, the study contained no new data or conclusions. The final results are not expected until late 2014.

Related: World's 10 most expensive energy projects

Some see the lack of data or negative comments in Friday's progress report as a positive for the industry.

"It signals that the Obama administration has no real appetite for additional federal regulations until 2014 at the earliest," said Nitzan Goldberger, a natural gas analyst at Eurasia Group, a political risk consultancy. "That's good news for the oil and gas guys."

The Obama administration has tightened some rules around fracking, but for the most part has left regulation up to the states.

Fracking involves injecting massive amounts of water, sand and some chemicals deep underground in a bid to crack shale rock and ease the flow of oil and natural gas.

The process has unleashed an energy boom in the United States, creating thousands of jobs, driving down the price of oil and natural gas and cutting energy imports to levels not seen in decades.

But it's also raised serious concerns over its effects on the environment, including air pollution from trucks and wells, its links to earthquakes and fears that it is contaminating drinking water.

For environmentalists, the negatives seem to outweigh the positives.

Fracking was once seen by some environmentalists as a technology that, given the proper regulations, could be done safely and provide a fuel that emits far fewer greenhouse gases than coal. Natural gas was seen as a good alternative to coal, at least until renewables like wind and solar were ready for prime time.

But declining costs for renewables, more instances of water contamination, uncertainly over the heat-trappng nature of natural gas that escapes from wells unburned, and a fear that cheap gas is crowding out wind and solar have led many to change their minds.

Several environmental groups are calling for an immediate ban on fracking, while others favor a gradual phase out combined with greater federal regulation.

On the other side are many analysts and economists that believe this technology can give the United States a significant economic and geopolitical advantage.

First Published: December 21, 2012: 2:54 PM ET

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Going over the cliff: What changes, what doesn't

Senate Majority Leader Harry Reid may need to do some heavy lifting to pass a fiscal cliff deal in the Senate, after House Speaker John Boehner's so-called Plan B did not garner enough support in the House.

NEW YORK (CNNMoney)

The good news: It won't be the end of the world.

The bad news: Going over the cliff could create problems that no one should have to deal with, simply because Congress and the White House couldn't get the job done on time.

Practically speaking, however, there is likely to be a "grace period" of a couple of weeks during which Congress could pass a deal to ward off the bulk of scheduled tax increases and spending cuts. And there are ways both may be postponed temporarily while lawmakers work that out.

Your paycheck: If you'll be paid during the first week in January, your company's payroll processor will probably be cutting your check during Christmas week. So far, however, the IRS hasn't told the payroll companies how much tax to withhold for 2013.

Unless new withholding tables are issued, payroll processors will continue to use 2012 withholding rates for the early January paychecks. In that sense, your paycheck in early January won't be much different than what it was in late December.

But your paycheck still could be smaller, because the 2% payroll tax holiday is expiring. Starting in January, workers will once again have 6.2% of their wages up to $113,700 withheld to pay for Social Security, up from the 4.2% rate that's been in effect for the past two years.

Effectively that means someone making $50,000 might get about $83 less a month in their paychecks. Someone making twice that would see their pay reduced by roughly $167 a month.

If you're getting a bonus, you'll likely have more withheld there, too, said Michael O'Toole, senior director of government relations for the American Payroll Association. That's because there's one supplemental withholding rate that applies to bonuses. This year it's 25%, but it's set to rise to 28% on Jan. 1, unless Congress decides to change it.

For paychecks that will be cut during the second, third and fourth weeks of January, payroll processors will likely continue to use 2012 income tax withholding tables if they've heard nothing from Treasury and the IRS by that point, O'Toole said.

CNN: Breakdown of support for Plan B

There also is some debate whether Treasury Secretary Tim Geithner will have the authority to tell employers that they should continue to use the 2012 withholding tables until further notice if he chooses.

The other option, of course, is that the IRS could issue new withholding tables reflecting 2013 law, which means everyone's tax rates will go up officially on Jan. 1. In that case, paychecks that are processed in January will have more withheld than they do currently.

If, as expected, Congress eventually chooses to extend the Bush tax cuts for all but the highest earners, adjustments would need to be made for paychecks that went out earlier in the year.

Treasury did not indicate to CNNMoney whether it would issue new withholding tables by Jan. 1.

Your 401(k) and IRA: There's no telling how markets will respond if fiscal cliff gridlock persists into 2013.

They've been relatively sanguine so far. But that may not be the case going forward.

After news that House Speaker John Boehner tabled Plan B because it lacked sufficient support, U.S. stocks fell Friday by just under 1%. World markets also ended the day modestly in the red.

Then again, some believe, markets may not move much on fiscal cliff news - whether Congress cuts a deal soon or not.

Your 2012 tax return: Here's where things potentially become a dumb mess. The IRS warned lawmakers that if they don't act to protect the middle class from having to pay the Alternative Minimum Tax for tax year 2012 by Dec. 31, up to 100 million taxpayers may not be able to file their 2012 taxes until late March.

That would mean their refunds will be delayed. And they wouldn't be injecting those refunds into the economy during the first quarter.

Based on Treasury Department records from the past three years, refunds paid during January, February and March combined have ranged from $117 billion to $136 billion.

Related: What's in the fiscal cliff?

Government spending: Unless lawmakers avert the so-called sequester, a series of automatic cuts will reduce the budgets of most federal agencies and programs by 8% to 10%.

But that doesn't necessarily mean those cuts would have to occur immediately, according to a former official with the Office of Management and Budget.

Both the White House budget office and federal agencies themselves will have some latitude to postpone the cuts from occurring "for several weeks if necessary," added OMB Watch, a group that monitors the federal budget.

The White House Budget Office did not respond to questions from CNNMoney.

Doctors' pay: Absent a fiscal cliff deal that includes a so-called "doc fix," Medicare physicians are facing a nearly 27% cut in their payments for treating Medicare patients.

But here again there may be a few weeks' grace period for Congress to change its mind and reverse the cut. That's because a claim submitted will be paid no less than two weeks after it's received.

Unemployment benefits: A federal extension of unemployment benefits is set to expire. If Congress does not renew it, workers who lost their jobs after July 1, 2012, will only receive up to 26 weeks in state unemployment benefits, down from as many as 73 weeks in state and federal benefits that have been available in 2012. As a result, more than 2 million of the long-term unemployed will run out of benefits in January, according to the National Employment Law Project, an advocacy group.

If Congress chooses early next year to keep the extension in place, and makes the extension retroactive, then many of the 2 million who fell off the rolls may be paid retroactively, said Rick McHugh, a NELP staff attorney.

First Published: December 21, 2012: 4:39 PM ET

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'Dairy cliff': Milk prices may double in New Year

If Congress doesn't act on an expiring protection for dairy farmers before Jan 1, milk prices could double.

NEW YORK (CNNMoney)

With Congress spending all its time trying to avert the fiscal cliff, a slew of other legislative matters are going unattended. One of them is the agriculture bill which, if not addressed, could lead to a doubling of the price of milk early next year.

It works like this: In order to keep dairy farmers in businesses, the government agrees to buy milk and other products if the price gets too low. The current agriculture bill has a formula that means the government steps in if the price of milk were to drop by roughly half from its current national average of about $3.65 a gallon.

Problem is, the current bill expired last summer, and Congress had been unable to agree on a new one. Several protections for farmers have already expired, and several more are set to do so over the next few months. One of them is the dairy subsidy, which expires January 1.

But instead of leaving farmers entirely out in the cold, the law states that if a new bill isn't passed or the current one extended, the formula for calculating the price the government pays for dairy products reverts back to a 1949 statute. Under that formula, the government would be forced to buy milk at twice today's price -- driving up the cost for everyone.

"If you like anything made with milk, you're going to be impacted by the fact that there's no farm bill," U.S. Secretary of Agriculture Tom Vilsack told CNN's Candy Crowley in an interview on State of the Union airing Sunday, Dec. 30.

"Consumers are going to be a bit shocked when instead of seeing $3.60 a gallon for milk, they see $7 a gallon for milk. And that's going to ripple throughout all of the commodities if this thing goes on for an extended period of time," Vilsack said.

Related: Independent farms rake in millions

Sky-high milk prices wouldn't necessarily be good for dairy farmers either, according to Chris Galen, a spokesman for the National Milk Producers Federation, which represents over 30,000 dairy farmers.

While it might provide a short term boost to profits, there's a fear that consumers would either cut back on dairy or opt for imported dairy products. It could also force food makers to search for alternatives to dairy, like soy.

"We call it the dairy cliff," Galen said.

Fortunately, there's still time for Congress to act.

Galen said the government would have to issue a notice saying it was going to pay the increased price for dairy products, then set up a schedule for when purchases would start, a process that could take a few weeks.

"It's not like people would dump blocks of cheese on the USDA's front lawn January first," he said.

To prevent the price spike, Congress either needs to extend the current bill, pass a new bill, or enact some provision to keep the 1949 law from taking effect.

Given the current state of the fiscal cliff talks and Congress' inability to get things done in general, dairy lovers might want to stock up now.

First Published: December 21, 2012: 3:31 PM ET

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EPA study supports more natural gas

NEW YORK (CNNMoney)

"As the administration and EPA has made clear, natural gas has a central role to play in our energy future," the agency said in a press release. "The administration continues to work to expand production of this important domestic resource safely and responsibly."

EPA outlined several steps it's taking to assess the impacts fracking -- short for hydraulic fracturing -- has on the nation's water supply, as directed by Congress in 2009.

Steps include:

-- Analyzing existing data from natural gas companies on chemicals and practices used

-- Modeling how discharging waste might impact the water

-- Lab testing on water discharge

-- Testing fracking chemicals for toxicity

-- Testing groundwater in five regions near drilling activity

As expected, the study contained no new data or conclusions. The final results are not expected until late 2014.

Related: World's 10 most expensive energy projects

Some see the lack of data or negative comments in Friday's progress report as a positive for the industry.

"It signals that the Obama administration has no real appetite for additional federal regulations until 2014 at the earliest," said Nitzan Goldberger, a natural gas analyst at Eurasia Group, a political risk consultancy. "That's good news for the oil and gas guys."

The Obama administration has tightened some rules around fracking, but for the most part has left regulation up to the states.

Fracking involves injecting massive amounts of water, sand and some chemicals deep underground in a bid to crack shale rock and ease the flow of oil and natural gas.

The process has unleashed an energy boom in the United States, creating thousands of jobs, driving down the price of oil and natural gas and cutting energy imports to levels not seen in decades.

But it's also raised serious concerns over its effects on the environment, including air pollution from trucks and wells, its links to earthquakes and fears that it is contaminating drinking water.

For environmentalists, the negatives seem to outweigh the positives.

Fracking was once seen by some environmentalists as a technology that, given the proper regulations, could be done safely and provide a fuel that emits far fewer greenhouse gases than coal. Natural gas was seen as a good alternative to coal, at least until renewables like wind and solar were ready for prime time.

But declining costs for renewables, more instances of water contamination, uncertainly over the heat-trappng nature of natural gas that escapes from wells unburned, and a fear that cheap gas is crowding out wind and solar have led many to change their minds.

Several environmental groups are calling for an immediate ban on fracking, while others favor a gradual phase out combined with greater federal regulation.

On the other side are many analysts and economists that believe this technology can give the United States a significant economic and geopolitical advantage.

First Published: December 21, 2012: 2:54 PM ET

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Going over the cliff: What changes, what doesn't

Senate Majority Leader Harry Reid may need to do some heavy lifting to pass a fiscal cliff deal in the Senate, after House Speaker John Boehner's so-called Plan B did not garner enough support in the House.

NEW YORK (CNNMoney)

The good news: It won't be the end of the world.

The bad news: Going over the cliff could create problems that no one should have to deal with, simply because Congress and the White House couldn't get the job done on time.

Practically speaking, however, there is likely to be a "grace period" of a couple of weeks during which Congress could pass a deal to ward off the bulk of scheduled tax increases and spending cuts. And there are ways both may be postponed temporarily while lawmakers work that out.

Your paycheck: If you'll be paid during the first week in January, your company's payroll processor will probably be cutting your check during Christmas week. So far, however, the IRS hasn't told the payroll companies how much tax to withhold for 2013.

Unless new withholding tables are issued, payroll processors will continue to use 2012 withholding rates for the early January paychecks. In that sense, your paycheck in early January won't be much different than what it was in late December.

But your paycheck still could be smaller, because the 2% payroll tax holiday is expiring. Starting in January, workers will once again have 6.2% of their wages up to $113,700 withheld to pay for Social Security, up from the 4.2% rate that's been in effect for the past two years.

Effectively that means someone making $50,000 might get about $83 less a month in their paychecks. Someone making twice that would see their pay reduced by roughly $167 a month.

If you're getting a bonus, you'll likely have more withheld there, too, said Michael O'Toole, senior director of government relations for the American Payroll Association. That's because there's one supplemental withholding rate that applies to bonuses. This year it's 25%, but it's set to rise to 28% on Jan. 1, unless Congress decides to change it.

For paychecks that will be cut during the second, third and fourth weeks of January, payroll processors will likely continue to use 2012 income tax withholding tables if they've heard nothing from Treasury and the IRS by that point, O'Toole said.

CNN: Breakdown of support for Plan B

There also is some debate whether Treasury Secretary Tim Geithner will have the authority to tell employers that they should continue to use the 2012 withholding tables until further notice if he chooses.

The other option, of course, is that the IRS could issue new withholding tables reflecting 2013 law, which means everyone's tax rates will go up officially on Jan. 1. In that case, paychecks that are processed in January will have more withheld than they do currently.

If, as expected, Congress eventually chooses to extend the Bush tax cuts for all but the highest earners, adjustments would need to be made for paychecks that went out earlier in the year.

Treasury did not indicate to CNNMoney whether it would issue new withholding tables by Jan. 1.

Your 401(k) and IRA: There's no telling how markets will respond if fiscal cliff gridlock persists into 2013.

They've been relatively sanguine so far. But that may not be the case going forward.

After news that House Speaker John Boehner tabled Plan B because it lacked sufficient support, U.S. stocks fell Friday by just under 1%. World markets also ended the day modestly in the red.

Then again, some believe, markets may not move much on fiscal cliff news - whether Congress cuts a deal soon or not.

Your 2012 tax return: Here's where things potentially become a dumb mess. The IRS warned lawmakers that if they don't act to protect the middle class from having to pay the Alternative Minimum Tax for tax year 2012 by Dec. 31, up to 100 million taxpayers may not be able to file their 2012 taxes until late March.

That would mean their refunds will be delayed. And they wouldn't be injecting those refunds into the economy during the first quarter.

Based on Treasury Department records from the past three years, refunds paid during January, February and March combined have ranged from $117 billion to $136 billion.

Related: What's in the fiscal cliff?

Government spending: Unless lawmakers avert the so-called sequester, a series of automatic cuts will reduce the budgets of most federal agencies and programs by 8% to 10%.

But that doesn't necessarily mean those cuts would have to occur immediately, according to a former official with the Office of Management and Budget.

Both the White House budget office and federal agencies themselves will have some latitude to postpone the cuts from occurring "for several weeks if necessary," added OMB Watch, a group that monitors the federal budget.

The White House Budget Office did not respond to questions from CNNMoney.

Doctors' pay: Absent a fiscal cliff deal that includes a so-called "doc fix," Medicare physicians are facing a nearly 27% cut in their payments for treating Medicare patients.

But here again there may be a few weeks' grace period for Congress to change its mind and reverse the cut. That's because a claim submitted will be paid no less than two weeks after it's received.

Unemployment benefits: A federal extension of unemployment benefits is set to expire. If Congress does not renew it, workers who lost their jobs after July 1, 2012, will only receive up to 26 weeks in state unemployment benefits, down from as many as 73 weeks in state and federal benefits that have been available in 2012. As a result, more than 2 million of the long-term unemployed will run out of benefits in January, according to the National Employment Law Project, an advocacy group.

If Congress chooses early next year to keep the extension in place, and makes the extension retroactive, then many of the 2 million who fell off the rolls may be paid retroactively, said Rick McHugh, a NELP staff attorney.

First Published: December 21, 2012: 4:39 PM ET

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'Dairy cliff': Milk prices may double in New Year

If Congress doesn't act on an expiring protection for dairy farmers before Jan 1, milk prices could double.

NEW YORK (CNNMoney)

With Congress spending all its time trying to avert the fiscal cliff, a slew of other legislative matters are going unattended. One of them is the agriculture bill which, if not addressed, could lead to a doubling of the price of milk early next year.

It works like this: In order to keep dairy farmers in businesses, the government agrees to buy milk and other products if the price gets too low. The current agriculture bill has a formula that means the government steps in if the price of milk were to drop by roughly half from its current national average of about $3.65 a gallon.

Problem is, the current bill expired last summer, and Congress had been unable to agree on a new one. Several protections for farmers have already expired, and several more are set to do so over the next few months. One of them is the dairy subsidy, which expires January 1.

But instead of leaving farmers entirely out in the cold, the law states that if a new bill isn't passed or the current one extended, the formula for calculating the price the government pays for dairy products reverts back to a 1949 statute. Under that formula, the government would be forced to buy milk at twice today's price -- driving up the cost for everyone.

"If you like anything made with milk, you're going to be impacted by the fact that there's no farm bill," U.S. Secretary of Agriculture Tom Vilsack told CNN's Candy Crowley in an interview on State of the Union airing Sunday, Dec. 30.

"Consumers are going to be a bit shocked when instead of seeing $3.60 a gallon for milk, they see $7 a gallon for milk. And that's going to ripple throughout all of the commodities if this thing goes on for an extended period of time," Vilsack said.

Related: Independent farms rake in millions

Sky-high milk prices wouldn't necessarily be good for dairy farmers either, according to Chris Galen, a spokesman for the National Milk Producers Federation, which represents over 30,000 dairy farmers.

While it might provide a short term boost to profits, there's a fear that consumers would either cut back on dairy or opt for imported dairy products. It could also force food makers to search for alternatives to dairy, like soy.

"We call it the dairy cliff," Galen said.

Fortunately, there's still time for Congress to act.

Galen said the government would have to issue a notice saying it was going to pay the increased price for dairy products, then set up a schedule for when purchases would start, a process that could take a few weeks.

"It's not like people would dump blocks of cheese on the USDA's front lawn January first," he said.

To prevent the price spike, Congress either needs to extend the current bill, pass a new bill, or enact some provision to keep the 1949 law from taking effect.

Given the current state of the fiscal cliff talks and Congress' inability to get things done in general, dairy lovers might want to stock up now.

First Published: December 21, 2012: 3:31 PM ET

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Stocks fall more than 1% on fiscal cliff fears

NEW YORK (CNNMoney)

It's not the end of the world -- literally or for the fiscal cliff talks -- but the latest signs of gridlock on Washington have struck fear into investors.

The Dow Jones Industrial Average, the S&P 500, and the Nasdaq dropped between 1% and 1.7%.

Lawmakers in the House failed to support the so-called "Plan B", a proposal backed by House Speaker John Boehner, late Thursday. The White House had already threatened to veto that plan, saying it would bring only "minimal" changes in projected budget deficits, but its failure underscored the lack of progress on Capitol Hill as the cliff draws nearer.

"Although the principal purpose of the proposed vote was to give [Boehner] additional leverage in his negotiations with President Barack Obama, this was nevertheless something of a set-back and is making markets more nervous," Nomura analyst Alastair Newton wrote in a research note.

Related: America's Debt Challenge

U.S. stocks had drifted higher Thursday amid the ongoing gridlock in Washington. Investors fear automatic tax rises and spending cuts due January 1 in the absence of a fiscal cliff deal could tip the U.S. into recession.

Mark Luschini, chief investment strategist at Janney Montgomery Scott, called the fate of the Plan B proposal "a litmus test for the receptibility of our Congress people to work toward a concrete solution."

"This is indicative of the kind of difficulty there will be to have something accomplished by year's end, and that's why you'll see pressure on equity prices," he said.

Related: Fallout from fiscal cliff inaction

Data released by the U.S. government Friday morning showed that personal income rose 0.6% in November, while spending increased 0.4% -- both figures came in higher than expected.

A report on consumer sentiment is due from the University of Michigan and Thomson Reuters at 10 a.m.

Shares of Blackberry maker Research in Motion (RIMM) fell 15%, after the company reported Thursday afternoon that sales for the latest quarter fell 47%.

Nokia (NOK) announced an agreement to settle all patent claims with RIM early Friday, however, financial terms were not disclosed.

Nike (NKE, Fortune 500) shares rose 4% after the apparel giant posted quarterly earnings Thursday afternoon that beat expectations.

Shares of Walgreens (WAG, Fortune 500) fell 2.8% Friday, after the company's quarterly results showed earnings and sales dropped versus a year ago.

Fear & Greed Index

European markets were trading lower on the prospect of further uncertainty about the U.S. economy, and oil prices fell. Asian markets also ended weak.

The dollar gained against the Euro but fell against the Yen. Oil prices fell, while gold prices rose. The yield on the 10-year Treasury note fell to 1.74% from 1.8% on Thursday.

First Published: December 21, 2012: 9:42 AM ET

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Americans earned more, spent more, saved more

NEW YORK (CNNMoney)

Personal income rose 0.6% during the month, and spending rose 0.4%.

Meanwhile, people also stashed away a larger portion of their earnings. The savings rate rose to 3.6% in November, up from 3.4% in October.

The encouraging news was partly the result of a comeback after Superstorm Sandy led income and spending to fall in October.

Even so, the rise in November was stronger than economists had anticipated, and led some to revise their forecasts for fourth quarter economic growth higher.

The Commerce Department's monthly data comes a day after it released a report showing the economy grew 3.1% in July through September, with a rise in consumer spending leading as the single largest driver of economic growth.

First Published: December 21, 2012: 8:53 AM ET

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Research in Motion shares plunge 17%

Click chart to view more information about RIM's stock.

NEW YORK (CNNMoney)

RIM's revenue for its fiscal third quarter, which ended Dec. 1, dropped 47% to $2.7 billion, matching the forecasts of analysts polled by Thomson Reuters.

The Waterloo, Ontario, company said it shipped just 6.9 million BlackBerry phones over the past three months, down from 7.4 million a year earlier. Research in Motion (RIMM) said it had 79 million subscribers last quarter, compared to 80 million in the prior quarter, and it shipped only 255,000 PlayBook tablets -- still paltry, but twice the number it shipped a year ago.

Subscriber losses weren't the only sour note worrying investors. On a conference call with analysts, RIM CEO Thorsten Heins said that the company would consider lowering its prices on existing BlackBerry 7 devices as well as the service fees it charges carriers in order to keep its current subscriber numbers up. Heins was mostly upbeat but cautious about when carriers would start selling and when business customers would begin to adopt BlackBerry 10.

The stock initially rose 8% in after-hours trading Thursday, thanks to a financial picture that wasn't as bad as Wall Street analysts had expected. The company increased its cash hoard to $2.9 billion after generating nearly $1 billion in cash flow from its operations last quarter.

RIM earned a $9 million profit last quarter, compared to a $235 million loss a year earlier. Most of that gain, though, came from a tax benefit. Excluding one-time costs and benefits, RIM said it would have lost $114 million, or 22 cents per share. Analysts polled by Thomson Reuters, who typically exclude one-time items from their estimates, had forecast a loss of 35 cents per share.

Still, RIM said it is likely to report a loss next quarter as it ramps up its marketing campaign for its new BlackBerry 10 operating system and smartphones, which are slated to go on sale Jan. 30. The company said its sales until then will likely take a hit.

The company announced last month that its new BlackBerry 10 will finally debut on Jan. 30, a year after the company's next-generation smartphones and software were originally slated to go on sale. Shares of RIM have rallied over the past several months as the company made progress with the twice-delayed BlackBerry 10, which promises to deliver must-have smartphone features that could make it competitive with Apple's (AAPL, Fortune 500) iPhone and Google's (GOOG, Fortune 500) Android.

Heins said Thursday that 150 carriers across the world are testing BlackBerry 10, and 64 of the Fortune 500 companies are trying out the new operating system.

But hopes aren't high for the future of the platform. After dominating the smartphone market for years, RIM controlled less than 5% of smartphone sales in 2012, and it will own just 4% of the market in 2016, according to IDC forecasts.

First Published: December 21, 2012: 8:26 AM ET

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