Congress and Businesses Preparing for Fiscal Cliff Very Differently
Subscribe today for Free Enterprise Updates
- Latest business trends and best practices
- News about legislation and regulation impacting business
- Business how-to articles from industry experts
- Commentary and interviews with newsmakers in business and politics
Seventy-five days remain until the largest tax increase in American history along with irresponsible automatic spending cuts hits the economy. The Congressional Budget Office warned in August that going over the “fiscal cliff” would cause the economy to go into a recession and the unemployment rate to rise to 9.1%.
As the January deadline approaches, businesses are preparing for a downturn by delaying investments and new hires. Matt Phillips at Quartz reports that companies like Dollar Tree and Levi Strauss are closely managing inventory and cash and not investing further in the expectation of negative economic fallout. On the jobs front, Morgan Stanley’s latest Business Conditions Index finds that future hiring plans took a hit. Economist Dane Vrabac wrote, “Reports of uncertainty created by the fiscal cliff continue to increase."
One would think this news would light a fire under Congress, but instead CQ ran a story about members of Congress investigating how to mitigate the damage instead of avoiding it. Contrast that to Sen. Marco Rubio telling Bloomberg (around the 2:15 mark) that Washington has to find a solution and not postpone it.
Such a solution would be the two-step path the U.S. Chamber advocates of 1) extending current tax rates and tax provisions for all tax payers and finding alternative spending cuts; then 2) engaging in pro-growth tax reform and spending reform that tackles entitlements.
The closer the economy steps toward the fiscal cliff, the more stories we’ll see about businesses putting their binders full of investment ideas back on the shelf and delaying hiring. If the economy slows even further, maybe that will spur Congress and the administration to find a solution.