Manufacturers Feel Fiscal Cliff's Threat
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Sure, consumers aren’t yet fearing the “fiscal cliff’s” combo of automatic tax hikes and spending cuts set to take effect in January 2013, but some businesses are preparing as the Wall Street Journal reports:
Some manufacturers have delayed hiring while they wait to see whether they will face sharply higher U.S. taxes and deep cuts in government spending in 2013, a new survey shows.
Uncertainty over U.S. tax and spending plans has prompted about a third of 60 large and small manufacturing companies—two-thirds of them with annual sales of more than $1 billion—to defer hiring. That is according to Manufacturers Alliance for Productivity and Innovation, an Arlington, Va., research group that polled executives at those firms in September. The survey said 17% had reduced or shelved capital investments because of the same worries.
Tax increases and spending cuts are due to take effect at year-end unless Congress acts before then to find other ways to deal with the U.S. budget deficit. Failing to stop those automatic adjustments would lead to a so-called "fiscal cliff." That would have "a moderately negative to very negative impact" on business, according to 83% of respondents. About 9% said the harm would be minimal.
John Engler, President of the Business Roundtable, addressed worries in a speech to the Detroit Economic Club on the uncertainty Washington has unleashed on businesses and the economy. Specifically, he noted the 60 tax provisions that expired last year and more than 40 set to expire at the end of this year if Congress doesn’t act. He urged Congress to pass a temporary fix to the automatic tax increases and spending cuts in the post-election, lame duck session then tackle tax reform and spending reform that takes on entitlement spending. The U.S. Chamber’s has been making a similar case.
In the next few months, Washington can take positive steps to responsibly avoid the fiscal cliff and instill confidence in businesses to invest, hire workers, and grow the economy.