Question of the week: what happens if the U.S. goes over the fiscal cliff?
A lot of pain short-term which is impossible to completely quantify right now, but we do know there will be some direct and indirect consequences on millions of Americans next year.
Some will not see much of an impact should they make less, however, the Congressional Budget Office (CBO) has predicted there will be a recession in the first two quarters of 2013 if we go over the fiscal cliff.
High unemployment will be a likely result as the marketplace will have to absorb newly unemployed government employees before meager economic recovery to where we are now at around 2% quarterly growth towards the end of the year. If the markets react negatively in January this could be problematic for many individuals are trying to retire as their 401K’s could be in jeopardy.
The issue that is often ignored is the Affordable Care Act and how it will affect economic productivity. Should employers begin to shift to a more part-time workforce this will produce a negative result and slow GDP growth.
Another challenge facing job creators will be added regulations in the financial sector and of course new Obamacare rules and regulations which were recently clarified through federal guidance. The question that remains unanswered is how the profit margins of small to mid-sized businesses will be changed due to a large increase in compliance coming in 2013.
The bottom line is the fiscal cliff is a man made problem that is a result of Congress, particularly the Senate and the President not doing their job. There needs to be a budget passed every year so the markets can have certainty. It has been years since the Senate has passed a budget. When they do not pass a budget we get a crisis like this fiscal cliff.
As always, pain will need to be realized before action can be taken. To reduce the pain for your business contact me today for answers to questions and recommendations on how your business can minimize damage and reduce costs.