Small Businesses Watch as Country Approaches the Cliff


It feels that every-so-often we seem to hear about another doomsday scenario for the American economy. Last year it was the debt ceiling; this year, it's the infamous fiscal cliff. The potential of the fiscal cliff, much like the debt ceiling, has been heavily debated in recent weeks. While one side will tell you it's the end of the economy as we know it, others will tell you not to sweat it. It's quite difficult to get through all of the white noise, especially during an election year. Who can you believe? Where are the facts?

Here's a fact that matters; the fiscal cliff is impacting small businesses right now. How so?

What is the fiscal cliff?

Firstly, it's beneficial to understand exactly what the fiscal cliff actually is instead of just throwing a buzzword around for the sake of it.

In short, the fiscal cliff represents billions of dollars covering a variety of tax increases and spending cuts that are set to take effect in the beginning of 2013. These spending cuts include the often-referenced Bush tax cuts on wealthier Americans. Remember when Congress couldn't come to a deal last year over the debt crisis and basically put the problem off for a later day? That later day is all but upon us now.

As it stands, taxes will increase for workers (as much as 2%), meanwhile income taxes will rise for everyone as the Bush tax cuts are rolled back. Furthermore, heavy domestic spending cuts will take place, especially in defense.

How does the fiscal cliff impact small businesses?

Consider this; the Congressional Budget Office projects that the fiscal cliff will drag the country's slow recovery down to an even more sluggish pace. The economy would be set to contract during the first six months of the new year, meanwhile the economy would overall grow only 1.7% over the next year. The Federal Reserve has stated that they would not be able to bail the country out, with Ben Bernanke specifically stating the impact of the fiscal cliff “could lead businesses to defer hiring.”

What do these numbers and projections mean for the economy? Bad news. In the words of the President, “not good enough.”

Specifically, not good enough for small businesses.

Small business owners are already facing a number of challenges and uncertainties between the Presidential election and the current state of the economy. The fiscal cliff throws a wrench into any sense of certainty that SMBs had left. Often unable to hire and unsure of what's next in terms of legislation and regulation, small businesses are stuck.

How can one truly plan or project the next few months or years with the economy in its current state? Short answer; it's just about impossible. Businesses are known to take risks, and in recent years it's almost been required for business owners to take a couple leaps of faith in order to stay afloat. But at what point are business owners simply flying blind?

Most business owners want to see what's out there. They want to get to work. They want to get their hands dirty.

These same go-getters are being forced into a game of economic “wait and see.”

What's next?

It's a sticky situation for the country to be in, especially in the midst of two very heated Presidential campaigns. Democrats desire a combination of tax increases and spending cuts in order to alleviate the problem, meanwhile Republicans also desire to cut spending; however, they do no want to raise taxes. President Obama's desire to tax wealthier Americans has become a staple of the campaign and a rather large talking point by both parties. Defense spending, which has hardly been discussed during the course of the political season, is something that the Republican party is strongly against at the moment.

Mitt Romney hasn't been shy in attacking President Obama concerning the cliff.

"Political gridlock threatens to plunge us back into recession,” Romney said. “But instead of seeking bipartisan solutions, President Obama is passively allowing us to go over a fiscal cliff.”

Romney has his own baggage in the debate, however, due to the fact that Paul Ryan was part of the Congress that agreed on automatic cuts in August 2011. President Obama himself has been relatively quiet on the issue in recent days, seemingly focused on the current conflicts in the Middle East. Both Romney and Obama are currently back on the campaign trail; however, the fiscal cliff battle will inevitably spark once again during the first Presidential debate in October.

The fact of the matter remains that a deal concerning the fiscal cliff won't likely be cut until the very last minute. We saw it with the debt ceiling, and all signs point to the same sort of political squabble and public spectacle all over again. With the American economy and small businesses hanging in the balance, we'd certainly like to see this resolved sooner rather than later. Unfortunately, history leads us to believe otherwise.

About the Author

Brent Barnhart

Brent Barnhart is a freelance content writer specializing in topics such as Internet marketing and content marketing for small businesses. His goal is to help business owners find their voices online and improve their content strategies. You can reach Brent or find out more at

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