Companies are starting to delay hiring and spending out of concern that Congress won’t reach a compromise in time to avoid automatic tax increases and budget cuts that would pull billions of dollars of purchasing power out of the economy.
Faced with a so-called fiscal cliff of more than $600 billion in higher taxes and reductions in defense and other government programs in 2013, U.S. companies are pulling back, though the deadline for congressional action is more than six months away.
Things would get worse next year if Congress allows all of the scheduled spending reductions and tax increases to take effect. In that case, a recession is likely, the non-partisan Congressional Budget Office warned in a report last month.
“I’m feeling more of a pinch and squeeze than I ever have before,” Goss said. “As soon as they start these massive cuts, they’re going to impact the economy.”
On the spending side, some $65 billion in automatic cuts are set to take effect in 2013 as part of last year’s deal to raise the debt limit. Half of the reductions will come from defense spending.
Kimmie Candy Co. this month put on hold plans to add five or six workers to its 23-person payroll because of slowing sales growth and the political uncertainty in Washington, said Joseph Dutra, president of the Reno, Nevada-based company.