As the country enters the final full month of the 2012 presidential campaign, another crucial issue has come onto the national political stage which could have a devastating impact on small and big businesses alike. The looming "fiscal cliff" is set to take place on January 1, 2013, and will likely be the most pressing issue for Congress and the president.
If Democrats and Republicans cannot compromise on how to reduce the nation's enormous $16 trillion debt, then the fiscal cliff is inevitable. The fiscal cliff is made up of an enormous amount of tax hikes and spending cuts set to go into effect in January 2013.
Congress has failed to reach resolutions on three main issues: Medicaid and Medicare, Social Security, and the defense budget. All three make up a large portion of the United States' federal budget and augment the national debt.
According to an article in the Washington Post:
"The issue is not only about the continuously rising spending on these issues that have been previously mentioned, but also the threat of passing that point where the national debt and deficit cross the line where the United States is unable to pay it back and that the country will default on our debt. The last major poll done on the issue of the debt limit and the concern about default was taking on May 24th 2011, where the question was asked "How concerned if at all are you that, raising the debt limit would lead to higher government spending and make the national debt bigger" with 77 % of those responded categorized as concerned while 47% of those responding as "very concerned" according to the Washington Post."
The fiscal cliff is particularly worrying to the defense and medical services industries. Companies such as defense giant Lockheed Martin could suffer significantly since they often benefit from the defense budget. In many cases, spending cuts will likely lead to job layoffs, a painful consequence for an already suffering economy.
Many businesses are already poised to act as concern over the fiscal cliff spreads nationwide. Scott Malone of Yahoo! News reports, "Most of the companies have accelerated their cost-cutting efforts, closing facilities, laying off workers and pressuring their suppliers to lower component costs. United Tech's Sikorsky helicopter unit on Monday said it would close a site in Elmira, New York, that modified Black Hawk and Sea Hawk helicopters, cutting some 575 jobs."
Cuts to the medical services industry would devastate states that have a large number of workers in the medical services field. Lynn Nicholas, the CEO of the Massachusetts Hospital Association told bizjournals.com, "We are deeply concerned that scheduled cuts to Medicare under sequestration will not only slash vital funding to hospitals, but cause widespread job loss in multiple sectors in Massachusetts and nationwide.”
The polarization in Washington is threatening the hope of reaching an agreement on the budget. Independent voters may have a sway this year to change the fundamentalist trends on Capitol Hill and elect more moderate, flexible candidates; making an agreement on these issues more likely.