There is danger in procrastination. The failure of Congress to reach a compromise on automatic tax increases and budget cuts is affecting business decisions.
Although the deadline for congressional action is six months away, U.S. businesses are playing it safe, postponing hiring and spending, Bloomberg News points out.
At stake are more than $600 billion in higher taxes and cuts in government programs that will kick in if Congress cannot wrap up a deal by Dec. 31 of this year.
But the so-called fiscal cliff is looming now, difficult to surmount.
With so much uncertainty, it is best for companies to stay lean and keep your inventories taut, said Sandy Cutler of Easton Corp., a manufacturer of industrial equipment in Cleveland.
Michael Hanson, economist at Bank of America, said: A lot of people see the fiscal cliff as a 2013 story, but you dont board up the windows when the hurricane is there, you board up the windows in anticipation.
So it goes, and the trend will increase the longer Congress dallies and the closer the deadline approaches.
If the spending cuts and tax increases go into effect next year, expect a recession, says the Congressional Budget Office.
The governments failure to resolve this issue is folly. Investors are preoccupied with Europes financial crisis now, but in time they will show great concern over the fiscal cliff.
Businesses are not to blame for playing it safe until the matter is resolved. But the economy will drag and consumers will be harmed if government refuses to act.