Is the Fiscal Cliff Already Affecting your Business?
According to a survey of members by AGC of America the fiscal cliff is already impacting contractors and how they conduct their business. The survey results also highlight the drastic action that members will potentially be forced to take if indiscriminate tax increases and indiscriminate spending cuts go into effect on Jan. 1.
According to the nearly 600 AGC members who responded to the survey the construction industry is already feeling the impact of the fiscal cliff especially the weight of the potential threats of higher tax rates and cuts to federal construction spending.
Fifty-four percent of survey respondents have already taken action with regard to the fiscal cliff typically by postponing hiring and capital investment. Of the 46 percent of the contractors who have not already taken action 63 percent plan to take action if rates rise. They also plan to reduce job opportunities capital investment employer contributions to health care and 401(k)s and their workforce. Construction program cuts as a result of sequestration – AGC has already estimated a potential $6 billion reduction in federal construction spending based on the sequester – will have similar impacts according to the survey.
The majority of AGC’s members are small businesses organized as pass-through entities – they pay business taxes at the individual rates and so do many of their customers. The results of this nationwide survey show the potential for reduced job opportunities reduced capital investment layoffs and benefit reductions if fiscal cliff negotiations fail to produce a resolution. If a compromise is not reached it will result in significantly higher tax rates and reduced federal construction spending.
The macroeconomic impacts of going over the fiscal cliff – as stated in a recent Congressional Budget Office report – has the potential to “spark a recession” reduce GDP growth from 2.2 percent to 0.5 percent and cause unemployment to spike to over 9 percent by the end of next year. And in its presentation to AGC of Washington members last month McGraw Hill Construction noted that driving off the fiscal cliff would change its 2013 forecast of construction starts from a 6% increase to a 7% decrease.
AGC is sending the survey results to all members of Congress and to the White House. Click here for the survey results.