Fiscal cliff concerns small businesses
Editor’s Note: This story is part of an occasional series examining the impact of the “fiscal cliff” on Watauga County.
At Black Bear Books in the Boone Mall, owner Karen Walker is in a holding pattern.
She says it’s “a real pain” not being able to effectively plan for the future with the so-called fiscal cliff looming ever closer.
“We usually hire extra people at Christmas, and this year we just couldn’t because we don’t know what’s coming,” Walker said. “So we’re all just working harder and pulling longer hours.”
Small businesses across Watauga County and the nation say they are already changing their behaviors in anticipation of the “fiscal cliff,” a term coined to describe the automatic government spending cuts and tax increases poised to begin at the start of 2013.
Federal economists say the changes would drastically downsize the nation’s deficit but could throw the United States into another recession next year unless an alternative deficit reduction plan is created to avert the automatic action.
The dramatic changes were agreed upon last year in the Budget Control Act in hopes that the threat would spur action in Washington to fix the nation’s debt issues. Instead, a “supercommittee” chosen to draft an agreement failed, and further talks have reached no conclusions, either.
Uncertainty about what might happen is the biggest issue for businesses right now, said Dan Meyer, president of the Boone Area Chamber of Commerce.
“Everybody’s kind of standing on the high-dive platform, kind of peering over the edge and saying, ‘I wonder how deep that water’s going to be beneath me,’” he said.
The result is that both business owners and consumers appear to be sitting on their hands, not spending or making investments until more clarity is available about the economic situation, Meyer said.
According to the National Federation of Independent Business, small business owner optimism went down in November — way down.
Its Index of Small Business Optimism, released Tuesday, declined 5.6 points, one of the largest drops since the survey began in 1986.
The NFIB said Hurricane Sandy combined with the national elections influenced that optimism level.
“Nearly half of owners are now certain that things will be worse next year than they are now,” NFIB chief economist Bill Dunkelberg said. “… Between the looming ‘fiscal cliff,’ the promise of higher health care costs and the endless onslaught of new regulations, owners have found themselves in a state of pessimism.”
For Misty Mountain Threadworks in Valle Crucis, the fiscal cliff could mean the difference between a multi-million-dollar government contract and no contract, said co-owner Goose Kearse.
The company, formed in 1985, makes climbing harnesses and equipment and is hoping to earn the right to create thousands of the harnesses and nylon slings for military use.
If the deal happens, the company will likely hire about five new workers to add to its current payroll of 14, Kearse said. The business also would need additional sewing machines and equipment and would likely have to expand its current space or rent another space, he said.
But if sequestration occurs, Misty Mountain likely won’t see those contracts, Kearse said. The “fiscal cliff” is expected to bring a 9.4 percent cut in funding for defense programs in addition to the 8.2 percent reduction in domestic spending in its first phase.
“I think any businessperson would probably echo something similar: We just want somewhat of a consistent, thought-out plan, and we can work with that, even if we don’t agree with all the aspects of it,” Kearse said.
Aside from the direct affects to his business, he said he believes the larger effects of the fiscal cliff and sequestration would cripple the nation.
Kearse said he has one message for President Barack Obama and House Speaker John Boehner: “Y’all need to get out of the way and do your job,” he said. “You don’t have to do it great. You just have to do it.”