As we approach the fiscal cliff’s ominous edge, we can look back at the telling words of Newtek CEO Barry Sloane. In his August 2012 Forbes article “Small Businesses Approach the Fiscal Cliff” he laid out what would be in store, if no action were taken before December’s end.
“There are potentially large, looming cuts in federal spending in the coming months,” he explained. “However, business owners listening to television and radio are reacting to those future cutbacks now. These cuts are causing some to delay hiring, or are even laying off staff to prepare for an anticipated reduction in business.”
Mr. Sloane went on to outline the degree to which cuts will be implemented, offering, “There is $110 billion in cuts slated for January 2012.”
He also explained their foreseeable impact, “These cuts will hit the defense industry the hardest. Small business firms that receive contracts from the government and who rely on these contracts for both payroll and profits … are greatly reducing their investment and hiring activity now.”
The article also outlined some of the secondary and tertiary affects summoned by the impending cliff.
“Congress … has not passed a budget since 2009 and this uncertainty is further creating a confidence crisis in the Small Business Community.
“We all await the future with the potential of smaller federal spending and how it will drag down the small business economy in the short term. In no uncertain terms, deficit reduction, holding everything else constant will be an economic drag.”
While Mr. Sloane and Newtek provide support to tens of thousands of small businesses and their owners, the CEO realizes that some compromise must be met among parties at the Federal level for the best interests of the people to be served.
“Economists and smaller federal government advocates argue that the plus side of smaller government spending and deficit reduction is a more certain environment for business,” explained Sloane, advising, “The key will be to reduce excessive non-productive spending with economic growth or tax reduction to transfer dollars from public to private spending.”