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The Fiscal Cliff: How the “Drop-off” Can Affect You and Your Small Business

The Fiscal Cliff: How the “Drop-off” Can Affect You and Your Small Business

The “Fiscal Cliff” is a serious word around these parts. It’s the delicate balance of tax increases and spending cuts that is even tighter than this past election. Granted this will only happen if Congress can’t handle the situation themselves but within this “bi-partisan” government nothing is guaranteed. Cliff, as we will call this precarious situation, can send our economy into another recession or save us from ourselves essentially. He can be a nice man, but in the real world he holds a lot of our economy’s cards in his hands.

So what does this all mean? It could be the biggest fiscal drag on our economy in the post-WWII era. That sounds big, right? Well it happens that our economy also affects the rest of the world’s economy so not a good time overall for anyone. If you want me to pull out numbers, we are looking at $600 billion or about 4% of the GDP, which experts use to measure the country’s economy.

Will there be another recession and how can we prepare? There are certain blocks of information that have to come together for us to have an idea and no one knows exactly what will happen but at least we know what we are looking for.

New Manufacturing Order – (ISM) 12/3/2012; the Institute of Supply Management releases a monthly measuring stick to give us an idea of the health of the manufacturing sector and we need it to stay above 50 to avoid another recession. Current reading: 54.2

Chicago Federal Reserve National Activity Index – 11/26/2012 and 12/21/2012; another monthly measuring stick, but this one is for economy activity and inflation. If the expectation is below zero, it means our economic growth is slower than expected.

Unemployment – 12/2/2012; probably not a huge shock as you hear about “unemployment” on a daily basis. Although these numbers are not the most consistent indicators, it is a buzzword for the public and we tend to jump up and take notice when we hear the media mention it. If unemployment increases or wages become stale, there is more risk of a recession. Current reading: 7.9%

Gasoline Prices – increases on gasoline acts like a tax on consumers. AAA gives us a daily national average. Higher prices, of course, are negatively influential to the economy by being a strain on the consumption of other products and services and therefore are more likely to lead to a recession.

There is little you or I can do at this point to save our economy. The best thing to do now is treat it like the Zombie Apocalypse is already here, hunker down and prepare for the worst. It is nice to know now that you know what to look for and can watch the zombie approach for the bite. Just thought I’d give you a way to give yourself a heads up this holiday season. Remember, the economy will always fluctuate and you will always have to maintain a level head in the darkest of times. We have shown over the last few years what we can overcome and that we don’t have to rely on the government for everything. Resilience, people! So keep yourself ahead of the money game, and as always protect you and yours. Good luck!


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