Fears about a looming fiscal crisis at the end of the year are starting to pinch job growth and threatening to undercut the nation’s fragile recovery, a growing number of economists and employers say.
Federal Reserve Chairman Ben S. Bernanke, in testimony Thursday before Congress, repeatedly warned about the so-called fiscal cliff — a reference to the expiration of tax cuts Dec. 31 and the imposition of automatic spending reductions Jan. 1.
By some accounts, the U.S. economy could see an unprecedented fiscal hit of as much as $720 billion if the slated changes take effect/.../
If Congress can’t compromise on a new budget, automatic cuts will take effect under the so-called sequester outlined in the Budget Control Act. For defense, the 10 percent elimination would shave about $53 billion from the budget, to $472 billion.
“People in the industry are really worried a train wreck could come.... They are starting to hedge,” said Todd Harrison, a senior fellow at the Center for Strategic and Budgetary Assessments.
The impact of the uncertainty, he said, will be magnified at thousands of smaller second- and third-tier contractors, some of which are already asking, “How can you best position a business to prepare for this shock?”