With the fiscal cliff looming, we're beginning to see some real ways it's impacting the economy right now.
Three quarters of consumers says they are following developments closely. Just a month ago, the issue of the fiscal cliff was noise to people. But now we're seeing a big decline in consumer confidence as a result of consumers tuning into the issue.
Businesses, meanwhile, have started cutting back on business investment.
Big businesses are not opening new facilities or buying new equipment. Small businesses, meanwhile, are seeing hiring plunge to a record low.
A new Gallup says almost 1 in 4 small businesses expect to reduce the number of employees they have over the next 6 months. That's the highest number ever recorded, even in the aftermath of the Great Recession.
It all adds up to lump of coal from Washington. But, I think, there is likelihood of an interim deal on the fiscal cliff followed by a pretty good possibility of a long-term deal. If it's real, and not just smoke and mirrors, it will deal with our nation's long-term issues based on demographics.
The good news is that even though the dysfunction in Washington created this negative environment, this is a glancing blow, not a knockout punch. Only if the politicos really foul things up will this be a long-term hurt.
We just have too many underlying strengths for this latest mess to disrupt us. We've reduced our household debt. Corporate America is sitting on enormous amounts of cash. Once the uncertainty lifts in D.C., the inherent advantages from new energy, sophisticated manufacturing, and a recovering banking sector will lead us to a sold path for economic growth.