Fiscal cliff

US Manufacturers Warn over Fiscal Cliff

Warnings are on the rise from U.S. businesses on the dangers of the cliff, which comprises a mandated sharp cut in government spending and the end to a package of tax break expected to suck half a trillion dollars out of the economy next year.

U.S. manufacturers warned Friday that the looming "fiscal cliff" spending cuts and tax hikes would wipe out $500 billion from the economy and send the country back into recession.

The National Association of Manufacturers said the measures, slated to start in January, would force the loss of six million jobs, sending the unemployment rate to 11%.

The NAM warned of deep damage to the manufacturing sector, especially to manufacturers of consumer goods and defense contractors.

"It will take most of the decade for economic activity and employment levels to recover from the fiscal shock," it said in a statement.

"In addition, there is a significant threat that another recession could deal a substantial blow to long-term economic potential, permanently reducing living standards in the United States."

Warnings are on the rise from U.S. businesses on the dangers of the cliff, which comprises a mandated sharp cut in government spending and the end to a package of tax break expected to suck half a trillion dollars out of the economy next year.

Congress and the White House have been under pressure to reverse or at least reduce the extent of the cuts and tax increases, and most politicians say they are in favor of adjustments.

Democratic President Barack Obama declared this week that the budget cuts, part of a $1 trillion, 10-year spending reduction mandated under current law, "will not happen."

But so far, Republicans and Democrats have not found any compromise over the issue, and will only have a few weeks to find a solution after the November 6 elections.

NAM said businesses have been holding off investments and hiring because of the uncertainty on whether Congress will act to reverse the cuts and tax hikes ahead of the December 31 deadline.

"Washington's failure to address the pending fiscal cliff is already having an impact, cutting 0.6%age points from GDP growth for 2012," NAM said.

Copyright Agence France-Presse, 2012

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