NAM Discusses Fiscal Cliff

National Association of Manufacturers (NAM) President and CEO Jay Timmons issued this statement after business leaders met with President Obama to discuss the fiscal cliff at the White House: “Manufacturers and their employees across the nation are already struggling due to the uncertainty of the fiscal abyss. By the end of 2012, the U.S. economy will have taken a 0.6 percent hit to GDP as a result of our fiscal crisis. Manufacturing will remain a central player in our economic future and in solving the fiscal abyss.”

“Manufacturers believe that a responsible solution is one that does not harm the economy with massive tax increases on job creators, but focuses on repairing the structural imbalances in entitlement programs. The importance of coming together for a solution can’t be overstated. Manufacturers who employ 12 million men and women in America are looking to the President and Congress for a resolution that promotes growth and protects jobs.”

NAM released a study showing how bad the fiscal abyss could get if the President and Congress are unable to arrive at a solution. 

The U.S. economy is bracing to take an immediate $500 billion hit on January 1, 2013. The “double whammy” of across-the-board cuts in spending and federal tax increases will be large and sudden.

Fiscal Shock: America’s Economic Crisis reveals the devastating economic consequences of not addressing the fiscal cliff before it happens. The NAM’s report concludes the following:

• Absent legislative action, large spending cuts and large tax increases will hit the economy at the same time, causing a total fiscal contraction of $500 billion, or about 3.2 percent of GDP.

• Washington’s failure to address the pending fiscal cliff is already having an impact, cutting 0.6 percentage points from GDP growth for 2012.

• The worst could be ahead. If the fiscal contraction happens, the economy will almost certainly experience a recession in 2013 and significantly slower growth through 2014.

• From 2012 to 2015, the economy will lose 12.8 percent of the average annual real GDP it could have attained with moderate growth, sapping critical resources from all economic sectors.

• Job losses will be dramatic. By 2014, the fiscal contraction will result in almost 6 million jobs lost, and the unemployment rate could reach more than 11 percent.

• Households will take a big hit. Real personal disposable income will drop almost 10 percent by 2015.

• Manufacturers of consumer goods and defense contractors likely will see large and durable contractions in their industries.

• It will take most of the decade for economic activity and employment levels to recover from the fiscal shock. Another recession could deal a substantial blow to long-term economic potential, permanently reducing living standards in the United States.