A number of companies are ready to expand in South Carolina, but they’re holding off until Congress and the White House resolve a looming budget crisis, according to state leaders and educators at the 2012 Central Carolina Commercial Real Estate Market Forecast.
By Chuck Crumbo
Published Oct. 18, 2012
S.C. Commerce Secretary Bobby Hitt says a number of economic development projects are waiting to be announced.
“We have more projects queued up at the Department of Commerce than anyone can remember,” Hitt said Wednesday at the 2012 Central Carolina Commercial Real Estate Market Forecast. “We’re simply waiting for a board to vote. It’s not a question of where, but when.”
But things like the presidential election, “fiscal cliff” and sequestration are keeping companies on the sidelines.
While the election outcome may offer business an idea of where U.S. economic policy is headed, it may not be the most important issue.
“It doesn’t matter who’s president,” said Timothy Koch, professor of banking and finance at the University of South Carolina’s Darla Moore School of Business. “We’re going to have a split Congress.
“What really matters is are we going to solve this fiscal cliff or kick the can down the road.”
“Fiscal cliff” refers to the dilemma the federal government faces at the end of the year when terms of the Budget Control Act of 2011 take over.
At midnight Dec. 31, temporary payroll tax cuts expire and workers will see their paychecks drop by 2%. Additionally, businesses will lose certain tax breaks, the alternative minimum tax will increase, the so-called Bush tax cuts expire and taxes related to the federal health care law kick in.
Also, across-the-board budget cuts totaling $1.2 trillion over the next 10 years will begin to take hold as the debt-ceiling deal of 2011 goes into effect. About 1,000 government programs will see their budgets trimmed by as much as 10%.
The largest cut is aimed at the Defense Department, which already is planning for $489 billion worth of budget cuts over the next 10 years as the war in Afghanistan winds down. The Pentagon could lose another $600 billion during the next decade if sequestration goes into effect.
Defense cuts would be felt close to home, say S.C. political leaders, who have warned that the state could lose 14,000 defense-related jobs over the next decade if Congress doesn’t put the brakes to sequestration.
“We do have a fiscal cliff coming our way,” said U.S. Rep. Joe Wilson, R-S.C.
But resolving the crisis will take bipartisan cooperation between the legislative and executive branches of the U.S. government, Wilson said.
The GOP-dominated House has passed budgets, Wilson said. Those measures, though, have died in the Democratic-led Senate and faced veto threats from President Barack Obama.
Because of the legislative impasse, Congress during the past three years has used concurrent resolutions — the political equivalent of “kicking the can down the road”— to keep the government running, Wilson said.
Wilson said he’s hopeful that a change in administrations will help break the impasse.
At risk is a fragile economy that last quarter grew at an anemic rate of 1.3%. “Things are getting better, but not fast enough,” Koch said.
If nothing is done about the “fiscal cliff,” taxes will go up, government spending drops sharply and the economy slides back into recession, Koch said.