The uncertainty over the outcome of the "fiscal cliff" seems to be having more impact on small business in eastern New Mexico than the tax increases and federal funding cuts it may bring.
If Congress can't approve an agreement that will brake the country's careening toward the cliff in about a dozen days, tax hikes and federal program cuts severe enough to cause a new recession will take effect, according to the Congressional Budget Office.
Bush-era tax cuts will end, tax increases in the Affordable Health Care Act will kick in, and cuts — some severe — to defense spending, federal recovery act unemployment benefit extensions, Medicare and some renewable energy credits will expire.
Micheal Snipes, an assistant professor of Economics at Eastern New Mexico University, said uncertainty causes business managers and owners to avoid risks and delay actions they would normally take. The standstill is likely to have as much impact on business performance as the actual plunge, he said.
Eastern New Mexico businesses seem to be in that risk-avoidance mode. They have put nearly everything on hold while they await the outcome, according to some business leaders.
"It's really just wait-and-see," said Sandra Taylor-Sawyer, director of Clovis Community College's Small Business Development Center. "What's the new game plan? Who knows?"
Clients who are planning to start new businesses or to expand existing ones, she said, are awaiting the outcome of the cliff issues before they proceed with expansion plans.
The owner of one business she works with, she said, is rushing to incur as much in expenses as possible before the end of the year, since some expense-related tax deductions may disappear over the cliff next year.
She said she is advising all of her business customers to consult with tax planners as soon as possible if they have not done so already.
Taylor-Sawyer, aside from being a business advisor, is also an owner of the Legal Shield business in Clovis, which provides access to legal services to members at no additional charge beyond a nominal monthly payment. In this capacity, she said, she has talked to her accountants and tax planners to be ready for a possible trip over the edge in 2013.
W. Larry Erwin, a Clovis financial consultant, is in the same uneasy state of uncertainty as the clients he advises and assists in their investments. Whether they are business owners or just people planning for retirement, he said, all have more questions than answers.
"I've had several clients go to all cash until things blow over," he said. "That means the clients have sold all their investments and placed the proceeds into bank accounts."
Estate planning is particularly difficult, he said, since taxes may be applied to estates beginning at any level from $1 million to $5 million.
He said he is advising clients who have large capital gains to capture them this year, because significant increases in capital-gains taxes are likely in any case.
Erwin has little faith in Congress's ability to pull real benefits to the economy out of the current situation.
"Whatever they do is going to be window dressing," he said. "It's only going to look like they're making cuts."
James Burns, owner of the Burns Do-It Centers in eastern New Mexico and West Texas, said uncertainty has slowed his business, but no matter how the cliff issues play out, he said, "nothing is going to get better soon."
"I don't have faith in anything the government can do right now," he said, "from the President or Congress."
In the meantime, he said, he is expecting business at his hardware, lumber and home improvement stores to continue at its same, slower pace than in previous times.
Coli Hunt, owner of Joe's Boot Shop in Clovis, has been preparing for the fiscal cliff for months, he said.
"There's a brick wall coming," he said, "I want to make sure we don't hit it."
He said he has been working with his financial planners to set goals, plan and enable his business to weather the cliff, should it come, "without overextending" himself.
If the cliff can't be avoided, Hunt said he is anticipating extra expenses, including the extra cost of Obamacare taxes and higher income taxes.
"We'll have to look carefully and cut expenses elsewhere," he said.
He said all the business owners he knows are in the same situation, dealing with "fear of the unknown."
"We're all affected," he said.
If the nation's economy takes the plunge as the year changes, the outcome is likely to depend on how consumers respond, Snipes said. If demand remains strong, he said, businesses could do well, despite higher taxes. He would expect, however, that credit would become more expensive, since the nation's credit rating is likely to tumble over the cliff, too. That prospect, he said, contributes more uncertainty.
Justin Coles, owner of the new Roosevelt Brewing Co. and Public House in Portales, is not particularly worried.
"I've been too busy with the new business to worry about politics," he said.
Besides, he said, "Historically, beer does well, even in bad times."