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Businesses poised to grow if fiscal cliff resolved

8:33 AM, Dec 17, 2012   |    comments
Some fiscal certainty could unleash the Michelin man and other business enterprises.(Photo: AP)
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The Next Big Idea may be right around the fiscal cliff.

Economists say businesses are poised to unleash a wave of new products and services, and expand into new markets and territories if Washington can reach a deal on the year-end package of tax increases and spending cuts called the fiscal cliff.

Such risk-taking behavior can drive the economy and job growth more dramatically than replacing worn factory equipment or gradually hiring to meet customer demand.

"We're ready to pull the trigger - just give us some certainty," Pete Selleck, CEO of Michelin North America, said of planned company projects, including the development of fresh markets for new types of tires.

The fiscal cliff has frozen many such investments. Thirty percent of large-company CEOs plan to increase their capital spending in the next six months, down from 48% in the first quarter, according to a Business Roundtable survey.

Yet, if a deal on the fiscal cliff is struck, as most analysts say is likely, a pent-up torrent of expansion-oriented projects could flow.

"That is where you get the big productivity gains, the outsize growth," says Mark Zandi, chief economist of Moody's Analytics.

During and after the recession, U.S. firms restored profits by cutting costs and modestly growing revenue. To ratchet growth much higher, companies must develop new products and markets, Zandi says.

Top U.S. corporations are sitting on record cash reserves. Yet, many backed off the past two years as the economy was slowed by events such as the European financial crisis.

Among the plans:

--Sports Resource Group of Minneapolis has developed a durable plastic wall for a popular elementary-school sport similar to dodge ball called Ga-Ga. Currently, schools use wooden walls that wear out faster.But Sports Resource chief Chris Guertin worries parent groups won't be able to raise the $3,700 for the walls with "this much uncertainty" about parents' future taxes. The project would add about a dozen factory workers.

--Abbey Color, which makes industrial dyes, will likely roll out new dyes in 2013 for the first time in four years if the fiscal cliff is resolved, says President Roger Nielsen in Philadelphia. He has worried the business won't provide the marketing capital he needs if the economy tanks.

--Sushi-teria, a high-end take-out sushi restaurant in Manhattan plans to open two more outlets next year after delaying expansion. When the fiscal cliff is fixed, "the mood of the country and the city will be different," says owner Victor Chan.

USA Today

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