Apparently at midnight, 1 January 2013, America turns into a fiscal cliff pumpkin. Was this the Mayan prophecy? Or is it simply reality hitting America after decades of fiscal debauchery, spending money like frat boys drink beer. Well, the party is coming to a close. Last call for alcohol.
When you borrow trillions of dollars, someone wants to be paid back. And like any household or business, you have to simultaneously cut expenses and increase earnings to get yourself out of debt. Bankrupting on the Federal Reserve is a big no-no. There’s no washing the dishes to work it off, like the hungover frat boys may offer after gorging at Denny’s.
The looming fiscal cliff is nothing more than making a tough choice over an ugly truth: It is time to pay up. And since governments don’t really know much except raising taxes, instigating inflation and enacting more regulations, this is exactly what they have forced themselves to do. The stimulus money didn’t work and the election is over. To quote Eminem, “Back to reality.”
Here is a definition from About.com: “Fiscal cliff” is the popular shorthand term used to describe the conundrum that the U.S. government will face at the end of 2012, when the terms of the Budget Control Act of 2011 are scheduled to go into effect.
Among the laws set to change at midnight on December 31, 2012, are the end of last year’s temporary payroll tax cuts (resulting in a 2% tax increase for workers), the end of certain tax breaks for businesses, shifts in the alternative minimum tax that would take a larger bite, the end of the tax cuts from 2001-2003, and the beginning of taxes related to President Obama’s health care law. At the same time, the spending cuts agreed upon as part of the debt ceiling deal of 2011 will begin to go into effect. According to Barron’s, over 1,000 government programs – including the defense budget and Medicare are in line for “deep, automatic cuts.” [end of quote]
More taxes, less government programs. This means less jobs. When you increase taxes, put more burden on business and spend less on government programs that employ people, you see the political and economic nightmare that stares at us all.
So. You can jump off the cliff or fly above it like any proactive individual would do when they see obstacles ahead. Unfortunately, those who are inclined to elect themselves victim will jump off. They will refuse all parachutes and any offered solutions. To them, I offer my condolences. To the business owner who wants to weather this storm that makes Sandy look like a frat party, I suggest you that take advantage of those who jump and thus leave many opportunities wide open for those that act. Now is the time to engage in Economical & Efficient Marketing.
Here’s the factual truth of marketing during a recession. Forget the media ballyhoo and the government’s false reassurances. Consider these facts: A McGraw-Hill study of 600 businesses found businesses that maintained or increased their ad spend saw higher sales growth during a recession and in the years following. In fact, the study found those who maintained or increased their ad budgets experienced a 256 percent increase in sales compared to those who cut their budgets.
And if you think waiting until the recession is over is a smart thing to do, consider this; a third study revealed 80 percent of the businesses that waited until a post-recession economic expansion to advertise saw zero increase in market share. Which, of course, is obvious since everyone else began advertising again.
Not Convinced Yet?
During the 1970 recession, a study by American Business Press and Meldrum & Fewsmith showed that, “Sales and profits can be maintained and increased in recession years and in the years immediately following by those who are willing to maintain an aggressive marketing posture, while others adopt the philosophy of cutting back on promotional efforts when sales appear to be harder to get.”
During the 1974-75 recession, another study by the same group stated, “Companies which did not cut marketing expenditures experienced higher sales and net income during those two years and the two years following than those companies which cut in either or both recession years.” Studies during the recessions in 1985, 1990-91 and 2001 showed sales for companies that remained aggressive during the recession enjoyed sales that were 2.5 times the average of all other businesses.
Here comes the cliff, ready or not. Jump or fly?