Small Businesses Fear Fiscal Cliff Awaits at Year-End

By EMILY MALTBY

Many small-business executives said they have little confidence that lawmakers and the president will be able to avoid a fiscal cliff by December 31.

Brian Greener

Alan Adler, president and CEO of Cases By Source.

A survey of 833 business owners released Wednesday found that 47% of small-business owners and chief executives said they don't expect the country will avoid the tax increases and deep spending cuts that are set to take effect at year-end unless Congress and President Barack Obama agree on a new deficit-reduction plan.

In comparison, 38% of respondents said they thought lawmakers would be able to reach an agreement. Another 14% weren't sure.

The fiscal cliff was created last year in negotiations to lift the federal debt ceiling. Congress and Mr. Obama set the spending cuts to take effect if no agreement could be reached on how to reduce the deficit. Tax cuts dating to the administration of President George W. Bush, which were extended under Mr. Obama, are set to expire the same day the spending cuts take effect.

"If there is a stalemate and they do the forced spending cuts, we'll all be forced into a recession," says Alan Adler, president and CEO of Cases By Source Inc., a 23-employee company in Mahwah, N.J. that specializes in custom packaging and cases for scientific equipment, medical devices and other fragile goods. Mr. Adler says it took roughly 18 months for revenue to recover following the 2008 downturn.

Clint Greenleaf who founded Greenleaf Book Group LLC, an Austin publishing company, says he dreads a kick-the-can-down-the-road scenario because it hinders long-term business planning. A one-year extension of the Bush tax cuts, for instance, "is the worst thing that can happen," says Mr. Greenleaf, whose 15-year-old firm has 35 employees and close to $11 million in annual revenue. "Whether I invest tomorrow will entirely depend on my taxes going forward," he said.

The survey, by Vistage International Inc. and The Wall Street Journal, was conducted online from Sept. 12 to Sept. 21. (More about the survey.)

The survey was conducted on members of Vistage, a peer-advisory group for CEOs and senior-level executives. The survey was limited to executives from companies with between $1 million and $20 million in annual revenue.

In the survey, 62% said they favor repeal of Mr. Obama's Affordable Care Act and 94% said they offer health insurance to their employees.

More than two-thirds of the respondents said they plan to vote for Mr. Romney, versus 19% for Mr. Obama. Only 30% of those surveyed believed Mr. Romney would win, while more than half expected Mr. Obama to be re-elected.

Almost half the respondents said they are willing to pay higher taxes as part of a deficit-reduction program—if that program also includes cuts in spending. Of respondents who identified as Republicans, 37% said they would be willing to pay higher taxes if spending were cut.

About 53% of respondents said they were Republican, while 12% said they were Democrat. The remainder identified themselves as independent or Libertarian.

The uncertainty around the fiscal cliff has been a point of concern for CEOs at large businesses, as well. Heads of big corporations have lowered expectations for sales, investment and employment over the last three months, according to the CEO Economic Outlook Survey, a poll of 138 officers of the U.S.'s largest companies, released by the Business Roundtable on September 26.

Respondents to the Vistage/WSJ survey which has been conducted for four months, have gained confidence about their businesses and the economy recently. The survey's overall confidence index rose to 95.4 last month from 93.7 in August and 91.7 in July. But last month's mark was down from June, when the index was set at 100.

The September survey has a margin of error plus or minus 3.5 percentage points.

A version of this article appeared October 4, 2012, on page B8 in the U.S. edition of The Wall Street Journal, with the headline: Entrepreneurs Fear a Fiscal Cliff Awaits.