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The Fiscal Cliff is Averted, But Big Issues Remain

The economy is finally starting to show signs of a recovery, and automatic tax hikes and federal spending cuts wouldn't have done any favors for small businesses and the middle class. This is why many firm owners throughout the country had been fearing the fiscal cliff.

"Today's agreement enshrines, I think, a principle into law that will remain in place for as long as I am president," President Barack Obama said after the House voted. "The deficit needs to be reduced in a way that is balanced. Everyone pays their fair share. Everyone does their part. That is how our economy works best. That is how we grow."

Experts Unsure About the Deal
In a last-minute agreement, Congress voted on a bipartisan solution that will allow income taxes to stay low and will help continue economic growth. The wealthy are being asked to take on higher tax cuts to help reduce the deficit, however, many experts are unsure of how the deal will work in the next few months and the future.

"What's challenging is that we're still going to have some slowing in growth because of the tax hikes," Michael Feroli, chief U.S. economist at J.P. Morgan Chase, told the newspaper. "What's not good is that deficits are still going to be large and it doesn't begin to touch the longer-term horizon."

The agreement raises revenue by $620 billion and cuts spending by only $12 billion, but glaring issues remain. These include a lack of attention to the deficit over the next 10 years and an expected standoff in February, when Congress will need to raise the $16.4 trillion federal borrowing limit so the government can keep paying its bills.
"Nothing really has been fixed," Joseph LaVorgna, an economist at Deutsche Bank, told The Associated Press. "There are much bigger philosophical issues that we aren't even addressing yet."

Economy will Improve, But Not by Much
Going over the fiscal cliff would have surely doomed several businesses, but this new deal isn't exactly something firm owners can put a lot of stock into. Many experts believe that businesses don't have that much room to grow, in fact, Mark Vitner, senior economist at Wells Fargo, predicts it will expand just 1.5 percent in 2013, reported the AP. Unemployment is expected to stay around 8 percent, meaning the fiscal cliff deal did not to encourage business growth.

"Regardless of a deal getting done, people on Wall Street are not going to run around giving high fives," Ben Schwartz, chief market strategist for Lightspeed Financial, told the AP. "The federal government is obviously dysfunctional, to say the least."

While the fiscal cliff agreement allows small business owners to breathe a sigh of relief, does it really help them in the long run? What are you planning to do to make sure your business is recession-proof?