Global Business Travel Association Tackles ‘Fiscal Cliff’ Scenarios

Jumping into the “fiscal cliff” discussion, the Global Business Travel Association released new research last week  (opens in a new tab) looking at the repercussions to U.S. business travel spending in two scenarios: if lawmakers fail to reach a deal that would prevent automatic budget cuts and tax increases at the end of the year, and if they avoid the cliff but fail to reduce deficit spending over the long run.

In the first scenario, if sequestration is triggered, the U.S. could see business travel spending drop by $20 billion (a 2.5 percent decline), with 32 million fewer business trips taken over the next nine quarters.

“Given business travel’s indispensable role in spurring economic growth, these findings dramatically illustrate the potential impact of the fiscal cliff on the overall economy,” Joseph Bates, vice president of research at the GBTA Foundation, said in a statement  (opens in a new tab). “Falling over the cliff would set back the clock substantially for business travel and every other sector of the economy in the near term.”

The GBTA study did report, however, that business travel spending and the overall economy would grow more quickly in the long run after absorbing the shock of the fiscal cliff because eliminating tax cuts and reducing federal spending would lead to reduced deficits and lower interest rates.

The alternative scenario—the “No Fiscal Restraint Scenario”—projects that with current tax rates unchanged and continued government spending, business travel would see an increase in volume and spending in the short term. In this scenario, the report estimated a loss of only 300,000 business trips and a increase of $5.5 billion in business travel spending over the next nine quarters.

Growing budget deficits and debt would eventually slow business travel growth, and by 2014, much of the increase in business travel spending would slow, the study projected.

“This research shows that we must seriously consider both the near-term ramifications of the fiscal cliff and the long-term implications of expanding government debt,” Michael W. McCormick, GBTA executive director and COO, said in a statement. “Either way, the fiscal cliff is a wake-up call for leaders looking to craft smart economic policy going forward.”

(David De Lossy/Photodisc/Thinkstock)