Travel Could Take a $20 Billion Hit From Fiscal Cliff

The Global Business Travel Association (GBTA) released results from a comprehensive new study of the impact of different "fiscal cliff" scenarios on business travel. The key finding: “falling over the cliff” would lead to a loss of $20 billion in U.S. business travel spending over the next nine quarters, the GBTA reports. 

The new GBTA report analyzes the business travel impact of expiring tax cuts and automatic spending reductions – commonly referred to as the “fiscal cliff” – as well as the longer-term ramifications of leaving current levels of deficit spending unaddressed. 

The report models the potential business travel impact of two scenarios – one in which the fiscal cliff takes effect, and one where no changes are made to current tax and spending provisions.

The GBTA conclusions:

-       Fiscal Cliff Scenario: If the fiscal cliff occurs, the U.S. economy would enter a recession. This would lead to a total loss of $20 billion in spending on U.S. business travel over the next nine quarters – a 2.5 percent decline – and a reduction of 32 million business trips.

However, the elimination of tax cuts and reductions in federal spending would lead to reduced deficits and lower interest rates over the long run, resulting in business travel spending and an overall economy that grows more quickly after absorbing the shock of the fiscal cliff, GBTA says.

-      No Fiscal Restraint Scenario: If all provisions of the fiscal cliff are eliminated or delayed indefinitely, business travel would experience more robust trip volume and spending as a result of stimulus from lower tax rates and continued government spending. In the near term, this scenario would lead to a cumulative loss of only 300,000 business trips and a gain of $5.5 billion in total business travel spending over the next nine quarters, GBTA says.

However, by 2014, much of the spending growth would be attributed to higher inflation, GBTA warns. Larger budget deficits and growing debt will begin to take a toll, and business travel spending growth would continue to slow beyond the forecast horizon. 

“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,” said Joseph Bates, vice president of research at the GBTA Foundation. “Falling over the cliff would set back the clock substantially for business travel and every other sector of the economy in the near term.

“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,” said Michael W. McCormick, GBTA executive director and COO. “Either way, the fiscal cliff is a wake-up call for leaders looking to craft smart economic policy going forward.”

Visit www.GBTA.org

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