Management

Who Is Impacted by Budget Uncertainty?

The tight-budget era is affecting corporations and consumers alike.

Paul Wohlleben, a former federal CIO, consults in the federal sector. E-mail him at paul.wohlleben@gmail.com, or visit his blog at www.businessofinfotech.blogspot.com.

Let’s look at some of the key players in the economy and how they are affected by budget uncertainty:

Businesses: Business leaders are sitting on large amounts of cash. They will take actions to use the cash to grow their businesses in ways that will drive economic demand and increase employment when they believe economic conditions will allow them to produce a fair return on their shareholders’ capital.
Investors: Investors have also hoarded significant amounts of cash in safe but low-yield investments. They too are waiting for economic conditions to allow them to redirect their capital into investments that hold the prospect of solid returns.
Consumers: Consumer spending drives a great amount of economic demand and has a significant impact on our economy. With unemployment high and real estate markets weakened, consumers are spending less. Bringing clarity to the economy, which increases employment and stabilizes real estate, will increase consumer confidence and spending.
Government Leaders: For the past few years, the leaders of federal agencies have dealt with significant uncertainty brought on by continuing budget resolutions and a stalemate on budget matters in Congress. As a result, their decision-making and procurement activities have been drastically slowed. On top of this, we now have the looming sequestration, which increases uncertainty. As we get more budget certainty, whatever the results and impacts on the size and scope of the federal budget, leadership should be positioned to act decisively.