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by Michael J. Shapiro | November 15, 2012

U.S. business travel spending could be slashed by $20 billion over the next nine quarters if the "fiscal cliff" scenario occurs, according to the Global Business Travel Association. A new GBTA Foundation study, released Thursday, projects the impact on business travel of two different economic scenarios. The first, in which expiring tax cuts and automatic spending reductions known as the "fiscal cliff" occur, would see the U.S. economy enter a recession. In that case, business travel spending would likely drop by 2.5 percent (or $20 billion) over the next two years, with 32 million fewer business trips taken. That said, the report notes, the elimination of tax cuts and the decrease in federal spending would likely lead to lower interest rates and reduced deficits in the long term, which would result in an economy and business travel market that grow more quickly once the shock of the fiscal cliff occurs.

The other case, dubbed the "No Fiscal Restraint Scenario" in the study, would entail eliminating or delaying indefinitely all of the provisions associated with the fiscal cliff. In that case, business travel would experience a higher trip volume and spending due to lower tax rates and continued government spending. That would equate to a loss of 300,000 business trips (vs. 32 million in the cliff scenario) and growth of $5.5 billion in business travel spending over the next nine quarters, notes the study. By 2014, however, much of the growth would be due to inflation; growing deficits and debt would begin to take a toll on the industry and slow its growth, according to the report.

"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." The full report is free for GBTA members and $499 for nonmembers; access it here.