Companies Plan to Cut Spending if Debt Limit Not Raised

If Congress and the White House fail to reach a deal to raise the debt ceiling, half of U.S. companies expect to take defensive actions such as freezing their hiring, cutting spending and lengthening their payment cycle to vendors.

A survey by the Association for Financial Professionals found that the debate about the debt ceiling would also have an impact on short-term investments and access to capital at U.S. companies.

The AFP Survey on Raising the U.S. Debt Ceiling found that nearly a quarter of the organizations holding Treasury securities said they would liquidate some or all of the holdings. Treasury securities are one of the three investment vehicles (including money market funds and bank deposits) in which companies place most or all of their short-term investments, according to recent data from AFP members.

Fifty-two percent of the financial professionals surveyed anticipate negative effects on their organizations' access to capital, including increased costs and decreased availability of debt bank financing and bank credit.