Is Congress to blame for a downshifting US economy?

The crisis is in some ways a direct descendant of last summer's debt-ceiling fight: To settle it, Congress, along with Obama, mandated $1.2 trillion in draconian spending cuts over the next decade unless lawmakers devised an alternative deficit-reduction plan. They have not, and so the first $109 billion installment of cuts comes due in January.

January also marks the expiration of the Bush-era tax cuts, extended unemployment benefits, and the lower payroll tax rate, among others. Then, probably in February, it will be time for another go-round over raising the national debt limit.

Budget experts call it the fiscal cliff. Pundits give it another name: taxmaggedon. By whatever name, here's what the CBO warns will happen to the economy if the tax increases and spending cuts come to pass as currently planned: Economic growth would fall from an estimated 4.4 percent next year to 0.5 percent. Moreover, the economy would likely enter a recession in the first half of 2013 before recovering in the second half.

Congress could provide clarity, but election-year politics have gummed up an already bitterly partisan institution. The conventional wisdom is that lawmakers won't seriously engage to give businesses and consumers the certainty they are looking for on the big issues until after the November election.

Meanwhile, a brief sweep through American businesses indicates how policy uncertainty is already stymieing economic growth:

•In New Mexico, a long-delayed bill for federal highway funding put the clamps on construction. "Our [state transportation] program has collapsed," says Mike Beck, head of the Associated General Contractors of New Mexico. "We can't go out to make any long-term commitments on equipment, capital, employing people around the state without knowing what's coming down the pike in the next couple of years."

•In the defense industry, firms face layoffs because defense spending would be cut by $55 billion starting in January, under last summer's accord. A law mandating 60 days' notice for mass layoffs or plant closings means affected defense industry workers would receive notice that they might be fired on the eve of the November elections.

•In tiny Lake Jackson, Texas, Glen Hamilton, owner of a small tool-and-die business, is sitting tight until he knows what will happen with taxes, including a medical-device tax imposed to help pay for Obama's health-care reform law and a tax provision allowing 100 percent expensing of newly purchased equipment. His firm, GME Inc., has 24 employees and about $3.1 million in annual revenue.

"I'm not going to do anything until I know if they're going to let the Bush tax cuts expire," says Mr. Hamilton. "I'm not going to buy anything or hire anybody until I know that's not going to happen."

Across corporate America, as Chamber of Commerce lobbyist Bruce Josten puts it, one question reigns: "How do you plan for chaos?"

A lazy summer on the Hill?

It's not as if lawmakers on Capitol Hill are unaware of the deleterious effects – potential and ongoing – of political gridlock on the economy. Members of both parties are among those who warn of economic doom and gloom if Congress does not settle – and soon – pressing problems of debt, deficit, taxes, and growth.

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