Given the stakes involved, economists surveyed by Bloomberg News last month said they expect lawmakers to avert an economic decline by delaying or rescinding many of the spending cuts and tax increases slated to take effect in 2013.
Even if Congress doesn't take steps to do that by the end of 2012, the U.S. won't immediately lapse into recession, according to Chad Stone, chief economist at the Center on Budget and Policy Priorities. The Washington group advocates policies that benefit lower- and middle-income Americans.
"The economy will indeed start down a slope that could ultimately lead to a recession in 2013," he wrote in a June 4 report. "That's a far cry from the economy falling off a cliff and plunging immediately into a recession."
Still, companies are hunkering down to prepare for the potential fallout.
Cash Flow
Kimmie Candy Co. this month put on hold plans to add five or six workers to its 23-person payroll because of slowing sales growth and the political uncertainty in Washington, said Joseph Dutra, president of the Reno, Nevada-based company.
"For a small business like mine, cash flow is the biggest concern," said Dutra, whose company makes Choco Rocks and Sunburst candies. "If you don't know where the economy is going and where the government is going on taxes, you don't want to take too many risks."
Other companies are reacting in similar ways, according to Jim McCaughan, chief executive officer of Des Moines, Iowa-based Principal Global Investors LLC, which works with some 30,000 employers on their retirement benefit plans.
"What they've said to us actually in the last couple of months is we are slowing hiring because of the fiscal cliff and that's really their reasoning more than the European uncertainty," he told a conference on June 6. "It's more that Washington isn't doing anything about the tax rises that are scheduled to come."
U.S. employers expanded their payrolls by 69,000 workers last month, the smallest increase in a year and significantly down from an increase of 275,000 in January.