Policymakers in the nation's capital are often, justifiably, accused of enacting well-intended policies that have significant unintended economic consequences.

But what can you say about politicians who intentionally set the economy on a collision course with recession? In August 2011, Congress—stalemated on a process for stabilizing the national debt as a share of GDP and with little real leadership from the White House— kicked the can down the road again by passing the Budget Control Act of 2011. It was thought the specter of massive automatic tax hikes and defense-spending cuts on Jan. 1, 2013, would motivate lawmakers to negotiate a bipartisan resolution to fix the long-term fiscal-deficit problem. So perilous was the consequence of inaction—equivalent to about 4% of GDP in calendar-year 2013—that Federal Reserve Chairman Ben Bernanke dubbed it the "fiscal cliff."

See Also: Lean Manufacturing Leadership Best Practices

Such a risky strategy might have worked with a legislative body with more political courage and effective leadership. But not with this Congress.

United They Stand

It takes a lot to unite the American business community. But the thought of elected officials playing a game of chicken with America's economic future has done the trick. In particular, American manufacturers—already threatened by the sovereign-debt crisis in Europe, unremitting sluggish growth in Japan and a sputtering recovery in China—have become increasingly concerned about the prospects for a government-instigated sharp contraction in the first half of 2013.

A recent MAPI survey asked senior finance executives in manufacturing how they are responding to the potential fiscal cliff. The findings: The vast majority are clearly nervous, even though responding firms only derive 10% or less of their revenue from defense spending—a reflection of the business community's general anxiety.

Among the results of the survey, contained in MAPI's quarterly "Survey on the Business Outlook," we found:

  • 83% of responding finance executives say Congress's inability to act will have anywhere from a moderately negative to very negative impact on their companies.
  • Many companies already have started taking action in preparation for some first-quarter contraction in 2013. One-third of them have delayed hiring because of their concerns, and 17% have scaled back or put on hold planned capital investments.
  • 16% said they were considering sending Worker Adjustment and Retraining Notification Act (WARN) notices to a portion of their employees in anticipation of layoffs.