Unless Congress acts, at midnight on Dec. 31, a disastrous combination of tax hikes and spending cuts will automatically take effect, threatening to plunge our economy back into recession.

If the 2001 and 2003 tax provisions and other tax extenders expire, current marginal rates and dividend and capital gains rates will increase — hitting investors and retirees especially hard. Vital business tax provisions will lapse. Estate tax relief will be dramatically reduced. And relief from the alternative minimum tax will be wiped out. Successful small businesses could see their marginal rates soar as high as 45 percent.

If Congress doesn’t extend these pro-growth tax provisions for everyone, the result will be the largest tax hike in history.

On top of that, $1.2 trillion in automatic budget cuts would be triggered on Jan. 1. The ill-designed, across-the-board discretionary spending cuts resulting from the failure of the Deficit Supercommittee would disproportionately cut $500 billion in defense spending. And they fail to address the real drivers of runaway spending — massive and growing entitlement programs.

This looming fiscal cliff is already raising economic uncertainty and stifling business investment. The Congressional Budget Office projects growth could slow to an anemic 0.5 percent in 2013. And unemployment would soar. Some estimates put lost jobs stemming from the tax hike alone at 300,000 to 2.9 million. Automatic spending cuts could wipe out 1 million defense and manufacturing jobs in two years.

Leaders must act immediately to extend all expired or expiring tax provisions and make smarter spending cuts. At the same time, Congress must agree to a strict timetable for restoring America’s long-term fiscal health by reforming the tax code and curbing entitlement-driven spending.

Specifically, we must adopt a fairer, simpler tax system that lowers marginal rates, encourages economic growth, promotes competitiveness and eases compliance. We must make sensible changes to Medicare, Medicaid, Social Security and other mandatory spending programs, which make up nearly 60 percent of our budget. Reforming entitlements is essential not just to our nation’s long-term fiscal health but to the future of the programs themselves. We must reform them to keep them solvent for other generations.

Let’s not use the excuse of an election year or partisan gridlock to punt on our problems. We can’t afford to wait and fix our economy after it’s taken a plunge for the worse. Instead, let’s stabilize our economy to create the jobs and growth we need today and build a stronger foundation for the future.

— Tom Donohue is president and CEO of the U.S. Chamber of Commerce.