For some time, I’ve been writing about policy uncertainty holding back the economy [here, here, and here for starters]. Geoff Colvin at Fortune questioned whether the current feeling of uncertainty is different than simply the ordinary inability to predict the future. He concludes that it is. "Economic uncertainty, especially policy uncertainty, is greater than it has been in many years," writes Colvin, pointing to the health care law and the fiscal cliff—tax increases and spending cuts set to take effect in 2013.

The Economic Policy Uncertainty Index created by economists Scott Baker, Nick Bloom, and Steven Davis shows policy uncertainty now has crept to its highest level since December 2011. That high point you see marked with an “N” was during the August 2011 debt ceiling debate. Think of that as a mini version of the fiscal cliff.

Wonkbook’s Dylan Matthews doesn’t totally discount policy uncertainty’s role in our lackluster economy, but he doesn’t think it’s that important. He should, because his argument has a flaw.

For him policy, uncertainty isn’t as important because its effect is outweighed by other factors such as weak demand in the economy. However, he fails to realize that some of that weak demand is because of policy uncertainty. For example, companies that have defense contracts are likely shelving plans to buy new machinery because they’re preparing for automatic defense budget cuts. Policy uncertainty surrounding the fiscal cliff creates lower demand.

It’s difficult to isolate individual causes for our sluggish economy. Thus, the authors of a Cleveland Federal Reserve paper on uncertainty and small business expansion, a paper linked by Matthews, advise that [emphasis mine] “policymakers should take seriously the widespread anecdotal reports that policy uncertainty is adversely affecting small business owners’ expansion plans.”

More than anecdotal, the most recent U.S. Chamber Small Business Outlook Survey shows that seventy-two percent think that the health care law will make it harder to hire more workers, and 90% worry about the fiscal cliff. Colvin notes both issues in his piece.

At the end of his post, Matthews asks,” So should you worry about policy uncertainty?” Businesses are unequivocally saying, “Yes.”