As the earnings season kicks off, we may be looking at the first quarter of negative year-over-year profit growth since the first quarter of 2009. In fact, it would be the first time that earnings turned negative — outside of a recession — since the Asian financial crisis of 1998. Analysts currently expect aggregated earnings for companies in the S&P 500 to fall 2% from the third quarter of 2011.

Bulls will correctly suggest that analysts steadily lower the bar until it’s beatable, implying we won’t actually see profits dip once companies deliver the usual “beat by a few pennies” game that often plays out. True, but it’s what companies will say about forward outlooks is how investors will really respond, and it’s getting harder to see why a company would be bullish about the fourth quarter and early 2013 after considering these next data points and concerns.

The market has been relieved that European policy makers have shown more resolve to keep Greece, Spain and others from falling into the abyss. This is truly a welcome development and greatly reduces the chances that the United States will be dragged down in some sort of global economic maelstrom. But Europe is still sick — and getting sicker. Regionwide unemployment stands at 11.4% and rising. And that figure vastly understates things as a number of the “employed” are only able to obtain part-time work.

High unemployment increases government benefits spending, exacerbates social tensions and leads to reduced government revenue as fewer taxpayers can contribute to the system. The ability for these governments to reduce stubbornly high budget deficits becomes more implausible as long as the economies such as the United Kingdom, France and Spain remain in recession.

Earlier, I noted that the delayed response to the looming fiscal cliff is sapping business confidence. Though that may seem like a short-term factor for businesses as legislators will eventually come to an agreement, it’s what they end up doing that really determines the course of the economy. Here’s what we know: The government spends much more than it earns, which means lawmakers will have to figure out ways to shrink spending and raise revenue. Few have fully grasped what higher taxes will do to consumer spending.

Even if lawmakers don’t raise tax rates, the mere expiration of many “Bush-era” tax cuts will be a tax hike for some. Letting the fiscal cliff come to pass means a 3% to 4% drag on the economy (in terms of growth domestic product), but even a solution to that looming draconian plan in the form of a closing government budget gap still equates to at least a 1% to 2% GDP drag. Can we afford that? And can companies really boost profits in 2013 if the economy doesn’t grow at a reasonable pace?