The fiscal cliff looms large. It should. Unless Washington doessomething, 2013 will face a sudden and automatic fiscal restraint.The shock would almost certainly drive this economy's alreadyenfeebled recovery into recession. It is a frighteningprospect, to be sure, but, still, likelihoods suggest that eventhis Congress will steer clear such a cliff.

Warnings on this matter have emerged through several channels.Federal Reserve Board Chairman Ben Bernanke, at last summer'stestimony on monetary policy, forcefully called Congress' attentionto the impending problems and, incidentally, coined the phrase“fiscal cliff.” The Congressional Budget Office (CBO) followedup with a full analysis, concluding that, if something is not done,restrictive automatic fiscal measures in 2013 could exceed $800billion and force this economy into at least two quarters ofdecline. And though there is always room to cavil, surely the CBO'sanalysis and conclusions are reasonable. Severe problems arebuilt into law on both the spending and on the revenue sides of thefederal budget.

The biggest item is the expiration of the Bush tax cuts. Thereis, of course, much dispute on these. President Obama and theDemocrats want to continue them for all but the wealthy, who theydefine as individuals who earn more than $200,000 a year andcouples who earn more than $250,000 a year. Republicans want toextend them for all, regardless of income level. But if nothing isdone, taxes will increase for all on January 2. Any relief onalternative minimum tax (AMT) also will disappear. Congress has noteven voted this year's usual “patch” to prevent AMT from spreadingfrom the present 4.4 million taxpayers affected by it to 32.9million. Its impact then would hit with the spring tax session for2012 taxes. Combined, these two matters, the end of the Bushtax breaks and AMT, would, according to the CBO, raise 2013 taxburdens by $265 billion.