And if the stalemate were to linger deep into the new year, many people could see their jobs disappear. The nonpartisan Congressional Budget Office says that if President Obama and lawmakers fail to reach an agreement, the U.S. unemployment rate later in 2013 could rise to 9 percent, from the current 7.7 percent.
Many economists say that might trigger a new recession some time next year. And that, in turn, could hurt the whole global economy as our trading partners start to feel the contraction.
Of course, both the White House and Congress say they have every intention of reaching some kind of agreement. In fact, the House of Representatives was formally scheduled to go home for the year this week, but Majority Leader Eric Cantor, R-Va., announced that "the House will not adjourn the 112th Congress until a credible solution to the fiscal cliff has been found."
But what if no deal is struck?
Here is a timeline of the changes that — in the absence of any action by the president and Congress — would start to take effect early in the new year:
— Income tax rates rise for virtually all Americans. The 2012 individual marginal rates of 10, 15, 28, 33, and 35 percent revert to the pre-Bush-era levels of 15, 25, 28, 36 and 39.6 percent.
— The withholding rate on the payroll tax that finances Social Security reverts to 6.2 percent from current reduced rate of 4.2 percent for the first $110,110 of a worker's salary. The Wall Street Journal notes: "For someone earning the 2011 median income of $50,054 that translates into $1,001.08 a year or about $40 less in a biweekly paycheck." The tax "holiday" had been in effect for two years.
— The estate tax rises to 55 percent for an inherited estate worth more than $1 million. In 2012, it's 35 percent and only applies to inheritances exceeding $5 million.
— The tax on dividends more than doubles from 15 percent to 39.6 percent.
— The tax on capital gains rises to — depending on income — somewhere between 10 and 20 percent, from a range of 5 to 15 percent in 2012.
— About 2 million Americans lose unemployment checks as long-term unemployment extensions expire.
— Payment to physicians treating Medicare patients are cut 27 percent as annual "doc fix" expires. Congress routinely creates a "fix" to adjust physician reimbursements to something close to the going rate for medical service, rather than a 1997 reimbursement formula.
$109 billion in spending cuts for 2013 begin to take effect. Half the cuts must come from the Pentagon budget; half from other discretionary spending.
113th Congress convenes.
President Obama's second Inauguration, a day after a private swearing-in. The president's inaugural committee is accepting corporate donations, unlike four years ago, to help pay for the events.
Feb. 15 (approximately)
Congressional action is needed to raise the nation's debt limit. The U.S is likely to exceed $16.394 trillion debt ceiling near the end of December 2012, according to the Treasury Department. But Treasury steps will let it continue funding the government until "mid-February or early March," the Congressional Budget Office projects.
Funding of federal government ends with the expiration of fiscal 2013 continuing resolution.
27 million taxpayers will have to pay the alternative minimum tax for tax year 2012. And that will delay filing dates and refunds because the IRS will have to reprogram its computers to deal with the lack of a "patch."
The AMT was created in 1969 to ensure some income tax for wealthy people who might otherwise use tax breaks to avoid any liability. But Congress did not include an inflation escalator, and so uses "patches" to make sure it hits about 5 million upper-middle-class households. Absent a new patch, the AMT will apply to nearly half of people with incomes of $75,000 to $100,000, who could pay an average of $3,700 more in taxes for 2012.
Potential Job Losses, Calendar Year 2013
According to the Congressional Research Service:
— 907,000 related to the Defense Department, CRS notes, citing a University of Maryland study.
— 80,500 Education Department and Head Start jobs, CRS says, citing a National Education Association study.
— Between 66,000 and 132,000 aerospace jobs, many of them in the Federal Aviation Administration, CRS reports, citing the Aerospace Industries Association.
— 33,700 jobs related to the National Institutes of Health, CRS says, citing a United for Medical Research report.
— 500,000 fewer jobs related to the Social Security Administration and Medicare: 212,000 were direct jobs (in occupations such as nurses, housekeepers, independent contractors, and medical residents), CRS reports, citing the American Hospital Association, American Medical Association and American Nurses Association.
Researchers Sarah Knight and Lauren Work contributed to this report.