The first problem is the notion of the cliff itself. It, of course, exists because the members of congress agreed that if they couldn't agree on policies and procedures to reduce the U.S. federal budget deficit and the long term trajectory of U.S. national debt by the end of this year, they would automatically allow a doomsday scenario to unfold. That scenario would allow President George W. Bush's tax cuts to automatically lapse and be replaced by the marginal tax rates that obtained under Bill Clinton while also automatically cutting about $600 billion of defense and other discretionary spending. It has been anticipated that the impact of this would be to a shift in U.S. GDP growth in 2013 from about plus 2.5 percent to about minus 2.5 percent growth. In other words, a rather nasty recession.
