Automatic tax hikes and spending cuts: Both parties are racing towards a fiscal cliff

In less than nine months, Bush-era tax rates are scheduled to expire, hiking rates for the middle class as well as top income earners. At the same time, automatic spending cuts will kick in. The combination, coupled with the expiration of the payroll tax cut and other factors, would constitute a blow that analysts say could imperil the economic recovery and send America crashing back into recession…

“I think the specter of a fiscal contraction that’s north of 3 percent of GDP should get even the most dysfunctional of Congresses’ attention,” said Jared Bernstein, former economic adviser to Vice President Biden.

Even so, practically no one in Washington believes an agreement will come together until an expected lame duck session after the November election upon which all political eyes are focused. And the results of that campaign will also have a big impact on the end-of-year tax debate…

“You have to remember that the 1986 moment started in more like 1982. I don’t think you’re going to see that kind of reform-based coalition forming any time soon,” said Bernstein, now a senior fellow at the Center on Budget and Policy Priorities. “There are fundamental disagreements — really existential disagreements — on the role of government.”