The so-called "fiscal cliff," very simply put, refers to the budget sequesters, in which automatic spending cuts and automatic tax increases are triggered on January 1, 2013 because of legislation passed by Congress as the Budget Control Act of 2011.
Therefore certain legislation must be passed by January 1, 2013 to keep this from happening. This is when Bushonian tax cuts for the wealthy are due to expire.
So what's wrong with this picture? This would dramatically slow GDP and it would constitute a drag of at least 1.5% on the GDP -- if it would take effect.
This would then enable a recession at least -- if not a depression. Nobody escapes. Everybody would get whacked. In the tax package there would be automatic increases in unearned income tax rate, so the Bushonian marginal rate of 15% would automatically increase to 28%.
Taxes on earned income in the so-called top tier would increase immediately from 35% to 39%.
There would also be immediate spending cuts that have already been voted on (this refers to the sequestration of the spending cut ledger that would automatically be $600 billion in governmental spending cuts which are literally across the board, since they affect all government purchasing, defense budgets, entitlements.