WASHINGTON (CBS/AP) – So just what is this “fiscal cliff” that everyone’s talking about now that the election is over.

There’s a January 1, 2013 deadline for President Obama and Congress to get something done about the deficit or a series of tax hikes and spending cuts will go into effect.

The tax cuts and major across-the-board spending cuts could total $800 billion next year, based on Congressional Budget Office estimates.

The “cliff” is the punishment for previous failures of a bitterly-divided Congress and White House to deal with the government’s spiraling debt or overhaul its unwieldy tax code.

WBZ NewsRadio 1030’s Joe Mathieu talks to Art Hogan

The largest component of the cliff comes with the expiration of tax cuts enacted in 2001 and 2003, the so-called Bush-era tax cuts. Those cuts were extended two years ago after the 2010 midterm elections.

“That basically means that if nothing else is done about this at the end of this year, there’s going to be a series of tax cuts that have been in place for two years that will go away. So, that means everybody’s taxes go up,” market analyst Art Hogan of Lazard Capital Markets told WBZ NewsRadio 1030 Friday.

The fiscal cliff also includes sharp spending cuts imposed as a consequence of the failure of last year’s “super committee” to reach a deal on reducing the national deficit.

The spending cuts would hurt military and domestic programs.

“Basically ten-percent of government spending is going to stop. They’re just going to take that right off the top and both of those things will happen automatically. There’s nothing we can do about it unless folks in Washington get together and decide to change that somehow and moderate that effect or actually come up with a better plan to pull back on the U.S. federal deficit,” Hogan said.

The fiscal cliff would require such a sharp cut in the deficit that the economy would contract, economists say.

Specifically, the cliff includes:

  • The expiration of Bush-era tax cuts on income, investments, married couples and families with children and inheritances.
  • A $55 billion, 9 percent cut in defense spending next year and another $55 billion in cuts to domestic programs, including a 2 percent cut to Medicare providers.
  • The expiration of unemployment benefits for the long-term jobless and a sharp cut in reimbursements for doctors participating in Medicare.
  • The expiration of Obama’s temporary 2 percentage point cut in payroll taxes.
  • The imposition of the alternative minimum tax on some 26 million households, which would raise their taxes by an average of $3,700.
  • A variety of smaller taxes cuts for both businesses and individuals collectively known as tax “extenders” in Washington-speak. They include a tax credit for research and development and a deduction for sales taxes in states that don’t have an income tax.

“The reason we have a fiscal cliff is because Washington couldn’t get together on a grand bargain a year ago.” Hogan said.

“There has really been little or no compromise down in Washington. There’s no bi-partisan activity, there’s no reaching across the aisle and trying to find some middle ground. Hopefully, that’s going to happen now. But I will tell you, we’re running out of runway to have that to happen before the end of this year.”

(TM and © Copyright 2012 CBS Radio Inc. and its relevant subsidiaries. CBS RADIO and EYE Logo TM and Copyright 2012 CBS Broadcasting Inc. Used under license. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.)

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