Analysts fear the 'fiscal cliff'

The analysis assumes there is a protracted impasse in Washington and the government falls off the "cliff" for the entire year, which most Capitol watchers now think is unlikely. All sides want to avoid the severe automatic changes, which are a one-two punch of expiring tax cuts and major across-the-board spending cuts to the Pentagon and domestic programs. It is the looming 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.

The report, updating an analysis from May, comes as a newly re-elected President Obama and Congress seek ways to avert or at least ease possible damage from the scheduled changes. All sides are promising cooperation, but many difficult decisions await and the politics of raising tax revenue and cutting federal benefits programs is exceedingly tricky.

The new study estimates that the nation's gross domestic product would grow by 2.2 percent next year if the Bush-era tax rates were extended and would expand by almost 3 percent if Obama's 2 percentage-point payroll tax cut and current jobless benefits for the long-term unemployed are extended.