(CBS NEWS) -- Well, here we are less than a week before the "fiscal cliff" hits and lawmakers are scrambling to come up with at least a partial solution President Obama has cut short his Hawaiian vacation to help push Congress along as lawmakers return to get to the business of dealing with the "cliff."

What happens if the country is forced over the "fiscal cliff" on January 1?

Various federal tax cuts and breaks enacted under President George W. Bush expire as well as the payroll tax holiday enacted under President Obama.

About $1.2 trillion in federal spending cuts begin to kick in (approximately $110 billion a year for 10 years), divided equally between the Pentagon and most other federal agencies.

And federal jobless benefits expire for 2 million unemployed Americans.

Hitting the national economy with the double whammy of tax increases and spending cuts is what's called going over the "fiscal cliff." If allowed to unfold over 2013, it could lead to recession, a big jump in unemployment and financial market turmoil, economists predict.

Taxes

If lawmakers fail to work out any sort of deal, there will be severe long-term consequences for the economy: According to the Tax Policy Center, going off the "cliff" would affect 88 percent of U.S. taxpayers, with their taxes rising by an average of $3,500 a year; taxes would jump $2,400 on average for families with incomes of $50,000 to $75,000. Because consumers would get less of their paychecks to spend, businesses and jobs would suffer.

Many economists, as well as the nonpartisan Congressional Budget Office, say the combination of spending cuts and tax hikes that are set to take effect would tip the economy into a new recession. The Congressional Budget Office has forecast that implementing all the mandated government spending cuts and tax hikes would reduce real GDP by 0.5 percent in 2013, with growth sinking in the first half of the year before resuming at a modest clip later in the year. The CBO forecasts that inaction would push up the unemployment rate to 9.1 percent by the end of 2013.

"The consequences of that would be felt by everybody," Federal Reserve Chairman Ben Bernanke said.

Spending Cuts

If the nation goes over the fiscal cliff, budget cuts of 8 percent or 9 percent would hit most of the federal government, touching all sorts of things from agriculture to law enforcement and the military to weather forecasting. A few areas, such as Social Security benefits, Veterans Affairs and some programs for the poor, are exempt.

The spending cuts, meanwhile, are phased in gradually. It's not as though $1.2 trillion would suddenly disappear from the economy at the end of the year: The cuts, while undeniably significant, are set to be phased in over a decade. In addition, there are budgetary maneuvers that can be taken to at least somewhat soften the blow of both the tax hikes and spending cuts. (The Treasury Department could, for instance, freeze paycheck withholding levels.) Certainly, total inaction on the "fiscal cliff" over the long term would likely have a deeply negative impact on the economy. But if a deal comes in January or February, after the deadline - as it well could - the structural damage could be relatively small.

The debate

Mr. Obama says any deal must include higher taxes for the wealthiest Americans. Many House Republicans oppose raising anyone's tax rates. House Speaker John Boehner tried to get the House to vote for higher taxes only on incomes above $1 million but dropped the effort when it became clear he didn't have the votes.

Republicans also insist on deeper spending cuts than Democrats want to make. And they want to bring the nation's long-term debt under control by significantly curtailing the growth of Medicare, Medicaid and Social Security - changes that many Democrats oppose.

Mr. Obama, meanwhile, wants more temporary economic "stimulus" spending to help speed up a sluggish recovery. Republicans say the nation can't afford it.

If lawmakers reach Dec. 31 without a deal, some economists worry that the financial markets might swoon. Would traders start to panic if Washington appeared unable to reach accord? Would worried consumers and businesses sharply reduce their spending? In what could be a preview, stock prices around the world dropped Friday after House Republican leaders' plan for addressing the fiscal cliff collapsed.