Election Day might be one week in the rear-view mirror, but the political wrangling on Capitol Hill will likely continue as lawmakers work to confront the year-end "fiscal cliff" that threatens to throw the economy back into recession.

If the standoff between President Barack Obama and the Republican-controlled Congress fails to produce new legislation, a combined $607 billion in tax increases and spending cuts will go into effect in January, as outlined by the 2011 Budget Control Act. The debt-reduction deal would commit to $1.2 trillion in spending cuts over 10 years.

The Congressional Budget Office predicted that inaction from both the administration and Congress to avert the fiscal cliff could shrink the economy by 0.5 percent in 2013 and bump unemployment to 9.1 percent from the most recent 7.9 percent rate.

Where Things Currently Stand

Republicans have been strongly against imposing tax hikes on the highest income earners. Democrats and President Obama are looking to continue a tax-cut extension for people making less than $250,000 per year, insisting that the wealthy should pay more in taxes. 

SEE ALSO: Fiscal Cliff Talks Begin For Boehner, Obama

Some analysts expect the two parties to strike a deal to avert the sweeping changes, even if the potential tax hikes and spending cuts fall short of what both sides would prefer.

"The split in Congress will force both sides to bargain,” economist Paul Ashworth of Capital Economics told NBC News. “We expect the Democrats to agree to extend the Bush-era (tax cuts) for higher income earners in exchange for Republicans agreeing to put off the spending cuts."

Fears of a stand-still over negotiations in Washington plunged the Dow Jones 313 points, or 2.4 percent, the day after Obama's reelection, as investors faced uncertainty over possible changes in tax policies. House Speaker John Boehner pushed an opposing proposal that would extend tax cuts for every American, including the rich, to buy more time to reach a new deal on taxes and spending cuts. Boehner said raising taxes on the wealthy would "slow down our ability to create the jobs that everyone says they want."

SEE ALSO: Dow Jones Dips Day After Obama Re-Election

"I’m proposing that we avert the fiscal cliff together in a manner that ensures that 2013 is finally the year that our government comes to grips with the major problems that are facing us,’’ Boehner said.

What Will It Cost?

So what would happen if America falls off this cliff? On Jan. 2, a series of tax cuts are set to expire, including the 2001 and 2003 Bush-era cuts. The end of the the Bush tax cuts would raise taxes by about $330 billion and cost about $3,400 for every household, according to the non-partisan Tax Policy Center.

Additionally, the temporary Social Security payroll tax cut will end, which would result in a tax increase of about $95 billion in 2013 alone. Analysts predict that the elimination of this tax holiday could decrease economic output by a percentage point next year and cost the economy at least one million jobs, as middle-class families could pay an additional $1,000 in taxes.

Average Tax Hike By Household Income Group (Source: Tax Policy Center)

• Lowest fifth (Average income: $11,239): $412

• Second-lowest fifth (Average income: $29,204): $1,231

• Middle fifth (Average income: $49,842): $1,984

• Second-highest fifth (Average income: $80,080): $3,540

• Highest fifth (Average income: $178,020): $14,173

• Top 1 percent (Average income: About $1.3 million): $120,537

What Else Is On the Chopping Block?

The triggered spending cuts would target mainly defense and domestic programs as the Pentagon budget would get trimmed $55 billion -- or 9 percent -- next year. Another $55 billion would be axed from non-defense, including a a 2 percent cut to Medicare that would reduce payments to doctors by $11 billion. Unemployment benefits for the long-term jobless would also be slashed by $26 billion.

Other areas that could be affected by domestic cuts include education, food inspection and air traffic safety.

What's Next?

Obama and House Speaker John Boehner will meet on Friday to negotiate ways on how to avoid the  fiscal cliff. House Minority Leader Nancy Pelosi, Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell will also participate in the meeting. 

SEE ALSO: Obama Urges Congress 'Let's Not Wait' On Fiscal Cliff

In the meantime, however, the president is scheduled to hold separate talks with labor and business leaders to garner support for his stance that high-income earners should pay more taxes.

 

Read more Neon Tommy stories on the fiscal cliff here.

Reach Staff Writer Danny Lee here; follow him here.