Trade Balance

Steering away from the fiscal cliff — and into a ditch

Efforts to avert the "fiscal cliff" offer great drama, but they won't solve Washington's budget woes and could precipitate another recession — or worse.

The Budget Act of 2011 requires the president and Congress to agree on a nine-year, $1.2 trillion deficit reduction program, or annual defense and non-entitlement outlays will be automatically cut $107 billion on Jan. 1. At the same time, the Bush tax cuts, payroll tax reductions and other assorted programs expire.

Altogether, $136 billion in annual spending reductions and $532 billion in additional taxes could trigger cataclysmic consequences for the economy. Unemployment past 15 percent and the collapse of state...