“Fiscal cliff” is being tossed around Washington to focus minds on the tax increases and budget cuts set to automatically go into effect at the end of 2012 if Congress and the White House do not act.

The Congressional Budget Office riled many this week by forecasting a recession if Congress does nothing. This follows the [via Ben Walsh] the Fed Open Market Committee’s April comment that this “sharp fiscal tightening” is a “sizable risk” to the economy and Fed chairman Ben Bernanke’s February remarks to Congress that “There is obviously a huge fiscal drag pending if Congress adheres to existing law.”

On January 1, 2013, the 2001 and 2003 tax cuts will expire, capital gains taxes will shoot up to 20%, and taxes on dividends will rise to 39.6%. A host of tax provisions have expired or will expire by year’s end, including “deductions for state and local general sales taxes, the research and experimentation (R&E) tax credit, and the 15-year depreciation for qualified restaurant and leasehold improvements.” Also, taxes to pay for Obamacare will go into effect.

Businesses are putting off plans to invest and hire more workers until they know what their tax burden will be. The result is an economy that continues its slow-growth trend.

There is a way to step back from the edge of the cliff. At America’s Small Business Summit 2012, U.S. Chamber Executive Vice President of Government Affairs Bruce Josten suggested that Congress temporarily extend the current tax code for up to two years, then work on comprehensive tax and entitlement reform.

Will Washington pull a fiscal Thelma and Louise? If it continues dithering, it could happen.