The U.S. Capitol building is seen Saturday, Nov. 19, 2011, in Washington. (AP Photo/Carolyn Kaster)
The Congressional Budget Office analysis says the combination of automatic tax increases and spending cuts would cut the deficit by $503 billion through next September. But that would cause the economy to shrink by 0.5 percent next year.
The report comes as a newly re-elected President Barack Obama and Congress are seeking ways to avert the problems.
The study estimates that America's gross domestic product would grow by 2.2 percent if the Bush-era tax rates were extended and expand by almost 3 percent if Obama's payroll tax cut and jobless benefits for the long-term unemployed are extended.
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