Senate Republicans and Democrats are quietly closing in on a deal to steer the country away from the sharp fiscal adjustment that could send the country into recession next year, The New York Times reports.

At the end of this year, the Bush-era tax cuts and other tax breaks are scheduled to expire at the same time automatic cuts to government spending kick in, a combination known as a fiscal cliff that could send the country sliding into recession if left unchecked by Congress.

Lawmakers have largely avoided dealing with tax and spending issues in an election year, though behind closed doors, Senators from both parties are close to agreeing on a multi-step plan to steer the economy away from collapse.

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Senators are close to agreeing on a $4 trillion deficit reduction target over 10 years made possible by raising revenue by overhauling the tax code, finding savings from changes to social programs like Medicare and Social Security and cuts to federal programs, according to The Times.

Should such efforts fail, a fiscal deficit blue print similar to proposals outlined by President Barack Obama’s fiscal commission led by Erskine Bowles, the Clinton White House chief of staff, and former Sen. Alan Simpson, R-Wyo., would take effect.

Such a backup plan would include changes to Social Security, cuts in federal programs and moves to lower tax rates, but eliminate or trim deductions and credits with the aim of drumming up $2 trillion in additional revenue.

The Times notes that lawmakers would put off the automatic spending cuts and tax increases due strike the economy at the same time in January.

“A lot of what happens and when it happens depends on the outcome of the election,” says Sen. Mitch McConnell, R-Ky., The Times adds.

A Tax Policy Center study finds that failure to do anything at all about the fiscal cliff could send income, payroll and other taxes rising for 90 percent of all Americans.

In dollar terms, failure to act could send taxes rising by $500 billion in 2013, or an average of almost $3,500 per household.

“Lawmakers could soften that near-term hit by delaying or repealing provisions in the ‘cliff’ or by enacting other spending and tax policies that would provide offsetting support for the economy,” the study stated.

Editor's Note: This Wasn’t an Accident — Experts Testify on Financial Meltdown