While California budget watchers celebrate some cautiously optimistic fiscal news, they are casting a wary eye toward Washington, where a debate over the so-called fiscal cliff could threaten the state’s fragile economic recovery.

Congress has until the end of the year to reach a deficit-reduction deal with President Obama. If those talks fail, about $500 billion worth of spending cuts and tax increases are set to automatically take effect.

The Congressional Budget Office says that could slow the national economy and spike unemployment, sending shockwaves through the nation's economy that would be felt all the way to California.