US President Barack Obama used his first public appearance since his return to the White House to issue a challenge to Republicans in Congress to work with him to prevent the economy going into freefall next year.

Obama called on Congress to strike a deal before the January 1 deadline that would see an automatic rise in taxes across the board and cuts in spending.

"I am not wedded to every detail of my plan. I am open to compromise," Obama said.

But he said he still wanted to raise tax rises for the wealthiest - a policy most Republicans oppose.