An agreement to avoid strict austerity measures was "in sight" but not complete, President Barack Obama said Monday, and urgent negotiations on Capitol Hill continued just hours before a midnight deadline.
Obama, speaking from the White House, expressed regret that his administration and Congress couldn't produce a "grand bargain" to address the country's chronic deficit spending, but he said that was impossible "with this Congress, at this time." Both sides have been unable to make such a sweeping deal for more than a year, and they set the midnight deadline months ago as motivation.
"There are still issues left to resolve, but we're hopeful Congress can get it done," Obama said. "But it's not done." Officials familiar with Monday's negotiations said an agreement would address the biggest issue by raising tax rates on family income over $450,000 a year.
But how to handle deep spending cuts remained a problem.
The contours of a deal to avert the so-called "fiscal cliff" were emerging. Officials familiar with the negotiations said the agreement would raise tax rates on families making over $450,000 a year to 39.6%. The tax on estates worth more than $5 million would increase to 40% from 35%. Unemployment benefits would continue for one year. Without that extension, 2 million people would lose benefits beginning in early January.
But the officials said the White House and Republicans were at an impasse over what to do about automatic, across-the-board spending cuts set to start taking effect Tuesday. Democrats want to put off the cuts for one year and offset them with unspecified revenue.
The officials requested anonymity in order to discuss the internal negotiations.
A Republican official familiar with the plans confirmed the details described to The Associated Press.
Urgent talks continued between the White House and congressional Republicans, with longtime negotiating partners Vice President Joe Biden and Senate Republican leader Mitch McConnell leading.
The deal would achieve about $600 billion in new revenue, the officials said.
Unless an agreement is reached and approved by Congress by the start of New Year's Day, more than a half-trillion dollars in tax increases for nearly all Americans will begin to take effect, and $109 billion will be cut from defense and domestic programs.
Though both would be felt gradually, economists warn that if allowed to fully take hold, their combined impact would rekindle a recession.
Republicans, who control the House, have been scared of raising taxes. Democrats, who control the Senate and are in the White House, have been scared of cutting spending. Each side has been scared of looking like it's giving in to the other.
Meanwhile, the country's deficit spending - about $1 trillion a year - continues without a deal to address it.
"This whole thing is a national embarrassment," Sen. Bob Corker, a Republican, told MSNBC earlier Monday.
If there's no deal, the effects could be harsh. The nation would lose up to 3.4 million jobs, the Congressional Budget Office has predicted. And budget cuts of 8% or 9% would hit most of the federal government.
And if the limit isn't raised on how much the government can borrow, the government's officially reaching its $16.4 trillion ceiling on Monday could lead to a first-ever default in February or March that would shake worldwide confidence in the United States.
On top of that, the current Congress is in session only through midday January 3. After that, a newly elected Congress would inherit the problem.
Letting tax rates rise for couples with incomes of $450,000 a year would be a concession for Obama, who campaigned for re-election on a pledge to set the level at $250,000 for couples. It also would mark a significant concession by Republican leaders who pledged to continue the George W. Bush-era tax cuts for all income earners.
The hope of the White House and lawmakers was to seal an agreement, enact it and send it to Obama for his signature before taxpayers felt the impact of higher income taxes or federal agencies began issuing furloughs or taking other steps required by spending cuts.