President Barack Obama and House Speaker John Boehner met for 45 minutes Monday in hopes of reaching a deal to avoid the "fiscal cliff," but the White House suggested later that it was not budging from its proposal.
"The only plan that we have seen that achieves the size and the balance that's required for sustainable — for long-term deficit reduction and for putting our economy on a sustainable fiscal path, is the president's," White House spokesman Jay Carney told reporters at a briefing.
Carney made his comments after the first face-to-face talks between the president and Boehner since Thursday. Treasury Secretary Timothy Geithner participated in Monday's talks. Obama and Boehner spoke by phone Friday and their advisers had discussions over the weekend.
"We're getting close," said one Democratic aide, who added however that a deal is not imminent. Senate Minority Leader Harry Reid said it appears lawmakers will return from holiday break the day after Christmas to complete work before the end-of-year deadline.
"The fiscal cliff is starting to get ironed out," said Frank Davis, director of sales and trading at LEK Securities.
The White House meeting came after Boehner on Friday offered $1 trillion in higher tax revenue over 10 years and an increase in the top tax rate on people making more than $1 million a year. The House speaker is also offering a large enough extension in the government's borrowing cap to fund the government for one year before the issue must be revisited — conditioned on Obama's agreeing to the $1 trillion in cuts.
The two negotiators are running out of time if they hope to make an agreement and get it passed through Congress before arriving at the cliff at the beginning of January, when an economically toxic mix of huge tax increases and slashing cuts to the Pentagon and other federal agencies begins to take effect.
"The president and the speaker are meeting at the White House to continue their discussions about the fiscal cliff and balanced deficit reduction," said Boehner spokesman Michael Steel. The two met for about 45 minutes, officials said.
Boehner "won't sign off on a deal that doesn't have enough votes to get through," a senior Republican aide said.
Given the pressing timetable, the two men are hoping to set the broad parameters of an agreement while taking care of urgent business like extending tax cuts for most earners, preventing sharp cuts in Medicare physician payments, and making sure millions of taxpayers don't get struck by the alternative minimum tax.
The idea is that other steps, like overhauling the tax code and additional cuts to popular programs like Medicare would take more time and be fleshed out next year. (Read More: Narrow 'Fiscal Cliff' Bargain Gains Currency.)
Obama is also pushing extending jobless benefits for the long-term unemployed and wants an extension of the 2 percentage point payroll tax cut or something like it.
Boehner's latest offer broke a long impasse. It calls for about $450 billion in revenue raised in part from increasing the top rate on million-dollar-plus income from 35 percent to the Clinton-era rate of 39.6 percent.
The additional revenue required to meet the $1 trillion target would be collected through a rewrite of the tax code next year and by slowing the inflation adjustments made to tax brackets. (Read More: How Much Money Would Taxing the Rich Raise?)
In return, Boehner is asking for $1 trillion in spending cuts from government benefit programs such as Medicare. Those cuts would defer most of a painful set of across-the-board spending cuts set to slash many domestic programs and the Pentagon budget by 8-9 percent, starting in January.
(Read More: GOP 'Cliff' Plan Cuts Medicare, Social Security)
Boehner's proposal was described Sunday by officials familiar with it. They required anonymity because of the sensitivity of the talks.
Boehner also continues to press for a less generous inflation adjustment for Social Security benefits, a move endorsed by many budget hawks. Obama and Democrats on last year's deficit "supercommittee" endorsed the idea in offers made last year, but they're more reluctant now.
The new inflation adjustment would also raise about $70 billion over a decade in new revenues because tax brackets would rise more slowly for inflation, driving people more quickly into higher tax brackets.
The increased optimism comes as time is running out before the adjournment of Congress. Tax rates on all workers go up in January, and $109 billion worth of across-the-board spending cuts begin to take effect then as well. Taken together with the expiration of extended jobless benefits and a 2-percentage-point break in Social Security payroll taxes, the combination of austerity steps threatens to send the economy back into recession.
The burst of optimism is tempered by the caution that the remaining steps to reaching a deal — particularly how much to cut Medicare and whether to impose the new, less generous inflation adjustment to Social Security — are difficult. Then comes the job of selling it to a polarized Congress, where GOP conservatives have been railing against higher tax rates for months as sure to cost jobs and hurt small business, and Democrats have taken a harder line against cost curbs to Medicare.
But it appears clear there is momentum as White House and congressional aides worked through the weekend.