Congressional Leaders Voice Optimism After 'Cliff' Talks
"Going over the fiscal cliff, in my view, is a bucket of crazy,'' Republican Rep. Peter Roskam, one of Boehner's deputies, said at a budget conference.
Obama insists that tax rates on the wealthiest 2 percent of Americans must rise, while Republicans pledge that they will not agree to any rate increase.
There could be room for compromise.
Obama could agree to allow the top tax rate to rise to something less than the 39.6 percent he wants, from the current 35 percent.
Policymakers, for example, could also agree to limit the tax increase to households making more than $500,000 annually, rather than the $250,000 cap Obama is demanding.
Republicans have suggested generating more revenue by limiting tax breaks for the wealthiest, rather than raising their rates.
Obama has said that would not raise enough money.
The negotiators also need to confront $109 billion in domestic and military spending cuts due to kick in on Jan. 2, the result of earlier failures to craft a more nuanced budget deal.
A senior Democratic Senate aide said it should be relatively easy to head off the cuts, known as "sequestration,'' if the two sides can get past the tax issue.
"The hard part is the tax cuts,'' the aide said. "Neither side wants sequestration to take place, and that should be easy to solve in a balanced plan that has revenues.''
Nonpartisan budget forecasters say failure to reach a deal could push the U.S. economy back into recession and drive up the unemployment rate.
The two sides could also agree to a temporary deal that would get them past the cliff and give them more time to work out a more lasting solution.
White House economic adviser Gene Sperling said the Obama administration is not interested in a solution that simply extends current provisions into next year.
"Compromise cannot be a dirty word if we want to move our country forward,'' Sperling said at a budget conference.
Lawmakers hope to revamp the tax code and retool expensive entitlement programs like Medicare, the government health insurance program for the elderly and disabled.
—Reuters and AP contributed to this report.