President Barack Obama says a deal to avert the US 'fiscal cliff' budget crisis is in sight, as dramatic New Year's Eve negotiations go down to the wire ahead of a midnight deadline.
'It appears that an agreement to prevent this New Year's tax hike is within sight. It's not done. There are still issues left to resolve, but we're hopeful that Congress can get it done,' Obama said at the White House.
The framework of a possible deal to head off automatic tax increases due to kick in with the turn of the year appeared to be in place after through-the-night negotiations between Democrats and Republicans on Capitol Hill.
But Obama hinted the proposed pact would not deal with complementary and punishing cuts to government spending also due to take place in the New Year, which he said would have to be dealt with down the line.
The president said the deal would extend tax credits for clean energy firms and also unemployment insurance for two million people, which are due to expire later Monday.
'For now, our most immediate priority is to stop taxes going up for middle class families, starting tomorrow. I think that is a modest goal that we can accomplish. Democrats and Republicans in congress have to get this done.'
Even if the Democratic-controlled Senate does sign off on a deal, avoiding the cliff could go down to the wire.
The bill must then go to the Republican-held House of Representatives.
The chamber is in session on Monday, but House Speaker John Boehner has struggled to control his party's restive conservatives, many of whom may baulk at signing on to any Obama-approved deal that raises taxes.
The key areas of friction are the income threshold at which taxes should rise, Obama's insistence on extending unemployment benefits and Republican demands for increased federal spending cuts.
Reports said the deal would see taxes rise for families earning more than $US450,000 a year. Obama had originally campaigned for the threshold to kick in for those making $US250,000 and above.
'There are a number of issues on which the two sides are still apart,' Democratic Senate Majority Harry Reid conceded. 'Negotiations are continuing as I speak, but we really are running out of time.'
Days of last-gasp talks have produced no deal between US political leaders struggling for a compromise to head off a fiscal crisis that could roil global markets and plunge the United States back into a punishing recession.
Republicans have dropped their demand for a new way of calculating inflation that would have cut the level of benefits for Social Security recipients.
But they were reportedly maintaining their insistence that estate inheritance tax rates stay at current levels.
The two sides remained bitterly at odds over the $US109 billion ($A105 billion) in automatic spending cuts set to hit the Pentagon as well as other federal agencies beginning in early January.