President Barack Obama has said a deal with Congress to avoid the US "fiscal cliff", with tax increases looming at midnight, was close, but he warned that it was not yet complete.
"Today it appears that an agreement to prevent this new year's tax hike is within sight, but it is not done," Mr Obama said during remarks at the White House complex.
"There are still issues left to resolve, but we're hopeful that Congress can get it done, but it's not done."
The president made his remarks surrounded by cheering supporters identified as "middle class Americans".
Mr Obama, who had won re-election in November partially on a promise to raise tax rates for the top 2 per cent of US earners, said the deal would ensure taxes do not go up for middle income families.
He stressed it would include an extension of unemployment benefits for the long-term jobless and extension of popular tax credits.
Mr Obama said the agreement being worked out with Republican leaders in Congress would not include a long-term solution to the government's debt problem.
"My preference would have been to solve all these problems in the context of a larger agreement, a bigger deal, a grand bargain, whatever you want to call it that solves our deficit
problems in a balanced and responsible way," he said.
"But with this Congress that was obviously a little too much to hope for at this time. Maybe we can do it in stages. We're going to solve this problem instead in several steps."
The outlines of a deal in the US Senate include raising income tax rates for individuals making more than $400,000 a year and households making more than $450,000 a year, but a
sticking point remains on how long to delay automatic spending cuts to defence and domestic programmes, known as a "sequester".
Mr Obama stressed that a deal over those spending cuts had to include revenue. "Any agreement we have to deal with these automatic spending cuts that are being threatened for next month, those also have to be balanced," he said.
"That means that revenues have to be part of the equation in turning off the sequester, in eliminating these automatic spending cuts, as well as spending cuts."
The same would be true for any future deficit-cutting agreement, he said.
As he often stresses, Mr Obama said deficit reduction would have to follow the principle of not hurting senior citizens, students, or middle class families.
"If we're going to be serious about deficit reduction and debt reduction, then it's going to have to be a matter of shared sacrifice, at least as long as I'm president, and I'm going to be
president for the next four years," he said.
Taxes are on track to rise for many Americans unless US lawmakers can cut such a last-minute deal to avoid the fiscal cliff, an outcome that seems unlikely, but still possible.
Financial markets are on edge hours before the midnight arrival at the long-awaited "cliff", an assortment of $600 billion (€455 billion) in tax hikes and broad federal spending cuts on defence and domestic programmes that has defied a political solution.
Senate Republican Leader Mitch McConnell and Democratic vice-president Joe Biden carried on "good talks" late yesterday evening, aides said. Details of their discussions are unclear.
Any resolution in the tug-of-war over taxes and spending cuts forged in the Senate would need to win approval in the House of Representatives, and the outcome in that chamber is uncertain.
"Republicans in the House do not want to raise tax rates without some significant spending cuts, and the Senate apparently has abandoned" a proposal to trim cost-of-living adjustments in the Social Security pension programme, said Greg Valliere, chief political strategist at Potomac Research Group.
"So, while the Senate stumbles toward a potential compromise, there's absolutely no assurance that it could pass later this week in the House," he said.
Still, a serious jolt from the markets could prod Democrats and Republicans into action, even at the eleventh hour - or in this case, today, at 11:59pm (or 0459 GMT tomorrow).
"I believe investors will show their displeasure" at the lack of progress in Washington, said Mohannad Aama, managing director at Beam Capital Management, an investment advisory firm in New York.
Democratic and Republican leaders in the Senate had hoped to clear the way for swift action yesterday. But with the two sides still at odds, Senate Democratic leader Harry Reid postponed any possible votes and the Senate adjourned until today.
The main sticking point between Republicans and Democrats remain whether to extend existing tax rates for everyone, as Republicans want, or just for income below $250,000 to $400,000, as Democrats have proposed. That threshold may be rising closer to a level of $500,000 or so, analysts said.
Also at issue are Republican demands for larger cuts in spending than those offered by Mr Obama.
Hopes for a "grand bargain" of deficit-reduction measures vanished weeks ago as talks stalled.
Expiring along with low tax rates at midnight tonight are a raft of other tax measures. One is a payroll tax holiday that Americans have enjoyed for two years.
Support for extending this seems to have faded away, in part because the tax funds Social Security. If it ends, the current 4.2 per cent payroll tax rate paid by about 160 million workers will revert to the previous 6.2 per cent rate after today and will be the most immediate hit to taxpayers.
A "patch" for the Alternative Minimum Tax (AMT) that would prevent millions of middle-class Americans from being taxed as if they were rich could go over the cliff. Republicans and Democrats support inserting another patch, but have not approved one.
Reuters