Fiscal cliff deal 'incomplete' - Obama

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.