U.S. President Barack Obama has returned to Washington, cutting short a vacation in Hawaii to tackle negotiations on preventing tax hikes and spending cuts from taking effect January 1.
Democrats and Republicans have, so far, failed to reach an agreement on averting the so-called fiscal cliff.
Senate Majority Leader Harry Reid says it appears the country is headed over the cliff. On the Senate floor Thursday, he blasted House Speaker John Boehner, accusing him of being more concerned with saving his speakership than coming to an agreement.
The White House says President Obama spoke to all four Congressional leaders Wednesday before departing Hawaii.
Many economists fear the combination of $500 billion in tax increases and spending cuts could push the fragile U.S. economy back into recession.
Boehner issued a statement Wednesday urging the Democratic-controlled Senate to pass a long-term deficit reduction package that would prevent going over the fiscal cliff.
Talks between Boehner and Mr. Obama collapsed last week. Boehner then failed to convince his own Republican bloc to approve an alternative plan that would have raised taxes only on Americans making $1 million per year or more. The president had offered to allow taxes to rise on those making at least $400,000 a year.
Observers say congressional leaders could allow income tax rates to rise on all Americans on January 1st, then pass legislation that would reduce taxes on everyone except the wealthy. The Senate will likely approve a measure that would allow tax hikes on those making $250,000 or more — a figure that Mr. Obama had proposed during his re-election bid.
The president has said increasing taxes for the wealthiest Americans must be a part of any agreement, while Boehner and most Republicans are opposed to tax increases of any kind.
U.S. Treasury Secretary Timothy Geithner said Wednesday that the nation's debt ceiling will reach its $16.4 trillion limit Monday, New Year's Eve. The ceiling is a limit on how much money the government can borrow to avoid defaulting on its debt.
