U.S. President Barack Obama says he is “modestly optimistic” that a deal can be reached with Congress to avert a looming set of tax hikes and spending cuts that threaten to plunge the U.S. economy back into recession.

Mr. Obama told reporters Friday that Republican Senator Mitch McConnell and Democratic Senator Harry Reid were working toward an 11th-hour bipartisan deal. He said the stopgap measures would focus on preventing automatic tax hikes on the middle class and assuring that unemployment benefits for some two million Americans continue beyond the January 1 cutoff deadline.

The president spoke after talks at the White House with top congressional leaders, as both sides pressed to avert the so-called “fiscal cliff.”

Congressional Republican leaders have called the House back into session this Sunday evening. The House had adjourned last week after failing to agree on a deal with the White House.

The Senate, however, kept working. Reid on Thursday said it looked as though the crisis would not be averted. He accused House Speaker John Boehner of running a dictatorship and being more concerned with saving his leadership position.

Boehner shot back, saying Reid should talk less and legislate more. He said Senate Democrats have refused to pass a long-term deficit reduction package that would stop the economy from going over the cliff.

President Obama has insisted that raising taxes on wealthy Americans along with some spending cuts is the only practical way to cut the country's huge deficit. Conservative Republicans do not want anyone's taxes to go up. They rejected Boehner's alternative plan to raise taxes only on Americans making at least $1 million per year. The president's offer would increase taxes for those making at least $400,000.

U.S. Treasury Secretary Timothy Geithner says 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. Geithner says Treasury officials will take what he calls “extraordinary measures” under the law to avoid default.