WASHINGTON (AP) -- The lights are burning at the White House and the U.S. Capitol this New Year's Eve as negotiations continue on a "fiscal cliff" compromise.
The White House and congressional Republicans have agreed to block across-the-board tax increases set for midnight. But they continue to haggle over spending cuts.
President Barack Obama said in an afternoon status report, "It appears that an agreement to prevent this New Year's tax hike is within sight." But he added, "it's not done."
Senate Republican Leader Mitch McConnell -- shepherding final talks with Vice President Joe Biden -- agreed with Obama that an overall deal was near. In remarks on the Senate floor, he suggested Congress move quickly to pass tax legislation and "continue to work on finding smarter ways to cut spending" later next year.
Democrats declined the offer, at least for the time being.
While the deadline to prevent tax increases and spending cuts was technically midnight, passage of legislation within the next 72 hours -- a timetable under consideration -- would eliminate or minimize any inconvenience for taxpayers.
Obama says this has been a "pressing issue on people's minds," and tells an audience of middle-class taxpayers the deal would, among other things, extend unemployment benefits for Americans "who are still out there looking for a job."
He voiced regret that the work of the administration and lawmakers on Capitol Hill won't produce a "grand bargain" on tax-and-spend issues, but said that "with this Congress, it couldn't happen at that time."
Officials familiar with the negotiations say an agreement would raise tax rates on family income over $450,000 a year and increase the estate tax rate. .
A person familiar with the negotiations says Democrats have offered to extend tax cuts for families making up to $450,000 a year and individuals making up to $400,000. President Barack Obama originally wanted the tax cuts to be extended only for families making up to $250,000 a year.
Unless an agreement is reached and approved by Congress by the start of New Year's Day, more than $500 billion in 2013 tax increases will begin to take effect and $109 billion will be carved from defense and domestic programs
The person familiar with the talks requested anonymity in order to discuss the internal negotiations.
NEW: Reid says 2 sides still apart on `fiscal cliff'
WASHINGTON (AP) -- Senate Majority Leader Harry Reid says the two sides are still apart as they race against a midnight deadline for resolving their differences over the "fiscal cliff."
The Nevada Democrat says negotiations are continuing. But he cautioned that bargainers are running out of time and still have differences over some issues, though he did not say what still divides them.
Reid's remarks came Monday morning after the two sides narrowed their differences during an evening of bargaining between Senate Minority Leader Mitch McConnell and Vice President Joe Biden.
Without agreement by midnight, wide-ranging tax increases and budget-wide spending cuts -- the so-called fiscal cliff -- will begin taking effect. Though the impact of those changes would be felt gradually, economists have warned that they could cause recession if left intact.
Senate Majority Leader Harry Reid, D-Nev., and Senate Republican leader Mitch McConnell remain at odds on such key issues as the income threshold for higher tax rates and how to deal with inheritance taxes.
McConnell complained that Reid had yet to respond to a GOP offer made Saturday evening and reached out to Vice President Joe Biden, a longtime friend, in hopes of breaking the impasse. Biden has assumed the lead role for Democrats, and a McConnell spokesman says the Kentucky Republican and the vice president are expected to negotiate by telephone into the night.
Rank-and-file lawmakers left the Capitol Sunday night with hopes that their leaders would give them something to vote on when they returned Monday morning.