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Obama 'optimistic' on reaching deal to avoid fiscal cliff

President Barack Obama, pushing for a deal to avoid the looming tax hikes and spending cuts known as the "fiscal cliff," entered last-minute talks with Senate leaders Friday, saying he still believed an agreement could be reached before the Jan. 1 deadline.

"I'm optimistic we may still be able to reach an agreement that can pass both houses in time," Obama declared in a brief news conference. Obama referred to "dysfunction in Washington," and said the American public is "not going to have any patience for a politically self-inflicted wound to our economy. Not right now."

Surprisingly, after weeks of postelection gridlock, Senate leaders sounded even more bullish.The Republican Leader, Sen. Mitch McConnell, said he was "hopeful and optimistic" of a deal, adding he hoped a compromise could be presented to rank-and-file lawmakers as early as Sunday, a little more than 24 hours before the year-end deadline.

Officials said there was a general understanding that any agreement would block scheduled income tax increases for middle class earners while letting rates rise at upper income levels.

Facing a deadline that was born out of Washington's dysfunction, success was far from guaranteed—even on a slimmed-down deal that postponed hard decisions about spending cuts into 2013—in a Congress where lawmakers grumbled about spending the new year holiday in the Capitol.

Republicans and Democrats say privately that any agreement would likely include an extension of middle-class tax cuts that had been set to expire at the end of the year, with increased tax rates at upper incomes—a priority that was central to Obama's re-election campaign.

House of Representatives Speaker John Boehner, House Democratic Leader Nancy Pelosi, McConnell and Reid and were all attending Friday's White House meeting. Vice President Joe Biden and Treasury Secretary Timothy Geithner also attended.

For Obama, the eleventh-hour scramble represented a test of how he would balance strength derived from his re-election against an avowed commitment to compromise in the face of divided government. Despite early talk of a grand bargain between Obama and Boehner that would reduce deficits by more than $2 trillion, the expectations were now far less ambitious

Democrats said Obama was sticking to his campaign call for increases above $250,000 in annual income, even though in recent negotiations with Boehner he said he could accept $400,000.

If a deal were to pass the Democratic-controlled Senate, Boehner would have to agree to take it to the floor in the Republican-controlled House.

The stock market was down again Friday amid the developments in Washington. Economists say that if the tax increases are allowed to hit most Americans and if the spending cuts aren't scaled back, the recovering but fragile economy could sustain a shock.
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