Susan Walsh / AP
Senate Minority Leader Mitch McConnell of Ky. arrives on Capitol Hill, Monday, Dec. 31, 2012, as fiscal cliff negotiations continued.
By Michael O'Brien, NBC News
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Updated at 2:07 p.m. ??President Barack Obama said that an agreement to prevent automatic tax hikes from taking effect is at "within sight," but not yet complete.
With few remaining hours until the onset of the fiscal cliff ? the combination of automatic spending cuts and tax hikes that take place at the end of 2012 ??the president said that a deal was not yet done. But as of Monday afternoon, there appeared to be significant movement toward a solution to stave off the fiscal cliff before it can inflict damage on the economy.
"Today, it appears that an agreement to prevent this New Year's tax hike is within sight," the president said at the White House. "But it's not done."
Senate Republican sources told NBC News that they had reached an agreement with the administration on income tax levels. Tax rates will be allowed to rise on individual income over $400,000 per year, and household income of $450,000 per year. The tax on estates would rise to 40 percent, with an exemption of $5 million.
Senate Majority Leader Harry Reid says the most important goal in the fiscal cliff talks is "to protect middle class families" but there are a number issues that both sides need to resolve before the deadline hits.
The sticking point involved the "sequester," the automatic and swift cuts to spending that make up the second prong of the fiscal cliff. Republicans have signaled they might let the sequester take effect unless it was offset by other spending cuts; the GOP has also said it might accept a delay, but only for a few months.
The Obama administration, however, is pushing for a longer delay in implementing the sequester. Otherwise, the president said, replacing those automatic cuts must be "balanced" ??shorthand for a combination of new taxes and other spending cuts.
"If Republicans think I will finish the job of deficit reduction through spending cuts alone," he said, "then they've got another thing coming."
Related:?Biden, McConnell broker 'emerging deal,' but deficit reduction remains sticking point
But even amid rising optimism that a deal could be reached, just a handful of hours separated Congress from the actual arrival of the cliff. Though Congress could still conceivably act after New Year's to preserve existing tax rates ? thereby limiting any lasting effect on consumers ? their inability to reach an agreement until the very last minute could still threaten to rattle the economy and markets.
Already, some prominent House Republicans openly wondered whether there was enough time available to approve new legislation before midnight.
"Knowing how this place works, I've been here long enough, I don't see how you get something voted on today," said Rep. Mike Rogers, R-Mich., the top Republican on the House Intelligence Committee. "I just don't see how you do it."
While Congress dangles over the fiscal cliff, Treasury Secretary Tim Geithner warns that the next big battle will be the debt ceiling. Former Senator Judd Greg joins Chris Cillizza to discuss the debt problem.
The House did act late Sunday, though, to clear the way for emergency consideration of Senate legislation if leaders are able to reach an agreement. The House Rules Committee convened with the purpose of dispensing with a rule instilled by Republicans in the early days of 2011 to require that legislation be posted online for a full 72 hours before a vote in the House. GOP leaders had sought that rule to showcase their own transparency, and in reaction to actions by the previous Democratic majority to quickly pass legislation during the health care reform battles of 2010.
Republicans' move to sidestep their own rule underscores the urgency of fiscal cliff talks in the final hours of 2012.
Talks have been helmed for the most part by Senate Minority Leader Mitch McConnell, Ky., for Republicans and Vice President Joe Biden for Democrats. Senate Majority Leader Harry Reid, D-Nev., said late Monday morning that there are "still some issues that need to be resolved before we can bring legislation to the floor."
But there were few ironclad assurances that any agreement McConnell, Reid and Biden manage to reach can be assured passage in Congress.
One leading liberal senator, Tom Harkin of Iowa, took to the floor Monday morning to warn against too many compromises, especially as it relates to taxes.
NBC's Domenico Montanaro reports on the latest in the fiscal cliff negotiations and that this Congress has been the least productive in the modern era.
"I've said no deal is better than a bad deal, and this looks like a very bad deal, the way it's shaping up," he said.
Due to Senate rules, if a senator were to object to advancing compromise legislation, it could significantly delay its passage, or even scuttle an agreement altogether.
The lurching nature of legislating has been characteristic of the Congress during the last two years, and that's a phenomenon that may well continue into the next Congress, when Democrats will continue to retain control of the Senate, and Republicans will hold a slightly slimmer grasp on the House.
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