President Barack Obama and top lawmakers Friday searched for a deal to stop the US economy tumbling off a "fiscal cliff" next week in a crisis that could cause a new recession and rock global markets.
Obama was to make a statement on the crunch talks at the White House at 2245 GMT, after a sense of crisis built throughout the day over a $500 billion time bomb of tax hikes and spending cuts due to detonate on Tuesday.
Wall Street picked up pessimistic signs, as the Dow Jones Industrial Average dropped 158.20 points or 1.21 percent, as Washington's perennial dysfunction and gridlock threatened to deal a massive self inflicted wound to the economy.
The president met Republicans House Speaker John Boehner and Senate Minority Leader Mitch McConnell, and top Democrats, Senate Majority Leader Harry Reid and House Minority Leader Nancy Pelosi, in the Oval Office.
An aide to Boehner said the talks focused on "potential options and components for a plan that could pass both chambers of Congress" and told Obama that the Senate must go first, before the House acts.
Reid told reporters he hoped the meeting "bears fruit" but there were few concrete details of the talks ahead of Obama's statement.
If no deal is reached by January 1, all Americans will face a tax hike and massive and automatic budget cuts will come into force which budget experts say could trigger a new US recession and cause a spike in unemployment.
The president is banking on a stopgap solution he suggested a week ago that would see taxes on American families earning more than $250,000 go up but would spare the middle class.
Obama did not make a new offer to Republicans during the talks, a source familiar with the meeting said, adding that the president also asked for an extension of expiring unemployment insurance for two million people.
He told Republicans that if they cannot come up with a counter-proposal to avert the fiscal cliff they must allow his plan to come up for a vote in both chambers of Congress, the source said.
Such a scenario would leave Republicans in a tough political spot as if they refuse, it would be easy for the White House to blame them for the economy toppling over the cliff.
It is not clear whether the Obama plan would avert the massive spending cuts due to come into force on January 1 or deal with his separate request to raise the $16 trillion ceiling on government borrowing.
Republicans want to extend George W. Bush-era tax cuts due to expire on Tuesday for everyone and accuse the president of failing to offer meaningful spending cuts in a bargain in return for them agreeing to raise revenues.
Some top lawmakers clung to hope.
"Sometimes, it's darkest before the dawn," said Democratic Senator Chuck Schumer on NBC, saying McConnell's role could be a catalyst for action.
But Republican Senator Bob Corker complained Obama and Democrats in Congress had balked at cutting spending on key social programs weighing on the budget, and inflating the deficit, accusing them of a "total dereliction of duty."
"We're going to end up with a small, kick-the-can-down-the-road bill that creates another fiscal cliff to deal with this fiscal cliff. How irresponsible is that?" Corker told reporters.
Retiring Democratic Senator Ben Nelson warned: "If this meeting is not successful in achieving a proposal, I think you need to get a parachute."
Obama broke off his vacation in Hawaii in search of a last-minute deal and Boehner called the House back to work on Sunday.
The president's scaled-down solution calls for an extension of tax cuts for people earning less than $250,000, and an extension of unemployment benefits before a wider effort to trim the deficit next year.
But it is doubtful the package could pass the House as restive conservatives last week rebuked Boehner by rejecting his fallback plan that would have raised taxes on people earning $1 million.
While each side must for the sake of appearances be seen to be seeking a deal, the easiest way out of the mess might be to allow the economy to go over the cliff, but to fix the problem in the first few days of next year.
In that scenario, Republicans, who are philosophically opposed to raising taxes, could back a bill to lower the newly raised rates on almost all Americans, thus sidestepping the stigma of raising taxes.
Recent polls show a majority of Americans back Obama's handling of the crisis, and would blame Republicans for a failure to fix it, so the president could get a short-term political boost from an early deal next year.
Should the stalemate linger however, the crisis would cloud the early months of Obama's second term, would dent his popularity and could detract from his key political goals like immigration reform and gun control.