President Barack Obama has met congressional leaders to try to avert a budget crisis that could tip the United States back into recession.
Unless he can reach an agreement with his Republican opponents by the end of this year, severe measures to cut the budget deficit will automatically take effect.
The Republican speaker of the House of Representatives, John Boehner, has described the initial discussions as constructive.
Mr Boehner said his party - which controls the House - was willing to consider increased revenue "as long as it is accompanied by spending cuts".
House Democratic leader Nancy Pelosi said "I feel confident that a solution may be in sight."
Tax cuts are due to expire and extensive new spending reductions are due to take effect next year and the economy has not recovered strongly from the financial crisis.
The aim of the negotiations is to agree a more moderate path for improving the federal budget.
The BBC reports the most difficult divergence is over whether tax rates should increase for higher income groups, the Republicans say they should not.
President Obama insists there will be no extension to the tax reductions for the top 2% of American earners.