Updated 3:10 p.m. — Senate Democrats said talks toward resolving the so-called fiscal cliff before the end-of-year deadline had hit a "major setback" on Sunday afternoon due to a standoff over proposed changes to Social Security. 

Democrats said that Republicans, led by Minority Leader Mitch McConnell, Ky., are insisting that a deal to resolve the fiscal cliff include what is known as "chained CPI" -- a change in how Social Security benefits are calculated to increase over time. 

Just before a self-imposed deadline at which Senate leaders were set to brief their respective caucuses about a prospective deal, negotiations toward a scaled-back agreement to avoid the onset of automatic tax hikes and spending cuts on Jan. 1 appeared on the verge of breakdown.

Related:Obama: GOP's insistence on halting tax hikes for the wealthy is stopping fiscal cliff deal

McConnell said that he had even reached out to Vice President Joe Biden, a former senator who's helped hammer out previous deals, in hopes of jump-starting the talks. 

"He and the vice president, I wish them well," Senate Majority Leader Harry Reid, D-Nev., said on the Senate floor. 

"In the meantime, I will try to come up with something," Reid added of Republicans' latest proposal, "but at this stage I don’t have a counter-offer to make."

Obama had offered chained CPI — which would essentially reduce the rate of growth in Social Security benefits over time — as part of a broader "grand bargain" he had previously proposed to Republicans. The GOP rejected that proposal, and moved from there onto House Speaker John Boehner's "Plan B," an ultimately unsuccessful effort. 

In his interview earlier today on NBC's "Meet the Press," the president pointed to his offer on chained CPI as evidence of his willingness to compromise in pursuit of a broad fiscal deal. 

"One of the proposals we made was something called Chain CPI, which sounds real technical but basically makes an adjustment in terms of how inflation is calculated on Social Security," Obama said. "Highly unpopular among Democrats. Not something supported by AARP. But in pursuit of strengthening Social Security for the long-term I'm willing to make those decisions."

A Senate Democratic aide said that Democrats had thought such a proposal was off the table, though, as part of the talks toward parried-down agreement. 

"It’s basically a poison pill," the aide said of Republicans' demand for chained CPI.

Sen. Lindsey Graham, R-S.C., expressed bewilderment at the breakdown, suggesting that there were more than enough votes for a compromise measure that didn't include chained CPI.

"I don't know what caused this but there's a critical mass of 80 senators who would vote to fix the [alternative minimum tax], the doc fix, extend unemployment insurance, protect everybody 500 thousand and below from a tax increase," he told reporters at the Capitol. "There's 80 senators who will do that without CPI."

McConnell, who spoke briefly on the Senate floor around 2 p.m., struck an ever-so-slightly sunnier note.

"There is no single issue that remains an impossible sticking point," the top Senate Republican said.  "I want everyone to know I'm willing to get this done. But I need a dance partner."

Senators are set to huddle with members of their respective parties this afternoon amid votes to discuss the latest as it relates to the fiscal cliff.

As House members return to town this evening for votes this evening, they'll also caucus with fellow party members to discuss what, if any, way forward there is on the fiscal cliff.

NBC's Frank Thorp contributed reporting.

Updated 6:30 p.m. ET -- President Barack Obama tasked the United States Senate with trying to resolve the “fiscal cliff” in the waning hours before the New Year following a meeting between congressional leaders and the president.

Senate Majority Leader Harry Reid, D-Nev., and Minority Leader Mitch McConnell, R-Ky., will lead the last-minute effort to avert the automatic tax hikes and spending cuts set to take effect on Jan. 1 unless Congress acts. 

And Obama said he is “optimistic” they can reach an accord before midnight on New Year’s Eve, the point at which the government would hit the fiscal cliff.

Absent that, the president said he had asked Reid to instead advance a bare-boned proposal that would extend the 2001 Bush tax cuts for income under $250,000.

Related -- Cliff Notes: Five things to watch at today's White House meeting

“I still want to get this done,” Obama said after his discussions with congressional leaders. He said “the hour for immediate action is here. It is now." 

The president will appear exclusively on Sunday on NBC's "Meet the Press," where he's expected to further outline steps toward reaching a final deal.

The White House talks -- at which Obama presented no new offer to Republicans in Congress -- yielded “no concrete proposal,” Reid told reporters at the Capitol following the meeting.

But in the waning hours before the end-of-year deadline, senators are now scrambling to produce a bipartisan package, at the request of Speaker John Boehner, R-Ohio, that can muster enough support in the House.

Reid, McConnell, Boehner, and House Minority Leader Nancy Pelosi, D-Calif., spent the meeting “discussing potential options and components for a plan that could pass both chambers of Congress,” according to a Boehner aide. 

But the most significant development appeared to be the emerging consensus that any final agreement would have to emerge from the Senate. That deal would necessarily require a “bipartisan approach,” according to the office of McConnell, the Republican leader in the upper chamber.

Among the major sticking points, senior Democratic aides told NBC’s Kelly O’Donnell, involve the income threshold at which tax rates would be allowed to rise and the level at which estates are taxed.

Boehner’s failed effort last week to push through a fallback plan with only Republican votes laid bare the internal GOP divisions after conservatives balked at supporting a plan from the speaker to allow tax rates to rise on income over $1 million.

The unsuccessful effort suggested that Boehner would need to lean upon Pelosi for Democratic votes if a deal -- which has eluded Obama and Congress for the better part of the last two years -- is to pass. 

A Senate-led agreement, though, faces no surefire guarantee of passage in the House. 

“The speaker told the president that if the Senate amends the House-passed legislation and sends back a plan, the House will consider it -- either by accepting or amending,” Boehner’s aide emailed reporters.

The protracted stalemate between Obama-led Democrats and congressional Republicans had prompted Friday's last-ditch meeting at the White House. It lasted just over an hour, and included Vice President Joe Biden and Treasury Secretary Tim Geithner.

Sources familiar with the meeting said that Obama made no new offer to Republicans, urging them to hold an up-or-down vote on a Democratic proposal to preserve existing tax rates for income under $250,000 and extend unemployment benefits (among other unresolved issues). 

It’s that very proposal which Obama said he would ask Reid to advance should he and McConnell fail to strike a deal. 

“I believe such a proposal could pass both houses with bipartisan majorities, as long as those leaders actually allow it to come to a vote,” he said.

Republicans had previously rejected such a proposal, but could feel pressure to relent to administration pressure in order to forestall across-the-board tax hikes in just a few days. The source familiar with the meeting told NBC's Peter Alexander and Kristen Welker that Obama asked Republicans what they would be willing to support, if not that proposal.

Amid negotiations toward a final deal, the House was set to return to Washington on Sunday at Boehner’s request, and remain at work through Jan. 2 -- the final day before the 112th Congress concludes and the next batch of lawmakers are sworn into office.

In the meanwhile, Obama voiced frustration toward the repeated pattern in Congress these past few years of lurching from crisis to crisis before reaching a last-minute deal to stave off catastrophe. 

“The American people are watching what we do here. Obviously, their patience is already thin. This is deja vu all over again,” Obama said. “America wonders why, for some reason, in this town you can’t get stuff done in an organized timetable ... The American people are not going to have any patience for a politically self-inflicted wound to our economy.”

House and Senate leaders from both parties will make their way to the White House this afternoon at President Barack Obama’s request for a last-ditch effort to reach an agreement to avoid the impending fiscal cliff.

Related: Obama bringing lawmakers to Oval Office for last-minute 'cliff' talks

The parties will enter the meeting seeming as far apart as ever on an agreement to avert the combination of automatic tax hikes and spending cuts set to take effect on Jan. 1. Republicans, led by House Speaker John Boehner, R-Ohio, say they have acted – by passing an extension of all of the expiring Bush tax cuts, an unpalatable proposition to Democrats – and now it’s the Senate’s turn.

The speaker’s office said Boehner “will continue to stress that the House has already passed legislation to avert the entire fiscal cliff and now the Senate must act” at tomorrow’s meeting.

And the Senate, led by Majority Leader Harry Reid, D-Nev., is demanding that the GOP-held House assents to a bill that would allow taxes to rise on income over $250,000 per year.

This posturing by both parties amounts to little more than a stalemate in lawmakers’ effort to avert the fiscal cliff, just days before the deadline to forge a deal. With that in mind, here are the variables to watch, which could signal either breakthrough or failure on the fiscal cliff.

TONE: Hopes for a fiscal cliff compromise spiked on Nov. 16 when the same congressional leaders who are gathering Friday appeared jointly following their first meeting at the White House to hail the “constructive” conversation, all the while avoiding the usual partisan barbs.

Negotiations have deteriorated in the weeks since then, to say the least.

But with time running out before the end-of-year deadline, how or whether lawmakers speak following their meeting with Obama could speak volumes about the prospects for a deal.

If Boehner, Reid, House Minority Leader Nancy Pelosi, D-Calif., and Senate Minority Leader Mitch McConnell, R-Ky., appear jointly – as they did in mid-November – it might portend good things about a potential resolution to the fiscal cliff.

But if they take to the microphones outside the West Wing separately (or issue statements), offering more vitriolic rhetoric and finger pointing, it would suggest bleak prospects for ongoing negotiations.

PROCESS: Much of the recent stalemate in Congress, as outlined above, involves whether it’s up to the House or the Senate to act first to resolve the fiscal cliff.

Recommended: Nearly out of time, lawmakers brace for blame on fiscal cliff

Neither party wants to be the one to make the first major concession, meaning that the House is looking to the Senate (and vice-versa) to be the first chamber to “jump,” so to speak.

Boehner has clearly and repeatedly signaled his desire to let the legislative process take its course. He argues that the Senate should amend any of the earlier tax bills that the Republican House has passed. The Senate could conceivably gut that legislation, replace it with any alternative that the upper chamber desires, and send it back to the House to see whether it can pass.

Alternatively, Reid is simply demanding that Republicans pass an existing Democratic tax bill, which would preserve existing tax rates on income under $250,000 a year. (Republicans counter that this law has a so-called “blue slip” problem –asserting that it’s procedurally flawed because tax bills cannot originate in the Senate, according to the Constitution.)

If the leaders emerge from their meeting at the White House with a clear idea of which chamber might act first, it would be a first step toward resolving the fiscal cliff by the New Year’s Eve deadline.

NUMBERS: Senate Democrats want the House to pass a bill that would preserve existing tax rates on incomes below $250,000.

Obama offered a deal to Boehner that would preserve income beneath a slightly higher threshold: $400,000 per year.

Boehner tried – and failed – to pass a bill (his “Plan B”) that would have kept tax rates the same for all income under $1 million.

If the leaders emerge from the White House today with some sort of number on which they have agreed, it could provide the framework for a final agreement.

Related: Boehner calls House back to Washington on Sunday

Just as important have been the topline numbers – that is, the target total savings in an agreement as collected from new taxes, or alternatively, spending cuts.

The president initially sought $1.6 trillion in new tax revenue before lowering that target to $1.4 trillion. Republicans offered $800 billion in revenue, which they said could be collected through tax reform that closes a number of deductions and loopholes.

At the same time, Obama’s last offer to Boehner included $1.2 trillion in spending cuts, including $400 billion in savings from entitlement programs.

An agreement of that scale seems unlikely with just a few days to go until the deadline, but an agreement on these topline numbers – either on a small deal, or a big deal – would suggest a degree of progress toward a solution.

CAN-KICKING: One option available to lawmakers would be to do something they’ve done all along: punt the problem to a later deadline.

In many respects, the fiscal cliff represents the ultimate example of lawmakers’ habit of kicking the can down the road. The automatic spending cuts that compose part of the cliff grew out of their inability to reach an agreement with Obama on taxes and spending during the debt ceiling fight in 2011. And the impending tax hikes are the byproduct of a two-year extension of the 2001 Bush tax cuts past their original expiration date in 2010.

But what Congress can do, it can also undo. And that means they could conceivably agree to delay the onset of the fiscal cliff for weeks, months or even a year to give themselves breathing room to negotiate a deal.

Furthermore, a decision to delay the fiscal cliff could mean that the contours of a fiscal cliff compromise have taken shape, and that lawmakers just need more time to hammer out the details. Alternatively, another can-kicking incident could rattle markets thanks to another instance of governing by lurching from crisis to crisis. Furthermore, it would do little to resolve the uncertainty on taxes that is hanging over many businesses heading into the new year.

THE FLANKS: Lastly, it’s important to keep an eye on the flanks in both parties – liberal Democrats and conservative Republicans – in terms of how they react to today’s meeting, and any possible deal that might emerge.

How many liberals or conservatives finish the day rattling their sabers, versus sitting on their hands?

The more anger there is on either flank toward any potential proposal, the more difficult it becomes for leaders in the House and Senate to find the necessary votes to approve an agreement – especially in such a politically polarized environment.

The importance of the flanks played vividly last week in the House, when conservatives refused to go along with Boehner’s “Plan B” (the proposal that would have allowed taxes to go up on millionaires) because, as the speaker put it, “they were dealing with the perception that somebody might accuse them of raising taxes.”

Jonathan Ernst / Reuters

President Barack Obama returns from Christmas visit in Hawaii to the White House, Dec. 27, 2012.

Any final agreement will almost certainly have to involve both Democratic and Republican votes. But if either party’s base is incensed by Friday’s meeting at the White House, it would make mustering the political willpower to pass an agreement that much more difficult.

Updated 2:48 p.m. - The Senate’s top Democrat said Thursday that he was pessimistic that Washington could avoid the impending fiscal cliff, accusing House Speaker John Boehner, R-Ohio, of running the lower chamber as a “dictatorship.”

Senate Majority Leader Harry Reid, D-Nev., said he was unsure there was enough time between now and the end of the year to reach a deal to avoid the combination of spending cuts and tax hikes set to take effect on Jan. 1. Reid said “the only viable escape route” was for the GOP-controlled House to give its approval to a Senate bill that would preserve existing tax rates on income under $250,000.

“Everyone knows that if they had brought up the Senate-passed bill, it would pass overwhelmingly. But the speaker says, no we can't do that,” Reid said on the Senate floor this morning. “It's [the House] being operated by a dictatorship of the speaker.”

In response, a spokesman for Boehner said in a statement,  "Senator Reid should talk less and legislate more. The House has already passed legislation to avoid the entire fiscal cliff.  Senate Democrats have not."

Recommended: The Top 10 political events of 2012

Reid’s remarks suggest there has been no thaw in the stalemate that has plagued Washington for weeks, as consensus continues to elude Republicans and Democrats on averting the fiscal cliff. Amid the standoff, President Barack Obama called Reid and  Boehner (along with House Democratic Leader Nancy Pelosi and Senate GOP Leader Mitch McConnell) late Wednesday from Hawaii. The president traveled back to the White House on Thursday following his brief family vacation.

"The leader is happy to review what the president has in mind, but to date, the Senate Democrat majority has not put forward a plan," said a spokesman for McConnell. "When they do, members on both sides of the aisle will review the legislation and make decisions on how best to proceed."

The discord almost gave way to an agreement on Thursday, as outgoing Massachusetts Sen. Scott Brown, R, posted on social media that he was rushing back to Washington to mull over a new offer Obama had made to Senate Republicans. Alas, those were false hopes; the administration and Senate Democrats flatly denied that they had made any new offer, and said that no agreement was imminent.

Both parties departed Washington on poor terms, a political chasm widened last week by Boehner’s unsuccessful pitch of “Plan B” legislation meant to extend tax rates on income under $1 million. Obama had vowed to veto it, and Boehner’s backup plan was generally regarded as more of a negotiating ploy than a comprehensive solution to the impending fiscal cliff. Nonetheless, conservatives balked at the speaker’s plan, laying bare Boehner’s ability to rally most Republicans behind any deal that even hinted at raising taxes.

And just five days before the onset of the fiscal cliff, Washington was locked in little more than a staring match between the House and Senate.

Republican leaders said in a joint statement on Wednesday that the Senate must amend Republican-passed legislation and return it to the House before any steps can be taken.

“The House will take this action on whatever the Senate can pass, but the Senate first must act,” the GOP leaders said.

But Reid said that arcane Senate rules prevented him from bringing up anything new for a vote. Republican leaders argue that the Senate bill also faces procedural flaws which would prevent it from consideration in the House; Democrats assert that the excuse is nonsense.

In the meantime, it appears that Thursday might be a lost day for negotiations. Obama landed in Washington around midday, but most House members remain in their districts. But Republican leaders notified their rank-and-file members that the House would be in session at 6:30 p.m. on Sunday, and remain so for the remainder of the year. The Senate is in session on Thursday, but is concentrating on other unfinished business from this year.

The absence of the House, though, prompted Reid to lay into Republicans and fret that a fiscal cliff failure was all but inevitable.

“If we go over the cliff, and it looks like that's where we're headed, Mr. President – the House of Representatives as we speak with four days left after today before the first year aren't here with the speaker telling him he'll give them 48 hours’ notice," he said. "I can't imagine their consciences – they're out wherever they are around the country and we're here trying to get something done."

Mary F. Calvert / Reuters

The U.S. Capitol building is pictured as lawmakers return from the Christmas recess in Washington Dec. 27, 2012.

Amid the standoff, each party was left bracing for the potential political fallout associated with a fiscal cliff failure.

The bleak atmosphere in Washington appeared to be extending across the country, for instance. A Gallup poll conducted Dec. 21-22 – as lawmakers left the Capitol for the Christmas holiday with no deal in hand – found that optimism in leaders’ ability to reach a deal had declined; just 50 percent viewed a deal as somewhat or very likely, versus 48 percent who said a fiscal cliff agreement was not too or very unlikely.

And as Congress and the administration appears set to do anything but, 68 percent of Americans said they thought the principal actors should compromise, versus sticking rigidly to their ideological guideposts.

Updated 1:53 p.m. - Republicans, confident that they would have the votes to be successful, said they would push ahead with their alternative plan to resolve the "fiscal cliff," even as Senate Democrats said the GOP proposal would never even be allowed a vote in their chamber.

GOP leaders said they intended to follow through with their vote to pass a pair of bills which would preserve tax rates on income less than $1 million and approve new spending cuts in place of the automatic cuts -- many to defense -- set to take effect on Jan. 1. 

"Absent a balanced option from the president, this is our nation's best option," House Majority Leader Eric Cantor, R-Va., told reporters on Capitol Hill. "And Senate Democrats should take up both of these measures immediately."

President Barack Obama has promised to veto the legislation; it is virtually dead-on-arrival in the Senate, where Democrats oppose the proposal.

"Until Republicans take up our bill in the House -- the one that passed here -- there's nothing to discuss," said Senate Majority Leader Harry Reid, D-Nev. "We're not taking up any of the things they're working on over there now." 

The partisan standoff devolved into protracted gamesmanship that appeared to move Democrats and Republicans no closer to a deal to resolve the fiscal cliff just 12 days before its onset. Much of Thursday's action in Washington, represented in a series of dueling press conferences throughout the day, seemed to have more to do with positioning each party for the possibility of failure than reaching the kind of agreement that has eluded lawmakers for so long. 

"After today, Senate Democrats and the White House are going to have to act on this measure," Boehner said at an afternoon press conference. "If Senate Democrats and the White House refuse to act, they'll be responsible for the largest tax hike in American history." 

With less than 12 days until the tax hikes and spending cuts which compose the "fiscal cliff" will snap into place, Republicans remain locked in a stalemate with Obama over the extent of the expiring tax rates they should extend, as well as how deep of cuts should be made -- and to which programs. 

Republicans' Plan B proposal, on which the House will vote this evening, came after the White House offered a deal in which no taxes would go up on income under $400,000, along with changes as to how Social Security benefits would be allowed to grow in coming years. But the administration views the plan as a non-starter, meaning that today's vote serves little more purpose than to posture the GOP for the final stages of negotiations (or, for the political fallout that would result from going over the fiscal cliff.) 

J. Scott Applewhite / AP

House Majority Leader Eric Cantor, R-Va., second from right, walks to a Republican strategy session with Speaker of the House John Boehner, R-Ohio, at the Capitol in Washington, Tuesday, Dec. 18, 2012.

"I've done my part," Boehner said about the state of negotiations. "They've done nothing." 

A handful of conservative Republicans, who oppose tax increases in virtually every instance, have said they would vote against their leadership on Plan B, making House Speaker John Boehner's, R-Ohio, task in approving the bill more difficult. Boehner can suffer only 24 defections from fellow Republicans if no Democrats break ranks and support the plan. 

Cantor, on Thursday, confidently predicted the bill would have adequate support when it reaches a final vote, tentatively scheduled for this evening. 

"We're going to have the votes to pass both the permanent tax relief bill as well as the spending reduction bill," he said. 

At the same time, Democrats ridiculed Republicans' strategy as a waste of time given Obama and Senate Democratic leaders' stated opposition to even allowing for consideration of the plan. 

But the speaker said he wasn't convinced his backup proposal really was dead in the Senate. "I'm not convinced at all that when the bill passes the House today, it will die in the Senate," he said. 

The impending Christmas holiday -- along with some congressional leaders' travel to Hawaii this weekend for the funeral of the late Sen. Daniel Inouye, D -- means there are few working days left for Republicans to resolve their standoff with Democrats and Obama. 

Reid said that senators would be asked to return to Washington next Thursday, four days before the fiscal cliff. 

Cantor said that the plan -- as of now -- was for lawmakers to stay in Washington following tonight's Plan B vote.

"We do not intend to send members home after this vote," he said. "We want to stay here, we want to avoid the fiscal cliff from happening." 

Boehner also said the House would stay in Washington past tonight's vote, though he would not say for how long.

Updated 1:36 p.m. ET - Capitol Hill leaders emerged from their meeting Friday with President Barack Obama sounding optimistic about their ability to reach consensus on vexing tax and spending issues and avoid the impending "fiscal cliff."

Just weeks before an end of year deadline -- when a series of income tax cuts are set to expire just as billions in automatic spending cuts stipulated in the 2011 debt ceiling deal will take effect -- House and Senate leaders suggested they had made progress during their first meeting with President Barack Obama since he won re-election last week. 

"I think we're all aware that we have some urgent business to do," Obama said at the top of the meeting, House Speaker John Boehner, R-Ohio, to his right and Senate Majority Leader Harry Reid, D-Nev., to his left.

That urgency, apparently, was not lost on Republican and Democratic leaders who appeared jointly after the hourlong meeting to express their optimism that a deal was within reach. The word of the day was "constructive," a term which each leader used to describe their talks on Friday.

"I feel very good about what we were able to talk about in there," said Reid. "We have the cornerstones of being able to work something out."

Boehner, the GOP speaker who faces a tough task in convincing conservatives to sign off on any final deal, referenced a framework he's offered tying tax reform to changes in entitlement programs as keeping with Obama's own goals. 

"I believe that the framework that I've outlined is consistent with the president's call for a fair and balanced approach," he said following the meeting. 

Both Obama and Republican leaders in Congress have sketched broad outlines for the type of deal on which they could agree. The president has insisted that wealthier Americans share a higher tax burden as part of any deal's outcome, an idea on which he campaigned against GOP presidential nominee Mitt Romney.

"Our challenge is to make sure that we are able to cooperate together, work together, find some common ground, make some tough compromises, build some consensus to do the people's business," the president said at the top of the meeting, adding later: "My hope is this is going to be the beginning of a fruitful process where we're able to come to an agreement that will reduce our deficit in a balanced way and deal with some of the long-term impediments to growth."

Boehner's office suggested after the meeting that the leaders' focus would turn to setting long-term targets on levels of taxing, spending and entitlement reform that could be presented to lawmakers after Thanksgiving.

Pool / Getty Images

President Barack Obama shakes hands with Speaker of the House John Boehner during a meeting with bipartisan group of congressional leaders in the Roosevelt Room of the White House on November 16, 2012 in Washington, DC.

Republicans have said they are open to new revenue, as long as it is the byproduct of tax reforms that lower rates and close loopholes and limit deductions. Boehner has also said tax reforms should be linked with steps toward shoring up the solvency of entitlement programs.

"I can say on the part of my members that we fully understand that you can't save the country until you have entitlement programs that fit the demographics of a changing America in the coming years," said Senate Minority Leader Mitch McConnell, R-Ky., following the meeting. "We're prepared to put revenue on the table provided we fix the real problem, even though most of my members -- I think, without exception -- believe we're in the dilemma we're in not because we tax too little, but because we spend too much."

Nonetheless, the leaders' tone following the meeting was a marked departure from much of the toxic rhetoric that had enveloped Washington for much of 2011, when a standoff between Republicans in Congress and Obama brought the government to the brink of shutdown several times and almost produced a default on the national debt.

"The president and the leadership had a constructive meeting and agreed to do everything possible to find a solution that averts the so-called 'fiscal cliff.' and to work together to find a balanced approach to reduce our deficit that includes both revenues and cuts in spending and encourages our long-term economic and job growth," White House press secretary Jay Carney said of the meeting. "Both sides agreed that while there may be differences in our preferred approaches, we will continue a constructive process to find a solution and come to a conclusion as soon as possible."

That August 2011 debt deal produced the series of automatic spending cuts, known as the "sequester," as part of the deal to extract an agreement to raise the debt limit. The sequester would inflict heavy and immediate cuts, especially to the defense budget, and was designed purposefully as such to offer lawmakers a political incentive to reach some sort of fiscal alternative. 

Complicating matters are the 2001 Bush income tax cuts, which were extended for two years by Obama in 2010, which are set to automatically expire (along with a payroll tax break) at the end of this year.

But talks over how to best address the looming sequester stalled for much of 2012, putting lawmakers now against a heard deadline to reach a deal. Economists have worried that the combined effect of tax hikes and spending cuts would have a perilous effect on the economy.

Adding to the encouraging signs, both Reid and House Minority Leader Nancy Pelosi, D-Calif., suggested that they could reach a deal before the end of the year. In Pelosi's case, she urged her colleagues to adopt a deadline before Christmas. 

Lawmakers are away from Washington on recess for the Thanksgiving holiday next week, during which, Reid said, talks would continue on how to best address the fiscal cliff. He said the leaders hoped to meet with Obama again shortly after the break. 

Updated 12:41 p.m. - GREER, S.C. -- Mitt Romney said Thursday that he had never paid less than a 13 percent effective tax rate after reviewing his returns from the past decade.

The presumptive Republican presidential nominee did not pledge to release any additional returns beyond what he had previously pledged, but essentially quashed rumors that he paid no taxes at some point.

Evan Vucci / AP

Republican presidential candidate Mitt Romney arrives at Birmingham International Airport, Ala., before boarding a plane for fundraising events Aug. 16.

"Given the challenges that America faces -- 23 million people out of work, Iran about to become nuclear, one out of six Americans in poverty, -- the fascination with the taxes I paid I find to be very small-minded compared to the broad issues we face," Romney told reporters gathered for a press conference at the Greer airport in South Carolina, where Romney had just arrived to attend a fundraiser.

"I did go back and look at my taxes, and, over the past 10 years, I never paid less than 13 percent," he said, later adding: "Every year, I paid at least 13 percent, and if you add in, in addition, the amount that goes to charity, the number gets well above 20 percent."

But the former Bain Capital executive has been dogged by accusations -- principally from Senate Majority Leader Harry Reid (D-NV) -- that he had skirted paying taxes.

"Harry Reid's charge is totally false. I'm sure waiting for Harry to put up who it was who told him what he says they told him. I don't believe him for a minute, by the way," Romney said.

Romney has released his tax returns from 2010, which reflected that he paid a 14 percent effective tax rate. This was because most of his income came from investments, which are taxed at a lower rate than employment income.

Democrats have highlighted the discrepancy between investment and employment income in making their case for comprehensive tax reform in which the wealthiest Americans would face a higher tax burden.

The former Massachusetts governor has vowed to make public his 2011 tax returns before Election Day, but Romney has strenuously resisted making any of his other returns public.

The White House has distanced itself from Senate Majority Leader Harry Reid’s comments that GOP presidential candidate Mitt Romney hasn’t paid taxes in a decade.

LAS VEGAS -- Mitt Romney said Friday that he has paid taxes "every year," vigorously disputing an assertion by Senate Majority Leader Harry Reid (D-NV) that the presumptive Republican presidential nominee paid no income taxes for a decade.

“Harry Reid really has to put up or shut up,” Romney told reporters following a rally here.

“Let me also say, categorically, I have paid taxes every year. And a lot of taxes. So Harry is simply wrong and that is why I am so anxious for him to give us the names of the people who put this forward. I wouldn’t be at all surprised to hear the names are people from the White House or the Obama campaign or who knows where they are coming from,” Romney added.

Romney's heated words toward the Senate's top Democrat follows Reid's repeated assertion this week that an investor in Romney's former firm, Bain Capital, confided that Romney had paid no taxes for 10 years. Reid hasn't substantiated the claim, nor has he identified his source, but that hasn't stopped the claim from advancing.

Reid wouldn't back down on Friday, either, issuing a statement calling for the release of more of the presumptive GOP nominee’s tax returns.

Rick Wilking / REUTERS

Republican presidential candidate Mitt Romney makes a point at a campaign event in Golden, Colorado August 2, 2012.

"Romney's message to Nevadans is this: he won't release his taxes, but he wants to raise yours,” Reid’s statement said. "It's hard to say which is more insulting to Americans' intelligence, Mitt Romney's tax plan or his refusal to show the American people what's in his tax returns.”

But asked why Romney won’t just release more of his tax returns to silence the attacks, the former Massachusetts governor said he is just following suit.

“I’m following the precedent set by the last presidential candidate of our party, John McCain, putting out two years of income tax returns and putting out a financial disclosure statement, those as required by law, of course,” Romney said.

Speaking to reporters during his first stateside press conference since last month's jobs report, Romney said these attacks by the Senate majority leader – in addition to those by President Barack Obama – are not what the country should be focusing on right now.

“I had hoped it would be a debate on the direction of the country but what we are seeing instead is one attack after the other that are misleading, false attacks,” he said. “The president’s ads saying I am going to raise taxes on the middle class. That’s patently, simply false. The president has now raised taxes on the middle class as so determined by the Supreme Court.”

The Senate's top Democrat announced Tuesday that he and House Speaker John Boehner (R-OH) had reached an agreement to keep the government open and funded through early next year.

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Senate Majority Leader Harry Reid (D-NV) said that he and Boehner had agreed on a temporary, six-month extension of government funding in order to avert a Sept. 30 government shutdown unless Congress had acted.

J. Scott Applewhite / AP

Senate Majority Leader Harry Reid announces to reporters on Capitol Hill July 31 that lawmakers have reached an agreement to keep the government running on autopilot for six months when the current budget year ends on Sept. 30.

"This agreement reached between the Senate, the House and the White House provides stability for the coming months, when we will have to resolve critical issues that directly affect middle class families," Reid said on Capitol Hill.

The six-month bill will maintain the topline funding level of $1.047 trillion, Reid said, announcing as well that a vote on the extension is likely for early September.

The agreement allows lawmakers to avoid the specter of a shutdown with just weeks to go until Election Day, a motivating factor that prodded negotiators to reach a deal. A Republican leadership aide told NBC News that the GOP did not want to risk a distraction from its central messaging on President Obama's economic record.

"Taking this issue off the table will keep the larger focus on jobs, the economy, and President Obama's failed economic policies," the aide said. "That's where Republicans win and Democrats lose."

The topline number was taken from the "Budget Control Act" passed last year by Congress to prevent a default on the nation's debt. Both Democrats and Republicans each achieved some of their goals in this deal, too. Conservative Republicans had wanted to cut the toplinenumber -- over the objections of Democrats -- but had agreed to maintain current spending levels in exchange for a six-month extension instead of the yearlong deal Democrats had preferred.

Appropriators will work up the legislation's formal language over the August recess, and its formal passage seems to be more of a formality considering the joint agreement between Reid, Boehner and President Obama. While a GOP operative told NBC News that some “discontent amongst the real conservative rank and file is possible” because the bill won’t cut current spending, it probably would not be enough to jeopardize the bill’s passage in the House.

Not to be lost, because the agreement only lasts six months, the expiration of this deal in early 2013 will add to a large, looming and contentious budget fight set for the beginning of the 113th Congress.

Updated 12:57 p.m. - President Barack Obama hailed a Supreme Court opinion upholding his signature health reform law as "a victory for people all over this country," as Mitt Romney led galvanized conservatives in vowing to seek the legislation's repeal.

The political stakes imbued in the high court's 5-4 ruling allowing the Affordable Care Act to stand were starkly evident by midday Thursday in Washington, as Obama and Romney, the presumptive Republican presidential nominee, laid out clearly different visions when it came to the law, "Obamacare."

The opinion, written by Chief Justice John Roberts, who joined the court's liberals, determined that the act's individual mandate -- the requirement that individuals purchase health insurance, or face a penalty -- was constitutional as a tax.

"I know there will be a lot of discussion today about the politics of all this, about who won and who lost," Obama said in remarks at the White House, in which he emphasized many of the law's benefits. "That discussion completely misses the point. Whatever the politics, today's decision was a victory for people all over this country whose lives are more secure because of this law and the Supreme Court's decision to uphold it."

Related: Supreme Court upholds health care law

A few minutes earlier, Romney renewed his promise to seek the full repeal of the law from his first day in office.

"What the court did not do on the last day of its session I will do on my first day as president," Romney said. He called the court's opinion both bad law and bad policy.

Each candidate's comments underscored, though, the political dividing lines that will shape the battle for control of the White House and Congress this November.

J. Scott Applewhite / AP

House Minority Leader Nancy Pelosi of Calif. relays the breaking news to her staff that the Supreme Court had just upheld the Affordable Care Act, June 28 on Capitol Hill.

For Obama and Democrats, the decision represented an unmitigated victory after he had championed passage of the law at considerable political expense.

And for Romney, the decision is poised to mobilize conservatives who have, at times, been less than enthusiastic about his candidacy. A number of Republicans' statements in reaction to the ruling emphasized the need to defeat Obama this fall. As a token of that enthusiasm for Romney, his campaign's aides boasted of raising hundreds of thousands of dollars in donations after the decision was handed down.

"This is now a time for the American people to make a choice," Romney said in remarks to reporters in downtown Washington. "Our mission is clear" -- if we want to get rid of Obamacare, we're going to have to replace President Obama."

The president treated the Affordable Care Act as a settled matter, now that the court has ruled. He urged the country to move forward.

"The highest court in the land has now spoken. We will continue to implement this law, and we'll work together to improve upon it where we can," Obama said. "But what we won't do -- and what the country can't afford to do -- is re-fight the political battles of two years ago, or go back to the way things were."

But already, House Republicans have scheduled a vote to repeal the law for July 11. They have made similar attempts in the past, but their legislation has failed in the Senate, where a supermajority of 60 votes is needed to advance legislation.

"Today's ruling underscores the urgency of repealing this harmful law in its entirety," said House Speaker John Boehner (R-OH) in a statement. "Republicans stand ready to work with a president who will listen to the people and will not repeat the mistakes that gave our country Obamacare."

Vote now: Do you agree with Supreme Court ruling on health care law?

Democrats, though, were jubilant. Many liberals had been bracing for defeat in front of the Supreme Court after the conservative jurists aggressively questioned Obama administration lawyers in oral arguments earlier this year.

House Minority Leader Nancy Pelosi (D-CA) helped shepherd the law to passage in the House as speaker in spring of 2010; Democrats lost control of the chamber in that fall's midterm elections, in part due to Republican-driven fury toward the health reform law.

"In passing health reform, we made history for our nation and progress for the American people," she said in a statement. "Today, the Supreme Court affirmed our progress and protected that right, securing a future of health and economic security for the middle class and for every American."

Democratic aides on Capitol Hill said that Pelosi this morning called Vicki Kennedy, the widow of the late Sen. Edward Kennedy (D-MA), a longtime champion of health reform.

"Now, Teddy can rest," Pelosi told Kennedy.

Senate Majority Leader Harry Reid (D-NV), speaking on the Senate floor, said he was "pleased to see the Supreme Court put the rule of law ahead of partisanship."

It was difficult, hours after the opinion was issued, to discern how the day's news would affect the long arc of the presidential campaign.

Romney has mostly focused his criticism of Obama on the anemic state of the economy; the health reform law Romney had signed as governor of Massachusetts also included an individual mandate. (Obama, in his remarks, took a shot at Romney, noting that many political figures had supported that provision, "including the current Republican nominee for president.")

But while the Supreme Court's opinion lets stand the Affordable Care Act, the law still invites intense political reaction from voters, and it's likely to remain as a central issue in the electoral battle for the presidency and control of Congress.

An NBC News/Wall Street Journal poll released earlier this week found that 37 percent of Americans said they would be pleased if the court struck down the law, while 22 percent would be disappointed.

And more Americans -- 41 percent -- said they thought the law was a bad idea, versus 35 percent who said it was a good plan.