President Obama's lead negotiator in the "fiscal cliff" talks said the administration is "absolutely" willing to allow the package of deep automatic spending cuts and across-the-board tax hikes to take effect Jan. 1, unless Republicans drop their opposition to higher income tax rates on the wealthy.
Treasury Secretary Timothy Geithner said in an interview with CNBC that both sides are "making a little bit of progress" toward a deal to avert the "cliff" but remain stuck on Obama's desired rate increase for the top U.S. income-earners.
"There's no prospect for an agreement that doesn't involve those rates going up on the top two percent of the wealthiest," Geithner said.
Most House Republicans, including Speaker John Boehner, remain opposed to any increase in tax rates.
Obama and Boehner spoke by phone this afternoon, their first conversation in exactly one week, an administration official said. Their relations have grown frosty in recent days as both sides have dug in on the issue of higher rates.
In separate appearances earlier today, Obama and Boehner publicly sparred over who's to blame for the standoff and what to do if lawmakers can't reach a broad deficit-reduction agreement in 27 days.
Obama, speaking at a meeting of 100 CEOs, warned Republicans that he would not accept a so-called "doomsday" deal that extends tax cuts for middle-income earners before the end of the year but nothing more.
Such an approach, which has been under consideration by top Republicans as a likely scenario, would set the stage for a big battle over spending cuts and top tax rates in early 2013 – all tied to the nation's debt ceiling, which will need to be raised, which only Congress can do.
"That is a bad strategy for America, it's bad strategy for businesses," Obama said. "It's not a game I will play."
Brinksmanship over the a 2011 debt ceiling increase to avoid a U.S. default cost the country its AAA credit rating and rattled markets around the world.
While both sides say publicly that the U.S. will not default on its debt obligations, Republicans believe the issue could give them increased leverage for extracting cuts to entitlement programs and other spending.
Boehner said at a morning news conference that Obama has stifled the "fiscal cliff" negotiations by imposing the precondition that Republicans accept income tax hikes on the top 2 percent of U.S. earners.
"We're ready and eager to talk to the president and to work with him to make sure that the American people aren't disadvantaged by what's happening here in Washington," Boehner said at a morning news conference.
"We need a response from the White House," he said. "We can't sit here and negotiate with ourselves."
Earlier this week, House Republicans presented a $2.2 trillion deficit reduction package, including $800 billion in higher taxes through elimination of loopholes and deductions, slower annual cost-of-living increases for Social Security benefits and a higher eligibility age for Medicare.
The plan contrasts sharply with the White House proposal, which calls for $1.6 trillion in new tax revenue -- largely from higher rates on upper-income earners -- modest unspecified savings from Medicare and a new burst of economic stimulus spending.
Both sides rejected the opposing plan as "unserious."