Obama says immediate action needed on fiscal cliff

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President Barack Obama says "the hour for immediate action is here" on a deal to avert the fiscal cliff.

The president says he remains "optimistic" that an agreement can be reached in Congress before a looming year-end deadline to avoid tax increases and spending cuts.

If Congress can't reach a deal, the president says Congress should allow a vote on a basic package that would preserve tax cuts for middle-class Americans while extending unemployment benefits for the long-term jobless and working toward a foundation for a broader deal.

The president says an hourlong meeting Friday with congressional leaders was "good and constructive."

Senate leaders say they hope to reach a compromise that could be presented to lawmakers by Sunday, little more than 24 hours before the deadline.

Obama met Friday for about an hour with House Speaker John Boehner, Senate Republican leader Mitch McConnell, Senate Majority Leader Harry Reid and House Democratic leader Nancy Pelosi.

The White House is trying to build support for a proposal it presented a week ago, when Obama urged lawmakers to preserve tax cuts for most Americans while letting rates rise on incomes above $250,000 a year. At the same time, Obama wants lawmakers to extend unemployment benefits for the long-term jobless.

Both sides are trying to prevent a toxic blend of middle-class tax increases and spending cuts from taking effect at the turn of the new year.

"I am hopeful that there will be a deal that avoids the worst part of the fiscal cliff, namely taxes going up on middle class people. I think there can be. I think the odds are better than people think that they could be," said Sen. Chuck Schumer (D-NY).

Any temporary agreement would also extend unemployment benefits for millions of Americans without jobs.

"Tax increases need to be averted. They need to be avoided. They can be, I think. In the end we'll get a deal. The question is the timing, but it is encouraging that both sides are sitting down and continue to have lines of communication open," said Sen. John Thune (R-South Dakota).

But a smaller deal will only delay the issue, leaving the real job for the new Congress coming to work in January. That's discouraging to a group of American CEOs.

"We still have this bigger challenge out there. How are we going to fix the deficit and debt problem? We know we have to make hard choices. We know they have to work together and they have got to get to work on this as quickly as possible," said Maya MacGuinea, Campaign to Fix the Debt.

Wall Street is keeping a close eye on talks in Washington. Analysts fear any delay could unnerve an already jittery stock market.