Fiscal cliff deal can be reached, say leading Republicans and Democrats

Both sides of Washington's political divide expressed optimism Sunday that a deal could be struck to avoid the "fiscal cliff" of swingeing spending cuts and tax increases that could put the US economy back into reverse.

Speaking on Fox News Sunday, Republican senator Bob Corker acknowledged that raising revenue from America's rich would have to be part of the plan to reduce soaring national debt. But he pushed for the closing of loopholes as a way to increase the government take, rather than upping the tax rate on millionaires.

Nonetheless, Corker suggested that a "basis for the deal" with Democrats existed. David Axelrod, one of President Barack Obama's closest aides, also appeared to suggest there was room for compromise.

"Obviously there is money to be gained by closing some of these loopholes and applying them to deficit reduction," Axelrod told CBS's Face the Nation. "I think there are a lot of ways to skin this cat, so long as everybody comes with a positive attitude towards the task."

Such comments will raise hopes that a deal will be reached before scheduled $600bn spending cuts and tax increases take effect at the end of the year. Some economists fear that a failure to avoid falling off the so-called "fiscal cliff" could be catastrophic for the US economic revival, plunging it back into recession.

President Obama has invited congressional leaders to the White House next week, to begin the process of hammering out a deficit-reduction package that is acceptable to both parties. Despite encouraging remarks from Republicans and Democrats on Sunday, an ideological divide will still need to be breached.

Last week, John Boehner, the Republican Speaker of the House of Representatives, reiterated his party's commitment to blocking tax rises, although he appeared more open to the idea of increasing revenue through changes in the tax code.

Obama used the first radio address of his second term to confirm that he would stick by an election pledge to increase the government's take from America's super-rich.

Obama said that a deficit reduction plan based on spending cuts alone was a non-starter: "I refuse to accept any approach that isn't balanced. I will not ask students or seniors or middle-class families to pay down the entire deficit while people making over $250,000 aren't asked to pay a dime more in taxes."

The president added that he believed his election victory over the Republican challenger Mitt Romney had given him a mandate to carry out his promise. "This was a central question in the election. And on Tuesday, we found out that the majority of Americans agree with my approach," he said.