US President Barack Obama has called Congressional leaders to talks at the White House to try to stop the US falling over the “fiscal cliff”.
Republicans and Democrats have only four days to reach an agreement before hundreds of billions of dollars of tax rises and spending cuts take effect.
Analysts say sliding over the “cliff” could tip the US into recession and set back the global economic recovery.
President Obama cut short his holiday in Hawaii to resume the negotiations.
The BBC’s Jonny Dymond in Washington says it is very difficult to see how a solution can be reached before the new year.
The Democratic majority leader in the Senate, Harry Reid, said he thought a deal was unlikely and Senate Republican leader Mitch McConnell said his colleagues were unwilling to sign a blank cheque.
White House officials confirmed Friday’s talks at 15:00 EST (20:00 GMT) in a brief announcement that the president would “host a meeting”.
“We’ll see what the president has to propose. Members on both sides of the aisle will review it, and then we’ll decide how best to proceed,” Mr McConnell said.
“Hopefully there is still time for an agreement of some kind that saves the taxpayers from a wholly preventable economic crisis.”
Analysts say the two political parties remain far apart, particularly over plans to increase taxes on the wealthiest Americans.
President Obama wants to ensure that taxes do not rise for Americans earning under $400,000 (£250,000), and insists on raising new tax revenue in any deal.
But many Republicans oppose new taxes, and an alternative plan proposed by Republican Speaker of the House of Representatives John Boehner – which would have seen taxes rise only on those earning over $1m – failed in the lower house of Congress late last week.
In the Senate chamber on Thursday, Mr Reid said the requirement to get at least 60 of 100 votes to move to a vote on any legislation almost certainly doomed any new plan unless Republicans gave it strong backing.
“It looks like that [the fiscal cliff] is where we’re headed,” Mr Reid said.
Mr McConnell said that while Senate Republicans would consider any proposal sent to them by Democrats, they would not “write a blank cheque” to resolve the fiscal cliff.
The term fiscal cliff refers to the combination of almost $600bn (£370bn) of tax rises and spending cuts due to come into force on 1 January if Congress does not pass new legislation.
Sweeping tax cuts passed during the presidency of George W Bush will expire, eventually affecting people of all income levels, and many businesses.
Other tax cuts and benefits to expire include:
- A 2010 payroll tax cut, the expiration of which would prompt immediate wage-packet cuts
- Benefits for the long-term unemployed
- Compensation for doctors treating patients on federal healthcare programmes
- Inheritance taxes are also likely to be affected if no deal is reached.
In addition, spending cuts mandated by a law passed to break a previous fiscal impasse in Congress will come into force, affecting both military and domestic budgets.
The cuts are expected to affect federal government departments and the defence sector, as well as hitting unemployment insurance and veterans’ support.