A failure to meet a midnight deadline to avoid the sharp tax hikes and spending cuts known as the fiscal cliff became inevitable late Monday when Republicans leaders in the U.S. House of Representatives said they couldn't keep waiting for the Senate to send a bill their way.

But lawmakers continued to hold out hope a deal could be reached when Congress reconvenes in the next couple of days, thereby avoid the possibility of a recession as the economy slows down.

While the deadline to prevent tax increases and spending cuts was technically midnight, passage of legislation by the time a new Congress takes office at noon on Jan. 3, 2013 _ the likely timetable _ would eliminate or minimize any inconvenience for taxpayers.

The impasse was remarkable, even for a government grown accustomed to gridlock. As darkness fell on the last day of the year, Obama, Biden and their aides were at work in the White House, while the lights burned in the House and Senate.

The U.S. faces the fiscal cliff because tax rate cuts dating back to President George W. Bush's tenure expire at the end of the year. The pending across-the-board reductions in government spending, which will slice money out of everything from social programs to the military, were put in place last year as an incentive to both parties to find ways to cut spending. That solution grew out of the two parties' inability in 2011 to agree to a grand bargain that would have taken a big bite out of the deficit.

“It appears that an agreement to prevent this New Year's tax hike is within sight,” President Barack Obama said in an early-afternoon status report on negotiations. “But it's not done.”

Senate Republican Leader Mitch McConnell _ shepherding final talks with Vice President Joe Biden _ agreed with Obama that an overall deal was near. In remarks on the Senate floor, he suggested Congress move quickly to pass tax legislation and “continue to work on finding smarter ways to cut spending” next year.

The White House and Democrats initially declined the offer, but several officials said they could reconsider.

For now, more than the embarrassment of a gridlocked Congress working through New Year's Eve in the Capitol was at stake.

Economists in and out of government have warned that a combination of tax hikes and spending cuts could trigger a new recession, and the White House and Congress have spent the seven seeks since the Nov. 6 elections struggling for a compromise to protect the economy.

Even so, with time running out, partisan agendas were evident.

Obama used an appearance Monday to chastise Congress, and to lay down a marker for the next round of negotiations early in 2013 when Republicans intend to seek spending cuts in exchange for letting the Treasury to borrow above the current debt limit of $16.4 trillion.

“Now, if Republicans think that I will finish the job of deficit reduction through spending cuts alone _ and you hear that sometimes coming from them ... then they've got another thing coming. ... That's not how it's going to work at least as long as I'm President,” he said.

“And I'm going to be President for the next four years, I think,” he added.

Officials in both parties said agreement had been reached to prevent tax increases on most Americans, while letting rates rise on individual income over $400,000 and household earnings over $450,000 to a maximum of 39.6 percent from the current 35 percent. That marked a victory for Obama, who campaigned successfully for re-election on a platform of requiring the wealthy to pay more. (AP)