Back from a holiday break, President Obama and members of Congress are focused on how to avoid the so-called fiscal cliff that involves tax increases and mandatory spending cuts set to take effect January 1st.
The White House and Democrats are warning that the cliff's middle-class tax hikes will hurt consumer confidence and retailers.
"We could solve the greatest economic emergency facing the nation today," said Senate Majority Leader Harry Reid.
White House economists say without a deal to avoid the fiscal cliff, Americans may start closing their wallets during the critical holiday shopping season and curb their spending well into next year.
"One of the many reasons it's important for Congress to extend middle class tax cuts without delay or drama is because it will help to maintain increase in consumer confidence we have seen," said Alan Krueger with the Chairman Council of Economic Advisers.
Both sides say they're ready to compromise to avoid the nearly $600 billion in tax hikes and mandatory spending cuts scheduled to kick in with the New Year, but taxes do remain the sticking point.
Monday Wyoming Republican Senator John Barrasso said entitlement reform will also need to be part of the solution. "It is Medicare and Social Security are the two tidal waves coming at us in terms of the spending."
GOP leaders have said they will need Democrats to give more in order to cut a deal. "It's time for the President to present a plan that goes beyond voices on the left and talking points from the campaign," said Republican Senator Mitch McConnell.
The report from White House economists says middle class families will see their taxes go up about $2,200 next year if Congress doesn't find a compromise.
President Obama spoke with Congressional leaders on the phone over the weekend, but the next round of face-to-face negotiations has not yet been announced.