Senators Offer Dire Take on 'Cliff' Talks

"We're willing to make difficult concessions as part of a balanced, comprehensive agreement, but we'll not agree to cut Social Security benefits as part of a small or short-term agreement," Reid said.

McConnell and Reid were hoping for a deal that would prevent higher taxes for most Americans while letting rates rise at higher income levels, although the precise point at which that would occur was a major sticking point.

Also at issue were the estate tax, taxes on investment income and dividends, continued benefits for the long-term unemployed and a pending 27.5% cut in payment levels for doctors who treat Medicare patients.

As the Senate opened a rare Sunday session, Chaplain Barry Black offered a timely prayer for lawmakers.

"Lord, show them the right thing to do and give them the courage to do it," Black said. "Look with favor on our nation and save us from self-inflicted wounds."

Senate negotiators were haggling over what threshold of income to set as the demarcation between current tax rates and higher tax rates. They were negotiating over estate limits and tax levels, how to extend unemployment benefits, how to prevent cuts in Medicare payments to doctors and how to keep a minimum income tax payment designed for the rich from hitting about 28 million middle class taxpayers.

Hopes for blocking across-the-board spending cuts were fading and Obama's proposal to renew the two percentage point payroll tax cut wasn't even part of the discussion.

Obama pressed lawmakers to start where both sides say they agree -- sparing middle-class families from looming tax hikes.

"If we can get that done, that takes a big bite out of the fiscal cliff. It avoids the worst outcomes. And we're then going to have some tough negotiations in terms of how we continue to reduce the deficit, grow the economy, create jobs," Obama said in the NBC interview.

Gone, however, is the talk of a grand deal that would tackle broad spending and revenue demands and set the nation on a course to lower deficits. Obama and Republican House Speaker John Boehner were once a couple hundred billion dollars apart of a deal that would have reduced the deficit by more than $2 trillion over ten years.

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