AP President Barack Obama waves to reporters as he steps off the Marine One helicopter and walks on the South Lawn at the White House on Thursday.
WASHINGTON—President Barack Obama telephoned congressional leaders from both parties with just a few days left to reach a deal to avoid the year-end tax increases and spending cuts known as the fiscal cliff.
Mr. Obama called House Speaker John Boehner (R., Ohio), Senate Minority Leader Mitch McConnell (R., Ky.), Senate Majority Leader Harry Reid (D., Nev.) and House Minority Leader Nancy Pelosi (D., Calif.) late Wednesday during his vacation in Hawaii "to receive an update on the ongoing fiscal negotiations," White House spokeswoman Amy Brundage said.
The calls come as leaders show little signs of progress toward reaching an agreement before tax increases hit almost every working American. It also marks the first time Mr. Obama has called Mr. McConnell, now seen as one of the keys to brokering a deal, to discuss the fiscal cliff. Mr. Obama and Senate leaders return to Washington Thursday.
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Don Stewart, a spokesman for Mr. McConnell, said, "Last night, the President called Sen. McConnell (the first Democrat to do so on the fiscal cliff since Thanksgiving) and other leaders to discuss the need for the Senate to act. The Leader is happy to review what the President has in mind, but to date, the Senate Democrat majority has not put forward a plan. When they do, members on both sides of the aisle will review the legislation and make decisions on how best to proceed."
After weeks of negotiations between Messrs. Obama and Boehner on a sweeping deficit-reduction package, political leaders are now looking to advance a smaller deal that focuses narrowly on blocking tax increases for most Americans and postponing or replacing scheduled spending cuts. The White House's goal at this stage in the process is to determine what kind of deal might be acceptable to Senate Republicans, officials said.
Time is running short to pass legislation through both chambers of Congress, even if such a deal can be negotiated. To squeeze in under the deadline, it would likely have to pass without hiccups, something Congress hasn't managed in recent history.
A spokesman for Mr. Boehner said of the call, "The speaker told the president that the Senate must now act, which is what he also told him in their Friday phone call. He also reaffirmed to the president that the House has already acted to avert the entire fiscal cliff."
Mr. Reid, the Senate Majority Leader, said Thursday there may not be enough time to avert the cliff, and called on House lawmakers to immediately return to Washington to jump-start negotiations. Seeking to lay blame, Mr. Reid said Mr. Boehner is running the House of Representatives like a "dictatorship" because he won't allow a vote on a Senate-passed measure that would maintain current tax rates on the first $250,000 of household income.
"If we go over the cliff, and it looks like that's where we're headed, the House of Representatives, as we speak with four days left after today ... aren't here," Mr. Reid said.
Meanwhile, the Treasury Department said Wednesday the government would hit its legal borrowing limit by Monday, setting in motion emergency measures to keep the government operating for several more weeks and serving as a reminder that the nation's budget wrangling could continue well into 2013.
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The Treasury's financial maneuvering is designed to put off until February or March the prospect of a full-blown debt crisis. Treasury Secretary 's two-paragraph letter to Congress didn't specify when the emergency measures might be exhausted, blaming the "significant uncertainty that now exists with regard to unresolved tax and spending policies for 2013."
—Timothy Geithner A narrow deal to avert that outcome might not include an agreement to raise the $16.394 trillion debt ceiling, as Democrats have pressed, meaning the big, unresolved questions over how the federal government should raise and spend money are likely to come to the fore as the debt deadline draws near.
The Geithner letter underscored how much the fiscal-cliff deliberations have frozen in place regular governmental activity. Mr. Geithner also said it wasn't possible to know whether the 2012 tax-filing season would be delayed.
When Messrs. Obama and Boehner discussed a broad deficit-reduction agreement as recently as this month, the White House hoped to include a debt-limit increase that would put the issue to rest for two years or more. Mr. Boehner, in his final offer before talks collapsed, showed willingness to raise the debt limit for a year if Mr. Obama agreed to significant cuts in entitlement programs.
A senior Democratic aide said Wednesday the prospect of including a debt-ceiling increase in a deal was "too much of a lift to pass either chamber" of Congress.
The U.S. government has a hard limit on the amount of debt it can accumulate, and only Congress can raise it, which for years was a routine procedure. Without an increase, the U.S. would eventually default on its debt obligations, potentially sparking a financial crisis.
In 2011, the last time the Obama administration notified Congress about nearing the debt ceiling, Republicans said they wouldn't raise the limit unless the White House agreed to major spending cuts. That standoff led to the Budget Control Act of 2011, which included the spending cuts set to take effect next week. It also ultimately led Standard & Poor's Ratings Services to strip the U.S. government of its top-notch credit rating.
Moody's Investors Service, another ratings firm, said Wednesday that reaching the borrowing limit wouldn't change its top rating on the U.S., but it said the firm would downgrade the U.S. "if there is no solution in 2013 that produces a clear picture of the medium-term fiscal outlook and the medium-term debt trajectory."
Mr. Obama has said he wouldn't negotiate with Congress again over raising the debt ceiling, saying it is lawmakers' responsibility to authorize payments for debts the country has already accumulated.
Treasury has known for months that the debt ceiling could be reached in December, which analysts have said would mean the emergency measures would keep the government operating until about late February.
—Janet Hook and Damian Paletta contributed to this article. Write to Carol E. Lee at carol.lee@wsj.com and Michael R. Crittenden at michael.crittenden@dowjones.com
