LOS ANGELES, CA (Catholic Online) - Both Republicans and Democrats are optimistic that they will reach an agreement before New Year's Day, January 1st. The White House says that President Obama will fly back from Hawaii, where he's been on vacation with his family in time to get back to work before the end of this week.

Officials are seeking to avert a doomsday scenario of income tax hikes, investment tax hikes, defense cuts and a cut-off in long-term unemployment aid that would happen all at once if no agreement is reached. However, few are saying how they intend to accomplish this.

A spokesman for House Speaker John Boehner said the president and the speaker did not talk over the weekend and both representatives for the Republican and Democratic Senate leaders say they have "nothing" to report. Everyone agrees that reaching an agreement is easier said than done.

Boehner has abruptly pulled his "Plan B" proposal from the floor, saying it lacked support from Republicans. That bill, though fiercely opposed by Democrats, would have extended current tax rates for all but those making over $1 million.

In the meantime, Obama aides and lawmakers are now talking about a scaled-down package as the most likely vehicle for solving the problem, something that could at least prevent most of the scheduled tax hikes and maybe extend jobless aid.

Lawmakers could then renew the debate early next year over the most contentious issues of entitlement cuts and tax reform.  

Democrats and Republicans still need to decide who -- if anyone -- would see a tax hike in 2013. Lawmakers still need a bill to work from. The administration official suggested there was a bit more contact in recent days between White House staff and Senate Democratic leadership staff, indicating that new legislation, if proposed, could come from the Senate side.

"At some point the United States Senate has to do something," Boehner said, calling upon Senate to make the next move. "What we were trying to do this week was to basically jumpstart and try to kick into gear some action by the Senate to avert these tax increases go into effect January 1."

Congress has worked under tougher deadlines before. The most recent example was over the vote to raise the debt ceiling, but also on countless budget bills and tax cut extension packages.

If Washington can't reach a deal, the American people are in for a historic blow. The rollback of the Bush-era tax rates is estimated to cost the typical middle-income family more than $2,000 a year. Another expiring tax provision could cost thousands more.

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