President Barack Obama and top lawmakers said progress was made in urgent budget talks on Wednesday night and that negotiators would work through the night to try to avert a government shutdown.
With the clock ticking toward a midnight Friday deadline, Obama met with Republican House of Representatives Speaker John Boehner, and Senate Majority Leader Harry Reid.
I thought the meetings were frank, they were constructive and what they did was narrow the issues and clarify the issues that are still outstanding, Obama told reporters after the evening talks at the White House.
Emerging from the meeting, Boehner and Reid made clear that there were still deep divisions, although they intended to keep working.
Republicans and Democrats have struggled to break a deadlock over measures to continue funding for government operations and keep more than 800,000 workers in their jobs past Friday's deadline.
Reid said the 90-minute Oval Office meeting was very honest.
I have confidence we can get this done. We're not there yet, but hope lies eternal, he said.
Boehner said there were honest differences but there was progress. He said there was no agreement on a figure for spending cuts.
The two leaders said their staffs would work throughout the night to try to reach an agreement, and they would meet on Thursday morning to assess the work of their aides and continue to talk.
Obama said he thought a deal could be reached, but it's going to require a sufficient sense of urgency from all parties.
A government shutdown, the first in 15 years, would ripple through an economy still recovering from the worst recession since the 1930s. Obama urged both parties to compromise and said failure to reach agreement would hurt the economy just as it was gaining momentum.
(Additional reporting by Alister Bull, Matt Spetalnick, Donna Smith, Thomas Ferraro, Tim Reid and David Morgan; Writing by Caren Bohan and John Whitesides; Editing by Paul Simao and Peter Cooney)