Obama Predicts GOP Surrender on Taxes

President Barack Obama told ABC News on Tuesday that he believed Republicans would join Democrats to extend current rates for 98 percent of earners by the end of the year.

"I'm pretty confident that Republicans would not hold middle-class taxes hostage in trying to protect tax cuts for high-income individuals," Obama told Barbara Walters in an interview.

"I don't think they'll do that," he said of Republicans forcing tax-rate increases for families earning $250,000 a year or less.

Alert: Will Raising Taxes Help or Hurt America? Vote Here!

Obama and Congress are trying to reach a deal to avert the automatic triggering of $6 trillion in tax hikes and $1.2 trillion in spending cuts that could begin on Jan. 2 via sequestration.

Both Obama and House Speaker John Boehner have exchanged new deficit-reduction plans over the last 24 hours, sources say, but there is little indication of real progress toward a deal.

The men also talked on Tuesday by telephone.

"I remain optimistic," Obama told Walters. "I'd like to see a big package. But the most important thing we can do is make sure that middle-class taxes do not go up on Jan. 1."

He said of his private meeting with Boehner at the White House on Sunday: "I think the tone was good. I believe that both Speaker Boehner and myself and the other leaders want to see a deal happen. And the question now is can we get it done. The outlines, the framework of what a deal should look like are pretty straightforward."

While the administration has emphasized tax increases on the wealthy, Republicans have called for specific commitments from the White House on cuts to such entitlement programs as Medicare, Medicaid and Social Security.

Obama also hinted at new flexibility on entitlement cuts, but only after Republicans concede on top tax rates.

"If the Republicans can move on that then we are prepared to do some tough things on the spending side," Obama told Walters. "Taxes are going to go up one way or another. And I think the key is that taxes go up on high-end individuals."

Alert: Will Raising Taxes Help or Hurt America? Vote Here!