Economists in both parties have cautioned that, given the sluggish state of the economy, a return to recession is likely unless lawmakers and the president reach a compromise on legislation.
At his news conference, Obama laid out bleak prospects if he and lawmakers can't reach agreement.
"Everybody's taxes will automatically go up, including the 98 percent of Americans who make less than $250,000 a year, and the 97 percent of small businesses who earn less than $250,000 a year. ... Our economy can't afford that right now," he said.
As an alternative, the president suggested that Congress pass legislation immediately to "prevent any tax hike whatsoever on the first $250,000 of everybody's income," a measure that he noted has passed the Senate and that Democrats in the House are ready to embrace.
"We should not hold the middle class hostage while we debate tax cuts for the wealthy, and we should at least do what we agree on, and that's keep middle class taxes low," he said.
He said enactment of legislation along those lines would eliminate half of the fiscal cliff, and he suggested that he and lawmakers could then "shape a process whereby we look at tax reform" and "take a serious look at how we reform our entitlements, because health care costs continue to be the biggest driver of our deficits.
Obama signed legislation two years ago extending the Bush-era tax cuts in their entirety after saying he wouldn't.
Asked why this time will be different, he said, "What I said at the time was what I meant, which is that this was a one-time proposition."
Now, he said, legislation that keeps most of the cuts in place but not those for the upper-income earners would be "actually removing half the fiscal cliff."
White House Press Secretary Jay Carney said the president would bring to the table a proposal for $1.6 trillion in new taxes on business and the wealthy when he begins discussions with congressional Republicans, a figure that Obama outlined in his most recent budget plan. The targeted revenue is twice the amount Obama discussed with Republican leaders during debt talks during the summer of 2011.
Carney said the figure, combined with $1.1 trillion in spending cuts already signed into law, would reduce deficits by $4 trillion.