WASHINGTON (CNN) - President Barack Obama said after his meeting Monday with the Senate majority leader that they believe "a significant deal remains possible" on deficit reduction this year, White House press secretary Jay Carney told reporters. Obama met with Sen. Harry Reid, D-Nevada, in the morning and was to later talk with Senate Minority Leader Mitch McConnell, R-Kentucky, to keep the negotiations going on a possible deficit reduction deal. The sessions come after talks led by Vice President Joe Biden concluded last week without an agreement and as congressional leaders hardened their positions, making a possible compromise more difficult. With an August 2 deadline looming to increase the federal debt ceiling or face possible default on debt obligations, pressure is mounting to reach a deal that will prevent market jitters and corresponding harm to the still-recovering economy. "If everyone is willing to abandon the 'my way or the highway approach' ... we can get a significant deal this year," Carney said. He made clear that the question of raising tax revenue, which Democrats support and Republicans oppose, is a major stumbling block. Carney also said that cutting both discretionary government spending and military spending is necessary, calling on Republicans to take on a "sacred cow" by backing defense reductions. Carney's comments indicated that the scope and breadth of the agreement also is an issue. McConnell has indicated that a smaller agreement is possible for now that would cause Republicans to back a short-term increase in the federal debt ceiling. On Sunday talk shows, legislators confirmed that the main impasse involves the tax revenue issue. Specifically, Democrats seek a broad approach that makes some spending cuts but also ends tax breaks to bring in more revenue. "You cannot achieve what you set out to do if you say it's just about cutting. It has to be about increasing the revenue stream as well," House Minority Leader Nancy Pelosi, D-California, told CNN's "State of theUnion." Taking aim at GOP leaders, Pelosi noted that Republicans insisted during the eight years of the previous administration that tax cuts would produce jobs. "They didn't," Pelosi said. "They produced a deficit." Republicans counter that any increased tax burden will further slow economic recovery. They insist the government collects enough revenue but spends too much on excessive or unnecessary programs, as well as economically unfeasible entitlement programs such as Medicare and Social Security. To McConnell, the question is one of political reality - Republicans control the House and a strong minority in the Senate, and they oppose any tax hike.

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