"We're still working on the long-term" bill, Reid told reporters as he exited the Capitol after a day of talks over both the payroll tax and spending measures. As for the two-month version, he said, "We'll only do that if what we're working on doesn't work out."

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Reid's remarks put a slight damper on a day on which for the first time, Democratic and Republican leaders expressed optimism at prospects for swift compromise on their payroll tax standoff and a spending battle that had threatened to shutter federal agencies beginning at midnight Friday.

A deal on the $1 trillion-plus spending bill was reached after Republicans agreed to drop language that would have blocked President Barack Obama's liberalized rules on people who visit and send money to relatives in Cuba. But a GOP provision will stay in the bill thwarting an Obama administration rule on energy efficiency standards that critics argued would make it hard for people to purchase inexpensive incandescent light bulbs.

A senior White House official said the administration supported the two-month plan.

Bargainers were considering the two-month extension of this year's payroll tax cut and unemployment benefits bill because so far, they haven't agreed how a yearlong extension would be paid for, said a Democratic aide who spoke on condition of anonymity to discuss the private talks.

The two-month bill would cost $40 billion, according to the aide. It would be paid for from a list of around $120 billion in savings that bargainers are considering, including sales of the broadcast spectrum and raising fees that Fannie Mae and Freddie Mac charge to back mortgages, the aide said.