Philip Scott Andrews/The New York Times
Representative Nancy Pelosi, the Democratic leader, and Speaker John A. Boehner on Thursday discussed compromise in news conferences. Congress had not reached an accord on how to pay for extending the payroll tax break.
By JENNIFER STEINHAUER and ROBERT PEAR
WASHINGTON — Retreating from their harsh partisan sniping, and perhaps fearing public rebuke, Congressional leaders said Thursday that they had agreed on a large-scale spending measure to keep the government running for the next nine months.
But an accord on extending a payroll tax holiday set to expire at the end of the month remained elusive, with Democrats weighing a possible short-term extension, setting the stage for another fight with Republicans over how to pay for it.
On Thursday, lawmakers began to strike a conciliatory tone as they came together on an 11th-hour deal to keep the government from shutting down after Friday, with weekend work probably required to finish their business.
“We’re making some progress,” said Representative Harold Rogers, the Kentucky Republican who leads the House Appropriations Committee. “I’m feeling optimistic. Things are looking up, and I’m looking up,” he said, opening his hands while looking skyward.
The spending bill appeared to modify some policy measures that had drawn sharp criticism from the White House, including eliminating one that reinstated tough restrictions on travel to Cuba.
“Congress should not and cannot go on vacation before they have made sure that working families aren’t seeing their taxes go up by $1,000 and those who are out there looking for work don’t see their unemployment insurance expire,” President Obama said Thursday as he encouraged Congress to reach a compromise. Administration officials said they would insist that the payroll tax holiday be extended to prevent damage to the struggling economy.
As the Senate convened Thursday, Senator Mitch McConnell of Kentucky, the Republican leader, said he was “confident and optimistic” that Congress would be able to pass a huge spending measure and continue the payroll tax break before adjourning for the holidays. It was a departure from the previous day, when he asserted that Democrats “obviously want to have the government shut down.”
Senator Harry Reid of Nevada, the majority leader, also sounded more hopeful, saying that he and Mr. McConnell intended to “come up with something that will get us out of here at a reasonable time in the next few days.”
For weeks, Republicans and Democrats have been fighting over how to pay for an extension of a payroll tax holiday for 160 million American workers, one that will expire at the end of the year if Congress does not take action. That measure has become linked to a large spending bill that would keep the government financed through the rest of the fiscal year.
While both sides have spent much of the week trying to outmaneuver one another, Thursday seemed to presage the second stage of what has become a familiar pattern in the 112th Congress — the ratcheting back of Stage 1, which is recriminations via news conference — on the road to Stage 3: a final, grudging compromise.
At a minimum, the Senate, which has until Dec. 31 to act on the payroll tax before it reverts to a higher level, will seek a two-month stopgap extension of the payroll tax holiday, unemployment insurance and Medicare payment rates for doctors, at a cost of an estimated $40 billion. Senate leaders were still hoping to reach a deal on a longer-term plan.
While Democrats have dropped their idea of imposing a surtax on income over $1 million, they are now considering a plan that would find savings in other ways, including fees on the federal housing finance agencies, and could seek to end certain deductions and other tax benefits for millionaires.
Staff members on both sides began poring through the 800-page spending bill, preparing for a vote as early as Friday, though the entire process is expected to bleed into the weekend. Republican leaders in the House said there would be a meeting Friday morning with their members to discuss the plan.
The White House declined to allow Democrats to sign off on the bill until restrictions on travel to Cuba were removed. Representative José E. Serrano, Democrat of New York and a senior member of the House Appropriations Committee, said the proposed restrictions had been “the one last sticking point” in negotiations on the omnibus spending bill. Republicans wanted to reinstate restrictions on travel to Cuba and remittances from the United States. Since President Obama relaxed the restrictions in 2009, Cuba has seen a surge in visitors and remittances.
House Republicans, including Representative Mario Diaz-Balart of Florida, sought the tougher restrictions, saying that tourist travel and remittances yielded a windfall to the Cuban government.
But in Miami, many Cuban-Americans rejected that argument, saying that in fact, the restrictions would have dampened a budding opposition movement on the island. Cubans, particularly the young, have been emboldened by the visits and the shipment of goods, including laptops, cellphones, computer memory devices and other items that allow Cubans to run small private businesses. These businesses are now permitted by the Cuban government.
“It would be a tremendous, tremendous setback,” said Pepe Hernandez, the president of the Cuban American National Foundation, which provides support to the anti-Castro movement in Cuba.
Speaker John A. Boehner also appeared to change his tone on Thursday, saying that a solution to the deadlock on spending was in sight. “There’s no need to shut down the government,” Mr. Boehner said at a news conference.
While Mr. Reid initially refused to allow a vote on the spending bill before one on the payroll tax holiday extension, the two appeared to become delinked Thursday, as each party sought to avoid the government shutdown that would have occurred without the spending bill passage, while a payroll tax bill could be worked out over the next few days, or even weeks.
Senator Dianne Feinstein, Democrat of California and a member of the Senate Appropriations Committee, helped write the omnibus spending bill and said she would support it even if Congress had not finished work on the payroll tax measure. “Anybody who walks away is very foolish,” Mrs. Feinstein said.
A short-term spending measure could be needed, even for a day or two, to keep the government running while lawmakers debated the measure.
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