Senate Majority Leader Harry Reid says congressional bargainers are preparing a two-month extension of the payroll tax cut and expiring jobless benefits as a fallback plan in case negotiations on a yearlong package don't succeed.
Lawmakers also worked on legislation to avoid a government shutdown at midnight Friday.
Those talks are still continuing and Reid said he still hoped they would succeed.
But with lawmakers hoping to leave town soon for the holidays, negotiators are working on shorter version they would revisit when Congress returns next year.
The bill would also avoid cuts in Medicare reimbursements to doctors that would last two months.