US budget talks generate cautious optimism US lawmakers appear to be moving closer to a budget deal that would fund the government and ease the pain of automatic budget cuts known as "sequestration," offering hope that a small fiscal agreement is within reach. A 29-member budget conference committee including both Democrats and Republicans has been in negotiations since late October, and appears to have experienced a breakthrough in recent days. According to people close to the talks, the contours of a deal are coming together to replace some sequestration cuts with a mix of spending cuts and new revenues derived from higher government fees. The deal would set spending levels for one or two years, but ensure that the US government would not be shut down on January 15. I would not disagree with the optimism in the air. That being said, I think we all know how these things can topple over with the slightest of breezes," said one Republican aide close to the budget talks. The precise amount of relief from sequestration, which would bring 2014 spending levels for government programmes down from $986bn to $967bn, is still up in the air, aides said. And many of the other details are still murky. On the chopping block are items such as farm subsidies and federal employee pensions on the spending side, and increases in transportation security fees, which would anger airlines, and money from wireless spectrum auctions. Paul Ryan, the Republican chairman of the House budget committee, and Patty Murray, the Democratic chair of the Senate budget committee, are leading the talks and deliberately set a low bar for success, always insisting that their goal was to reach a small agreement. Neither side has the political will to pursue a larger fiscal deal that would include big reforms to popular health and pension programmes such as Social Security and Medicare, as Republicans demand, or higher taxes on the wealthy, as Democrats are calling for. Nevertheless, even a minor deal would mark a more encouraging chapter in Washington's persistent fiscal squabbles, which have resulted in two close brushes with default and one 16-day government shutdown since 2011. A deal "would ease a lot of tension around here," said Tom Cole, a Republican congressman from Oklahoma who is participating in the talks, in a Reuters interview. "It's likely to be a pretty small deal, something that trades some relatively modest savings and perhaps some small entitlement reforms and maybe a little dab of revenue somehow," Mr Cole said. Both parties have been divided in their approach to the talks. Some conservative Republicans want to maintain the lower levels of spending under sequestration, but more moderate members and defence hawks believe that would inflict too much damage on the Pentagon. Some Democrats want their party negotiators to hold a firm line for scrapping tax breaks on the wealthy and corporations, but others insist that some sequestration relief would be a sufficient victory, because it would also help a plethora of other domestic agencies, from the National Institutes of Health to the Environmental Protection Agency. Democrats have been hoping to include an extension of unemployment benefits in a deal, but that appears unlikely. But neither Republicans nor Democrats appear to be angling for another big fiscal showdown on the heels of last month's impasse, which bodes well for a small agreement. The budget conference committee is facing a deadline of December 13 to reach a deal. Politico first reported the contours of the emerging deal.