WASHINGTON (AP) _ Flinching in the face of a veto threat, Democratic congressional leaders neared agreement with the Bush administration Tuesday on legislation to pay for the Iraq war without setting a timeline for troop withdrawal.

Several officials said the emerging compromise bill would cost about $120 billion, including as much as $8 billion for Democratic domestic priorities _ originally resisted by the White House _ such as disaster relief for Hurricane Katrina victims and farmers hurt by drought.

After a bruising veto struggle over war funding, congressional leaders in both political parties said they hoped the compromise would be cleared for President Bush's signature by Friday.

Despite the concession, Senate Majority Leader Harry Reid, D-Nev., told reporters that the legislation would be the first war-funding bill sent to Bush since the U.S. invasion of Iraq ``where he won't get a blank check.''

Reid and other Democrats pointed to a provision that would set standards for the Iraqi government in developing a more democratic society. U.S. reconstruction aid would be conditioned on progress toward meeting the goals, but Bush would have authority to order the money to be spent regardless of how the government in Baghdad performed.

He said Democrats would look to a different defense bill later this summer to ``continue our battle _ and that's what it is _ to represent the American people like they want us to represent them, to change the course of the war in Iraq.''

Republicans said that after weeks of struggle, they had forced Democrats to give up their demand for a date to withdraw the troops.

``I'm optimistic that we will achieve the following: a full four-month funding bill without surrender dates. I think there's a good chance of that,'' said Senate Republican leader Mitch McConnell of Kentucky.

Rep. John Boehner of Ohio, the House Republican leader, added, ``Democrats have finally conceded defeat in their effort to include mandatory surrender dates in a funding bill for the troops, so forward progress has been made for the first time in this four-month process.''

Republicans paid a price, too, in terms of billions of dollars in domestic spending that Democrats wrung from them and the administration.

Officials said the final details of the measure remained in flux. They spoke on condition of anonymity, saying that House Speaker Nancy Pelosi intended to present the proposal to her rank and file at an evening meeting.

In all, officials said the measure included about $17 billion more than Bush initially requested. Of the $17 billion, about $9 billion would go for defense-related items and veterans' health care. The balance would be for other domestic programs.

The bill would also include the first increase in the federal minimum wage in more than a decade. Both the House and Senate have passed measures raising the current level of $5.15 an hour to $7.25 an hour in three separate 70-cent increases over 26 months. Those measures included modest tax breaks, mainly aimed at helping businesses that hire low-skilled or handicapped workers.

The Iraq war has dominated the early months of the Congress that took office in January, as majority Democrats promised to pressure Bush to change course. While Republicans have largely backed Bush, they, too, have grown nervous over the prospect of supporting a war that is increasingly costly and unpopular with the public.

The collision led to a veto of legislation that contained a timeline for a troop withdrawal. The House failed to override the veto, and that led to negotiations involving the administration and key lawmakers in both houses.

While agreement on legislation appeared close, it was not clear whether either Pelosi or Reid would vote for the war funding. Democrats in the House were discussing the possibility of breaking the legislation into two pieces, one containing war money and the other billions for domestic programs.

That would allow anti-war Democrats to vote against money for military operations and allow the bill to pass on the strength of Republican support. Democrats would then vote for the second bill.

Under this scenario, the two bills would be merged into one in the Senate, leaving Reid and other war critics without the luxury of opposing part and supporting part of the spending.