Senate GOP defeats jobless aid measure

WASHINGTON -- Republicans on Thursday defeated Democrats' showcase election-year jobs bill, including an extension of weekly unemployment benefits for millions of people out of work more than six months.

The 57-41 vote fell three votes short of the 60 required to crack a GOP filibuster, delivering a major blow to President Barack Obama and Democrats facing big losses of House and Senate seats in the fall election.

The rejected bill would also have provided $16 billion in new aid to states, preserving the jobs of thousands of state and local government workers and providing what White House officials called an insurance policy against a double-dip recession. It also included dozens of tax breaks sought by business lobbyists, and tax increases on domestically produced oil and on investment fund managers.

The demise of the bill means that unemployment benefits will phase out for more than 200,000 people a week. Governors who had been counting on federal aid will now have to consider a fresh round of budget cuts, tax increases and layoffs of state workers.

"This is a bill that would remedy serious challenges that American families face as a result of this Great Recession," said Max Baucus, D-Mont., the chief author of the bill. "This is a bill that works to build a stronger economy. This is a bill to put Americans back to work."

The bill has been pared back after weeks of negotiations with GOP moderates Olympia Snowe and Susan Collins of Maine. The most recent version, unveiled Wednesday night, contained new cuts to food stamps and pared back the state aid provision to allow Democrats to claim the measure was fully paid for except for the unemployment insurance extension.

That didn't move Republicans like Minority Leader Mitch McConnell of Kentucky.

"It adds new taxes and over $30 billion to an already staggering $13 trillion dollar national debt," McConnell said.

Only one Democrat, Ben Nelson of Nebraska, voted with Republicans. Another, Robert Byrd of West Virginia, did not vote.

After the Senate vote, the House passed by a 417-1 vote a measure to reverse a 21 percent federal fee cut imposed last week on doctors providing care to seniors on Medicare. That measure was one of the most important contained in the now-dead catchall bill, but was broken out and passed separately by the Senate last week.

The House's move would send the stand-alone Medicare fee fix to Obama for his signature.

Democrats hope that political pressure from voters outraged about the cutoff of jobless benefits averaging $300 a week and from business groups seeking renewal of longstanding tax breaks might eventually revive the bill.

The latest version of the measure contains a variety of provisions sought by lawmakers in both parties, anchored by the jobless aid and dozens of tax cuts sought by the business groups. The latest draft would add $33 billion to the deficit -- down from the $80 billion deficit impact of the measure when it came to the floor two weeks ago.

The catchall measure also includes farm disaster aid, $1 billion for a youth summer jobs initiative and an extension of a bond program that subsidizes interest costs for state and local infrastructure projects. It would levy a new tax on investment fund managers but extend tax breaks such as lucrative credits that help businesses finance research and develop new products, and a sales tax deduction that mainly helps people in states without income taxes.

The death of the measure would mean that more than 200,000 people a week would lose their jobless benefits because they would be unable to reapply for additional tiers of benefits enacted since 2008. People seeking the popular homebuyer tax credit would be denied a paperwork extension approved by the Senate last week. And state and local governments would lose subsidies on bonds they issue to finance infrastructure projects.

It also includes $4.6 billion to settle a long-running class-action lawsuit brought by black farmers against the Agriculture Department for discrimination and another by American Indians involving the government's management and accounting of more than 300,000 trust accounts.

By the end of this week, more than 1.2 million people will have lost their jobless benefits since a temporary extension expired at the beginning of the month, according to Labor Department estimates.

Thirty states had been counting on federal support to help balance their budgets for the fiscal year beginning next week since a $24 billion version had earlier passed both House and Senate. Without the money, governors warn they'll have to lay off tens of thousands of workers.

Crestfallen Democrats tried in vain to win support from moderate Republicans Snowe, Collins and Scott Brown of Massachusetts. They voted in March to defeat a filibuster.

"The debt is out of control," Brown said. "Since I did that last time, the debt's at over $13 trillion and rising."

The bill has long been considered a must-pass measure, but the political sands have shifted since it first passed in March. That vote came in the wake of a political scalding for Republicans after Sen. Jim Bunning, R-Ky., blocked a short-term extension of jobless aid.

In the interim, however, the debt crisis in Europe and growing anxiety on deficits and debt among voters has turned Republicans against the legislation, even though it's been cut considerably since passage of a March version that would have added about $100 billion to the debt.

Most of the measure -- except for a six-month extension of jobless benefits for people who have been out of work for more than six months -- is financed with offsetting tax increases or spending cuts. Congress has always approved additional unemployment benefits as a deficit-financed emergency measure.

Democratic leaders said they bent over backwards to accommodate demands by Republicans for a smaller measure. Among the cuts revealed Wednesday was a more than $10 billion cut from last year's stimulus bill, mostly buy paring back food stamp benefits by about $11 a month per beneficiary.

"They asked to have it reduced, we did it," said Sen. Patty Murray, D-Wash. "They asked to have it paid for, we did it."

Just before the vote, Snowe said she opposed the measure because of new taxes on small businesses. She said Democrats had gone back on an offer to delete a tax provision aimed at small businesses that shelter income as dividends exempt from payroll taxes.

Snowe said the measure was drafted too broadly and would have ensnared businesses that aren't abusing the system.