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Senate defeats federal jobs bill

States expecting aid must now consider cuts, layoffs, and tax increases. Benefits for many unemployed will end.

WASHINGTON - Republicans on Thursday defeated the Democrats' showcase election-year jobs bill, including an extension of weekly unemployment benefits for 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 Obama and Democrats facing big losses of House and Senate seats in the fall election.

The rejected bill would 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 counted 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 bill's chief author.

White House spokesman Robert Gibbs said in a statement: "The president will continue to press Congress to pass this bill and bring this relief that's critical to our economic recovery."

"I'm sorry to hear it. It's going to be a hardship for these people," said Cheryl Spaulding, cofounder of Joseph's People, a network of support groups for the unemployed in the Philadelphia suburbs, in response to the defeat. "What do the senators think that the people with no jobs who are capable and desirous of working are going to do?"

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

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

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

In February, McConnell had supported an earlier, bipartisan version of the bill that would have added more than $30 billion to the debt, according to a coauthor of the measure, Sen. Charles Grassley (R., Iowa).

One piece of the emergency bill survived. Medicare payments to doctors were due to drop 21 percent earlier this month, but the Senate approved a six-month fix that will increase payments 2.2 percent through Nov. 30.

Democrats hope that political pressure from voters outraged about the cutoff of jobless aid and from business groups seeking renewal of tax breaks might eventually revive the bill.

The latest version of the bill contained provisions sought by lawmakers in both parties, anchored by the jobless aid and the dozens of tax cuts for business. The latest draft would have added $33 billion to the deficit, down from the $80 billion deficit impact of the measure when it came to the floor two weeks ago.

It included disaster aid for farmers and an extension of a bond program that subsidizes interest costs for state and local infrastructure projects. It would have levied a new tax on managers of investment funds, but extended breaks such as credits that help businesses finance research and develop products, and a sales tax deduction that mainly helped people in states without income taxes.

The death of the measure also means that people seeking the popular home buyer tax credit would be denied a paperwork extension approved by the Senate last week.

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.

Most of the measure - except for a six-month extension of jobless benefits for those jobless for more than six months - was financed with offsetting tax increases or spending cuts, including more than $10 billion cut from last year's stimulus bill. Congress had always approved additional unemployment benefits as a deficit-financed emergency measure.