Democrats Shock Leadership - Defeat Aid & Tax Incentives Package

A dozen Democrats shocked their Senate leadership on Wednesday by voting with Republicans to defeat a $141 billion package of tax incentives for individuals and businesses, as well as jobless benefits, aid to cash-strapped states, and a critical reimbursement fix for Medicare providers.

After a 45-52 vote, Senate Democratic leaders returned to the drawing board to see what kind of package they can formulate that can pass muster with those wary Democrats, anxious about voter anger against rising deficits and the $13 trillion debt, looking to trim down the measure that would have hit the already-ballooning deficit with another $80 billion.

Democrats, already aware the measure was likely to fall short of votes, are expected to quickly unveil a slimmed-down alternate package once they meet in a special caucus Wednesday afternoon to discuss a way forward. Leadership aides told Fox Tuesday that one was already in the works, dialing back many of the provisions in the current bill though not altering its general framework. One senior Democratic leadership aide said the $24 billion in Medicaid funding for the states was likely to remain unscathed, however.

Likely to be included, a proposal by Sen. Jon Tester, D-MT, that would trim off about $6 billion from the price tag by slimming down the unemployment benefits in the bill. Tester would strike a $25-per week hike in the payout of benefits, something that started in the stimulus bill earlier this year.

Sen. Debbie Stabenow, D-MI, said Tuesday, "I think everything, a lot of things, will be on the table," naming the Medicare doctor fix as a likely candidate. There is a 19-month patch to the current formula, stopping a whopping 21% cut in the doctors' federal reimbursement, that could get trimmed to merely fill out the remainder of 2010 or possibly 12 months, according to Democratic sources. Stabenow also said the Tester proposal was seen by many as presenting perhaps the best possible way forward to passage for the bill, though she does not support the actual reduction in benefits.

The senator criticized Republicans for voting for a larger bill in March that added more to the deficit than the bill currently on the floor, but a spokesman for Senate GOP Leader Mitch McConnell, R-KY, said the dynamics surrounding the debate have changed, most notably the nation has hit the $13 trillion debt mark.

Stabenow saw a different cause. "Politics. It's all politics. They think this is what voters want this fall, so that's what they're after," the senator accused.

The group of Democrats voting with Republicans on Wednesday, largely centrists, includes: Sens Mark Begich of Alaska, Russ Feingold and Herb Kohl of Wisconsin, Mary Landrieu of Louisiana, Joe Lieberman of Connecticut, Claire McCaskill of Missouri, Ben Nelson of Nebraska, Bill Nelson of Florida, Mark Pryor of Arkansas, and Jim Webb of Virginia.