House passes pared-back tax and spending bill extending benefits for long-term jobless

WASHINGTON (AP) — The House has adopted a measure renewing unemployment benefits for people who have been without a job for at least six months.

The jobless benefits are in a legislative grab bag blending numerous spending measures with a renewal of tax breaks as well as tax increases to help pay for it all.

Pressure from moderate Blue Dog Democrats unhappy over record budget deficits forced Democratic leaders to drop tens of billions of dollars of spending from the measure. It was adopted on a 215-204 vote.

The Senate won't act on the bill before adjourning for a weeklong Memorial Day recess, leaving thousands of people without unemployment aid once their six months of state-paid benefits expire.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.

Facing a rebellion by Democrats worried about budget deficits, House leaders have tossed aside billions of dollars in aid to states and health insurance subsidies for laid-off workers as they seek Friday to salvage a measure to extend unemployment insurance.

The House took up the measure, which blends numerous other spending measures with a renewal of tax breaks and offsetting tax increases. Still, Democrats will miss their self-imposed deadline of passing a jobless benefits measure before Memorial Day, even if the House passes its version of the bill Friday. The Senate doesn't plan to hold any more votes until senators return June 7.

The steps taken by House leaders could reduce the deficit effect of the bill to as little as $30 billion or so in hopes of winning over fiscally conservative "Blue Dog" Democrats unhappy about adding to the deficit as the national debt closes in on $13 trillion. A version circulated last week would have added $134 billion to the deficit.

One Blue Dog, Rep. Henry Cuellar, D-Texas, said Thursday that he would probably vote for a slimmed-down bill.

"The bigness issue and the deficit issue has been addressed," Cuellar said.

To attract the votes needed to extend unemployment benefits and renew more than 50 popular tax breaks that expired last year, House leaders dropped $24 billion in Medicaid aid to states and will allow health insurance subsidies for laid-off workers to expire.

Left twisting in the wind was a $22 billion provision to delay a scheduled 21 percent cut in Medicare reimbursements to doctors until 2012. It would have to win a separate floor vote, though Democratic aides were hopeful that the measure would prevail.

The aid to states was sought by a powerful bipartisan majority of the nation's governors, who are desperate for fiscal relief as weak tax revenues are forcing painful cutbacks, including layoffs and furloughs of state workers.

Democrats say that continuing unemployment benefits would not only help the jobless but provide a boost to the economy since the money is typically spent immediately and spurs demand.

"With this vote, we can help families across the country and continue the path we set out on last year to help dig the country out of a terrible recession," said Rep. Louise Slaughter, D-N.Y.

Republicans countered that the $58 billion in tax increases to partially pay for the measure - including $11 billion from quadrupling to 34 cents the per-barrel tax that oil companies pay into the Oil Spill Liability Trust Fund - are job killers.

"Delighted to have our colleagues on the Democratic side come and talk about jobs," said Rep. Pete Session, R-Texas. "It's not going to happen. These are massive tax increases."

The partisan House debate follows a much smoother path in the Senate Thursday night for an almost $60 billion war funding measure, which passed by a bipartisan 67-28 vote. The main beneficiary of the bill, part of congressional action ahead of the Memorial Day recess, was President Barack Obama's plan to send 30,000 additional troops to Afghanistan.

The war-funding bill includes $5 billion to replenish disaster aid accounts, and money for Haitian earthquake relief and aid to U.S. allies in the fight against terror.

The war-funding measure has been kept relatively clean of add-ons that could draw GOP opposition - to the frustration of liberal Democrats such as Sen. Tom Harkin of Iowa, the top Senate sponsor of a $23 billion plan to help school districts avoid teacher layoffs as local revenues remain weak. Facing certain defeat, Harkin declined to offer the plan to the war-funding bill.

Thousands of people are set to begin losing jobless benefits when an extension of unemployment insurance expires next week. People who have been out of a job for more than six months will gradually lose eligibility for additional weeks of benefits that are fully financed by the federal government. The first six months of unemployment benefits would not be affected, since they are the responsibility of the states.

The cutoff of health insurance subsidies means that, starting next month the newly unemployed won't be eligible for a 65 percent subsidy under the COBRA program. People currently receiving the subsidy would continue to get it until they've received six months of the benefit.

Democratic leaders had already cut the package of spending proposals and tax cuts Wednesday by about $50 billion to $143 billion. Friday's action could eliminate at least $30 billion to $50 billion from the measure, depending on whether the Medicare doctor's payment plan survives.

The tax cuts extended by the measure including a property tax deduction for people who don't itemize, 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.

But there are also a bevy of special interest tax perks, including tax breaks for biodiesal producers, domestic wool producers and NASCAR tracks.

The cost of the bill would be partially offset by tax increases on investment fund managers, oil companies and some international businesses. The tax increases total about $57 billion over the next decade. Changes giving underfunded pensions more time to improve their finances would raise $2 billion.