Published: Jun 25, 2010 10:37 AM EDT
Updated: Jun 25, 2010 7:38 AM EDT

WASHINGTON (AP) - Congressional Democrats are looking for ways

to salvage their election-year jobs agenda after the Senate failed

to pass a long-sought extension of unemployment payments.

Senate Democrats cut billions from the bill in an attempt to

attract enough Republican votes to overcome a filibuster. But

Thursday's 57-41 vote fell three votes short of the 60 required to

crack a GOP filibuster, leaving the way forward unclear.

"Democrats have given Republicans every chance to say 'yes' to

this bill and support economic recovery for our middle class,"

said Senate Majority Leader Harry Reid, D-Nev. "But they made a

choice to say 'no' yet again."

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 hikes and layoffs of state workers.

White House Press Secretary Robert Gibbs said President Barack

Obama will continue to press Congress to pass the bill. But

Democrats are at a loss as they struggle to find votes to help

boost the economy in the run-up to congressional elections this


The setback forced congressional Democrats to settle for a much

smaller victory: Congress passed a bill temporarily sparing doctors

from a 21 percent cut in Medicare payments, sending the measure to

Obama for his signature.

The Medicare funding had been a part of the larger bill to

provide extended unemployment benefits for laid-off workers and

provide states with billions of dollars to avert layoffs. When it

became clear Senate Republicans would block the larger bill,

Democrats begrudgingly voted for the smaller Medicare fix.

"It is clear that Senate Republicans have no intention of

passing any jobs legislation, whether it is tied to physician

payments or not," said House Speaker Nancy Pelosi, D-Calif.

Congressional Democrats began the year with an aggressive agenda

of passing a series of bills designed to create jobs. One has

become law, offering tax breaks to companies that hire unemployed

workers. Others stalled as lawmakers, after hearing from angry

voters, became wary of adding to the national debt, which stands at

$13 billion.

"The debt is out of control," said Sen. Scott Brown, R-Mass.

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


"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 legislation had been sharply pared back after weeks of

negotiations with GOP moderates Olympia Snowe and Susan Collins of

Maine, but they were not persuaded to support the measure. The

latest draft would have added $33 billion to the deficit.

The Medicare bill that passed Thursday would delay cuts in

payments to doctors until the end of November - after congressional

elections - when lawmakers hope the political climate is better for

passing a more permanent, and expensive, solution.

There was some urgency to approve the funding because Medicare

announced last week it would begin processing claims it had already

received for June at the lower rate. Lawmakers said some doctors

have already stopped seeing new Medicare patients because of the


The bill would increase payments to providers by 2.2 percent.

The legislation, which costs about $6.5 billion, is paid for with a

series of health care and pension changes that both Democrats and

Republicans agreed to.

The Medicare cuts were required under a 1990s budget-cutting law

that Congress has routinely waived. The latest extension expired

May 31 after concerns about adding to the budget deficit held up

the larger bill that also included unemployment benefits.

Obama praised Congress for passing the measure, while urging

lawmakers to work on a more permanent solution.