Dems want both stimulus and unemployment benefits 

The Senate failed at a third attempt to pass a state aid and unemployment benefits package as lawmakers balked over adding to the deficit and a provision in the bill that would have increased taxes on some small businesses.

Senate Democrats failed to garner the 60 votes needed to cut off debate on the $100 billion legislation, which has been under consideration for nearly two months.

Democrats blamed Republicans, all of whom voted against the bill, but their own caucus also stood in the way of passage as Sens. Ben Nelson, D-Neb., and Joseph Lieberman, I-Conn., objected to the bill because of the deficit.

Senate Majority Leader Harry Reid, D-Nev., signaled that he is moving on to different legislation and is essentially giving up on passing the aid package, at least for now.

"We have done everything we could to try to get Republican votes," Reid said following the defeat of the bill. "It's up to them."

Republicans put forward an alternative bill that would extend unemployment benefits and pay for them with unused funds from the $787 billion stimulus.

"We've offered ways of paying for these programs and we've been eager to approve them," said Senate Minority Leader Mitch McConnell, R-Ky.

But Democrats objected, saying the stimulus funds are needed for job creation.

The defeat came after days of intense negotiations over the bill, which had been pared back from a $112 billion package in an effort to attract moderate Republicans. Democrats came up with offsets for much of the bill, leaving the $33 billion for unemployment insurance unpaid for.

But they lost critical support from Sen. Olympia Snowe, R-Maine, who was ready to get behind the bill if Democrats would remove a 15.3 percent payroll tax on some businesses.

At first, Democrats told Snowe they were willing to strike the tax provision, but they later backed out of that agreement after a lawmaker in their own caucus objected.

"I was told last week that those new taxes would be removed because of the punitive effect it would have primarily on small businesses," Snowe said.

"Yet last night the tide turned once again and I was informed that they would remain in the legislation. At a time of festering high unemployment, this is exactly the wrong prescription for job creation."

The bill also included billions in aid to help struggling states cover Medicaid costs. Reid said a group of governors would be arriving at the Capitol on Monday to complain about the lack of funds.

Reid held two press conferences about the bill on Friday in an effort to drive home the Democratic argument that Republicans are voting against the bill for political reasons.

Reid said Republicans have "abused the system" by repeatedly voting against the bill, and he suggested they are trying to block every Democratic measure in order to damage the president and the party.

"They want everything to be Obama's Waterloo," Reid said.

The rank-and-file lawmakers had a different perspective.

"At some point we need to pay for the benefits and we need to pay for the spending and we are not doing that right now," Nelson said.

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