Confusion over Senate action to boost job growth

Feb 12, 2010, 14:11 GMT

Washington - The US Senate's top Democrat on Thursday proposed scaling back a bipartisan jobs package offered just hours earlier by two leading senators, signalling a tough road ahead for lawmakers' efforts to revive the US labour market.

Senate Majority Leader Harry Reid rejected the compromise presented by Democratic Senator Max Baucus and Republican Senator Chuck Grassley, leaders of the Senate Finance Committee.

Baucus and Grassley had released a 90-billion-dollar draft bill that included tax incentives to encourage hiring by smaller businesses, extending unemployment and health benefits, infrastructure initiatives, and some tax cut extensions designed to court opposition Republican votes in Congress.

Their initiative was welcomed by President Barack Obama. The White House earlier Thursday warned that it expects the US unemployment rate to hover at its quarter-century high of 10 per cent for much of the year.

Reid said the legislation had become 'watered down' with measures that did not specifically target jobs. Reid would offer a 'smaller package' focused on small-business incentives, extending funding for infrastructure and an effort to lower state borrowing costs.

With much of Washington paralyzed by heavy snow, Reid said a vote would take place once the Senate returns from a week-long holiday recess that begins next week. The House of Representatives passed a more ambitious 150-billion-dollar jobs bill in December.

'The American people want to see Washington put aside partisan differences and make progress on jobs,' Obama said in an earlier statement.

He said the Baucus-Grassley bill was in line with many of the Obama administration's priorities.

More than 8 million Americans have lost their jobs since December 2007 in the country's worst recession since the Great Depression. The US unemployment rate stood at 9.7 per cent in January.

The White House earlier Thursday warned that while the recession has ended, economic growth will not be robust enough to plug the massive jobless gap over the coming year.

In an annual economic report submitted to Congress, the White House Council of Economic Advisers predicted that 94,000 jobs would be added per month on average during 2010. Yet the jobless rate might rise in coming months as many discouraged workers return to the labour market and resume looking for jobs.

Obama, whose approval ratings slipped over the last year amid the weak economy, promised to make job creation his 'number-one focus' in 2010. Some critics fear any new jobs package will unnecessarily add to an already skyrocketing budget deficit.

The unemployment rate is forecast to remain at an average of 10 per cent in 2010, before sliding to 9.2 per cent in 2011 and 8.2 per cent in 2012, according to the White House report.

Obama's advisers have argued that the situation would be far worse without measures taken last year to combat the economic slide. The first stimulus package passed in February 2009, worth 787 billion dollars, has saved or created 2 million jobs to date, according to White House estimates, which are sharply disputed by critics.

The White House forecast that the US economy will grow by 3 per cent next year and 4.3 per cent in 2012. Gross domestic product surged at an annualize rate of 5.7 per cent in the fourth quarter of 2009, according to initial government estimates.