WASHINGTON - The House of Representatives on Friday was to vote on a reduced package of safety-net spending and tax measures that would raise taxes on fund managers, but it likely was too late to avoid disrupting jobless benefits for hundreds of thousands of Americans.
Democrats, who say the bill would lower the country's 9.9 percent unemployment rate, had hoped it would clear Congress this week to ensure that jobless benefits and other safety-net provisions do not expire. But the Senate was set to leave town for a week-long break without taking action.
As a result, hundreds of thousands of jobless Americans will probably lose the weekly payments that help them cover their bills as they look for work in a sluggish economy.
Congressional wrangling has delayed such benefits at least four times in the past year. Democrats say they will restore the benefits when they return in early June.
The delay also gives Wall Street fund managers another chance to try to weaken a provision to tax their earnings at regular income rates rather than lower capital-gains rates.
With November's congressional elections looming, Democrats who control Congress face conflicting pressures to reduce the 9.9 percent unemployment rate and close the budget deficit, which hit a record $1.4 trillion last year.
At the beginning of the year, Democrats said job creation would be their top priority, but they have shown little appetite for ambitious measures such as last year's $863 billion stimulus package.
Democratic leaders have trimmed the bill several times to satisfy fiscal hawks in their own ranks who balked at its cost.
The latest version released on Friday dumps $30 billion in health-care subsidies for cash-strapped states and jobless people.
It also jettisons a $23 billion provision to ensure that doctors do not take a pay cut under the Medicare health-insurance program. The House will vote on that measure separately.
The current bill would add $31 billion to the deficit over 10 years -- a sharp drop from the original version, which would have increased it by $134 billion.
The bill would extend unemployment benefits through the end of November. It includes other job-creation measures, such as construction subsidies and a summer-jobs program for students.
Jobs, jobs, jobs -- that is what this bill is about, said Democratic Representative Judy Chu.
The bill also renews a grab bag of tax breaks that expired at the end of 2009, such as a research-and-development credit for businesses.
To offset some of these costs, the bill tightens tax rules on multinational corporations and oil companies.
Republicans said those tighter tax rules would harm employers and undercut the bill's job-creation efforts.
I've got letter after letter after letter from businesses across this country who say this will harm American jobs, said Republican Pete Sessions.
The bill would raise $18 billion by targeting managers of private-equity, venture-capital, real-estate and hedge funds, amid widespread public outrage at Wall Street.
Fund managers pay a long-term capital gains rate of only 15 percent on the share of profits they retain, rather than the income-tax rate that tops out at 35 percent. Fund managers typically hold onto 20 percent of profits, which can amount to millions of dollars in a good year.
The bill would treat 75 percent of those profits as ordinary income. Until 2013, 50 percent of the profits would be treated as ordinary income.
Some Democrats in the Senate aim to water down that provision.
(Editing by Vicki Allen)