Senate Passes $138 Billion Bill Extending Jobless Aid (Update2)

March 10 (Bloomberg) -- The U.S. Senate approved a $138 billion measure that would extend unemployment benefits and provide additional aid to states in lawmakers’ second major effort this year to boost the economy.

The chamber voted 62-36 for the legislation, which would also extend dozens of expiring tax cuts, ease corporate-pension requirements and head off cuts in Medicare reimbursements to doctors.

“This has been and continues to be a horrific recession,” said Senator Bob Casey, a Pennsylvania Democrat. “In addition to aiding families who are desperately in need of putting food on their tables and a roof over their heads, an extension of the unemployment insurance has a direct impact on our nation’s economy.”

The bill now goes to the House. Increased unemployment benefits are one of the best ways of providing short-term stimulus to the economy because people who are cash-strapped are likely to spend aid quickly, which boosts overall demand, according to the nonpartisan Congressional Budget Office.

President Barack Obama said in a statement, “I am grateful to senators in both parties who took one more step forward today in getting our nation back on a solid economic footing.”

The Labor Department today reported the unemployment rate in January climbed in 30 states and decreased in nine. Sixteen states had jobless rates topping the nationwide 9.7 average unemployment rate. Unemployment in California, Florida, Georgia, North and South Carolina and the District of Columbia climbed to the highest levels since records began in 1976.

Hiring the Jobless

Congress’s earlier effort to help the jobless, an $18 billion plan offering companies a tax break for hiring people who have been unemployed for at least 60 days, is awaiting final approval in the Senate.

The bill approved today would extend until Dec. 31 expiring provisions in the law that offer as many as 99 weeks of unemployment checks, along with a 65 percent subsidy to help buy health insurance through the Cobra program.

The legislation would prevent millions from exhausting their benefits, though it would not spare all. According to the National Employment Law Project, a half-million Americans may burn through all of their allowable assistance by August.

Senator Dick Durbin of Illinois, the chamber’s No. 2 Democrat, said, “We’re trying to give enough time to people on the chance they find something, but we know how hard it is.”

‘Trying to Survive’

“These poor people -- I can’t imagine what lies ahead for them,” Durbin said. “In my state, there are not many options out there and they’re all awful; people end up homeless, some of them struggle in soup kitchens and pantries trying to survive.”

Six Republicans joined Durbin and 55 other Democrats in voting for the bill; the only Democrat to oppose it was Senator Ben Nelson of Nebraska.

The bill would send $25 billion to states struggling with slack tax revenue to help prevent layoffs of teachers, police officers and other public service employees. It would spend $6 billion to prevent for seven months a 21 percent scheduled cut in Medicare reimbursements.

The measure would renew a series of tax breaks for businesses and individuals that expired Dec. 31, including a research credit backed in the past by Microsoft Corp., Amgen Inc. and Boeing Co. It would renew a break that allows companies like General Electric Co. to defer U.S. taxes on profits from financing sales of equipment in overseas markets.

Sales Tax Deduction

For individuals, the bill would renew a deduction for state and local sales taxes that could be used instead of the deduction for state and local income taxes. Some states, including Texas and Florida, don’t have an income tax.

It would extend a $250 deduction for teachers who buy their own classroom supplies, as well as tax credits for installing energy-efficient windows, doors and skylights that meet 2010 Energy Star standards.

The bill would add $97 billion to the federal deficit, according to the CBO. To cover part of its cost, the legislation would give the Internal Revenue Service more tools to attack tax shelters by more precisely defining when tax-avoidance transactions lack economic substance.

It also would prevent paper companies from claiming a tax credit for producing fuel from a byproduct of the pulp-making process known as “black liquor.” The IRS issued a ruling last year that congressional analysts said opened the door for abuses, although companies have expressed little interest in claiming the credit.

To contact the reporter on this story: Brian Faler in Washington at   or bfaler@bloomberg.net