$56 billion stimulus bill fails in Senate

WASHINGTON Fri Sep 26, 2008 1:31pm EDT

WASHINGTON (Reuters) - The Senate on Friday blocked a $56.2 billion economic stimulus package that would have extended unemployment benefits, increased food aid and funded new construction projects to create jobs.

The 52-42 vote fell short of the 60 votes needed in the 100-member Senate for Democrats to clear a Republican procedural hurdle and move toward passage of the bill, which backers said would give the ailing U.S. economy a needed boost.

The House of Representatives plans to consider a slightly different stimulus package as soon as Friday afternoon but chances of any stimulus bill becoming law appear slim as the White House has threatened a veto.

The bill would have kept in place a ban on development of domestic oil shale deposits that expires next week.

The Democratic-controlled Congress passed a $168 billion stimulus package in January that relied mostly on tax rebates to spark consumer spending.

While that measure has been credited with contributing to economic growth, consumers have been hurt by rising food and energy prices, a higher unemployment rate and continued home foreclosures.

Democrats said the second attempt would help struggling consumers at a time when Congress is considering an unpopular $700 billion Wall Street bailout shortly before the November 4 presidential and congressional elections.

"What about the honest, hard-working, play-by-the-rule citizens at the bottom of this pyramid left in the ruins after years of mismanagement and outright malpractice by the titans of the financial industry?" said Iowa Democratic Sen. Tom Harkin.

Republicans said they did not have time to review the spending measures properly and the White House said the increased spending could lead to higher taxes or deficits.

Some Republicans also objected to a measure that would have kept in place a ban on development of domestic oil shale deposits that expires next week.

Republicans have pressed for more domestic energy production amid high gas prices but many Democrats and environmental groups say oil-shale development requires too much water in western states with scarce water resources.

The bill would have extended unemployment benefits by up to 20 weeks and boosted funding for food stamps by 10 percent. It would have helped states pay health-care costs and provided low-interest loans for small businesses.

It also included spending for a wide range of other measures, from a new Coast Guard icebreaker to a next-generation spacecraft and upgrades to local sewer systems.

(Additional reporting by Lisa Lambert and Tom Doggett; Editing by Bill Trott)

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