UPDATE 4-US Senate lawmakers unveil long-awaited jobs bill

* Limited scope draws fire from key Republican

* Business tax breaks, construction funds (Adds Republican criticism)

By Andy Sullivan and Thomas Ferraro

WASHINGTON, Feb 11 (Reuters) - Democratic U.S. senators unveiled a limited job-creation bill on Thursday, but hopes for quick passage were thrown into question after a Republican co-sponsor criticized the legislation.

Senate Majority Leader Harry Reid pared back a wide range of job-creating proposals to craft a relatively modest $15 billion measure focused on tax breaks and construction, with the aim of overcoming the partisan gridlock that has stalled many major initiatives in this session of Congress.

His decision baffled some Democrats and appeared to alienate Republican Charles Grassley, who had attached his name to a wide-ranging draft released earlier in the day that had drawn praise from President Barack Obama.

"The majority leader pulled the rug out from work to build broad-based support for tax relief and other efforts to help the private sector recover from the economic crisis," said Grassley spokeswoman Jill Kozeny.

With a nervous eye on the November congressional elections, Obama and his Democratic allies on Capitol Hill hope to show voters they are capable of bringing down the 9.7 percent unemployment rate as the economy recovers from the worst recession in 70 years.

"We feel that the American people need a message. The message that they need is that we're doing something about jobs," said Reid, who faces a tough re-election campaign back home in Nevada.

The House of Representatives passed a $155 billion jobs bill in December, but Democrats in the Senate need at least one Republican vote to advance legislation after they lost their supermajority in last month's surprise Republican victory in Massachusetts.

STICKER SHOCK

Democrats also face a growing voter backlash for the hundreds of billions of dollars in deficit spending they approved last year to blunt the recession's impact.

Reid has planned to offer a series of job-related bills that would avoid the sticker shock of the House bill, while attracting some Republican support.

The bill outlined by Reid would feature a tax credit to encourage hiring, crafted with Republican Orrin Hatch.

It would also include a tax credit to encourage businesses to buy new equipment, subsidies for state and local construction bonds, and money to shore up a highway-construction fund.

The bill's $15 billion cost will be offset by closing unspecified tax loopholes, Democratic aides said.

Reid's proposal left out several other items outlined by Grassley and Max Baucus, his Democratic counterpart on the tax-writing Finance Committee.

Many of those provisions, such as $22 billion in further unemployment insurance and a $31 billion in business tax breaks, either expired at the end of 2009 or will expire soon.

Reid aims to pass those provisions soon after the initial jobs bill passes, an aide said. Still, Grassley's defection could foreshadow a tough fight for a bill that was designed to be relatively noncontroversial.

"It was unclear how much Republican support we would have gotten for a bigger bill, but there is no reason that this slimmed-down bill ... shouldn't pass with overwhelming bipartisan support," Reid spokeswoman Regan Lachapelle said.

With a weeklong recess looming, the bill will not come up for a vote before the week of Feb. 22.

Despite its relatively narrow scope, the bill could face resistance from both the left and right.

Republican Senator Judd Gregg has said the construction money is wasteful and its actual cost is hidden by accounting gimmicks. His staff released a memo on Wednesday suggesting he could use budget rules to defeat the bill.

Many liberals, including House Speaker Nancy Pelosi, have questioned the effectiveness of Hatch's tax credit for businesses that hire people who have been unemployed at least 60 days.

That approach would cost between $56,000 and $125,000 in lost tax revenue for every full-time job created, according to the nonpartisan Congressional Budget Office. (Editing by Jackie Frank and Peter Cooney)