UPDATE 2-Jobless aid, tax breaks clear Senate hurdle

* Extends jobless aid, renews tax breaks

* Senate expected to pass the bill in next few days

(Adds details, byline)

By Andy Sullivan

WASHINGTON, March 9 (Reuters) - Democratic efforts to spur job creation advanced in Congress on Tuesday as a $149 billion package of tax breaks and unemployment aid cleared a procedural hurdle in the Senate.

The 66 to 34 vote allows the bill to move toward final passage. It is part of what Democrats call a "jobs agenda" to reduce the country's 9.7 percent unemployment rate before November congressional elections.

The Senate is expected to pass the bill within the next few days and send it to the House, where many Democratic lawmakers have pushed for more aggressive job-creation measures.

The bill largely continues existing government policies. Jobless workers would their see unemployment aid and healthcare subsidies extended to the end of the year, while businesses would once again benefit from $25 billion worth of tax breaks that expired at the end of 2009.

Cash-strapped states would get $25 billion to help cover their portion of the Medicaid healthcare program for the poor.

The bill raises at least $37 billion by closing tax loopholes to offset the $149 billion in new spending. That could conflict with President Barack Obama's plans to use the new revenue to help pay for his proposed healthcare overhaul.

LONG-TERM UNEMPLOYED

The U.S. economy has shed 8.4 million jobs since entering recession in December 2007, though the pace of job loss has slowed since the recovery began in the second half of last year.

More than four in 10 of the unemployed have been out of work for more than six months, the usual limit for unemployment aid. Congress has extended the program to cover those out of work for nearly two years in some high-unemployment areas, but millions could still exhaust their benefits as soon as next month without a further extension.

Economists say that unemployment aid is one of the most cost-effective ways to stimulate the economy because recipients spend the money quickly.

But it is not cheap. Extending the program through the end of the year would cost $70 billion. Many Republicans voted against the measure on the grounds that it should cut spending elsewhere to cover all of its costs.

Republicans also say job creation has been hampered by a climate of uncertainty created by as-yet-unfinished Democratic initiatives like healthcare reform.

Democrats last year passed an $863 billion stimulus package that has created up to 2.1 million jobs, according to the non-partisan Congressional Budget Office, but they face a growing backlash over spending.

Democrats say job creation is their top priority this year, but the House and the Senate have taken markedly differing approaches and they have not yet agreed on a bill for Obama to sign into law.

The House in December passed a $154 billion package centered on highway construction and aid to states, but the Senate ignored it.

The Senate last month passed a $15 billion jobs bill built around a payroll tax break for businesses that hire workers, which many House lawmakers derided as paltry. The House modified that bill before passing it, requiring another vote in the Senate.

(Editing by Alan Elsner)