Economic stimulus package founders in Congress

WASHINGTON (Reuters) - A multibillion-dollar stimulus package that aims to create jobs by funding new construction projects foundered in Congress on Friday as Republicans said the hastily crafted measure was a waste of taxpayer money.

The Democratic-backed package would have extended unemployment benefits and increased money for food stamps as the U.S. Congress is wrestling with an unpopular $700 billion Wall Street bailout shortly before the November 4 elections.

The House of Representatives passed its package, which carries a $60.8 billion price tag, by a vote of 264 to 158.

But a similar $56.2 billion bill was blocked in the Senate, rendering moot a White House veto threat. The 52-42 Senate vote fell short of the 60 votes needed in the 100-member body to clear a procedural hurdle.

The measure is unlikely to be resurrected as Congress wraps up its legislative business before the November 4 elections, a Senate aide said.

The Democratic-controlled Congress in January passed a $168 billion stimulus package 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.

The second measure would have extended unemployment benefits by up to 20 weeks and boosted funding for food stamps. It would have helped states pay health-care costs and provided billions to fix highways, airports and schools.

With elections looming, Democrats painted the stimulus package as a chance to help consumers more directly than the Wall Street bailout.

"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 decried the package as a political gimmick. They said the increased spending could lead to higher taxes and questioned whether the construction projects, for everything from sewer systems to a Coast Guard icebreaker, would actually create new jobs in a timely manner.

"Saddling taxpayers with tens of billions in unscrutinized spending simply to fulfill an election year agenda is the height of irresponsibility," said House Republican leader John Boehner.

They also said Democrats had not given them an opportunity to change the bills or examine them in detail. The Senate bill was introduced on Thursday and the House bill on Friday morning.

Some Republicans also objected to a provision in the Senate bill 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.

(Additional reporting by Lisa Lambert and Tom Doggett, editing by David Alexander)