Senators reach deal on stimulus bill

By Jeremy Pelofsky and Thomas Ferraro

WASHINGTON (Reuters) - Democratic senators agreed on Friday to cut their hopes for a larger economic stimulus package and support a $800 billion compromise that would give President Barack Obama an important but narrow victory.

Democrats said a vote on passage of the measure -- drafted by leaders of a group of moderate lawmakers from both parties -- and closely watched overseas as a sign of U.S. commitment to help revive the world economy, would be held on Tuesday.

"We are pleased the process is moving forward and we are closer to getting Americans a plan to create millions of jobs and get people back to work," said White House spokesman Robert Gibbs.

With the United States in the grip of the worst economic crisis in more than 70 years -- a report on Friday showed nearly 600,000 jobs were lost in January -- Obama has demanded that a bill be put on his desk by February 16.

The president may well get the bill by then, but the legislative victory would be tempered by the fact that he will likely muster only a few Republican votes.

After five days of negotiations, Democrats agreed to cut tens of billions of dollars to their earlier $937 billion proposal to trim what critics, mostly Republicans, called billions of dollars in unwarranted spending.

Democratic Senator Ben Nelson, a leader of the group, said the stimulus compromise would help to jolt the struggling economy through middle-class tax cuts and targeted investment.

"We trimmed the fat, fried the bacon and milked the sacred cows," he said on the Senate floor.

The group announced the agreement was for $780 billion in spending and tax cuts, but aides said the total could be as much as $47 billion more because of tax incentives senators previously added to boost flagging home and auto sales.

The Senate met as official data showed U.S. job losses accelerating in January and the unemployment rate surging to a 16-year high. Despite that news, U.S. stocks rallied for a second day on Friday partly in anticipation of a possible accord on the stimulus.

If the measure passes, lawmakers would have to resolve differences between it and an $819 billion version of the legislation approved last week by the House of Representatives without a single Republican vote.

Once a final bill is crafted and passed by both chambers, the measure would be sent to Obama to sign into law.

JUST ENOUGH SUPPORT

Democrats had hoped to vote on the measure late on Friday, but Republicans blocked such action, saying they had not been given a chance to read the compromise.

Senate Majority Leader Harry Reid said debate would continue on Saturday and Monday, setting up a vote on passage around midday Tuesday.