* House, Senate may vote on it this week
* Seen as a victory for Obama and his Democrats
* Frees Republicans of possible election-year problem
By Richard Cowan and Thomas Ferraro
WASHINGTON, Feb 16 (Reuters) - A payroll tax cut for 160 million Americans, set to expire at the end of this month, would be extended through December under a bipartisan deal announced early on Thursday by U.S. congressional leaders.
The accord would also renew expiring jobless benefits for millions of others and prevent a pay cut for doctors of elderly Medicare patients.
The comprehensive agreement represents a victory for President Barack Obama and his fellow Democrats in Congress, and allows Republicans to put behind them a tax debate that threatened to hurt them in the November elections.
Economists say the tax cut extension and renewal of jobless benefits should provide a lift to the U.S. economy, certain to be a key issue in the battle for control of Congress and the White House in the run-up to Election Day.
“We have reached an agreement and we’re moving forward,” Republican Representative Dave Camp, who headed the negotiating committee, told reporters shortly after midnight EST on Thursday.
It was not immediately clear when the House of Representatives and Senate would vote on the deal, but lawmakers hoped to do so before they leave Friday for a week-long recess.
While congressional leaders announced a deal, they said a few undisclosed details had to be resolved before the agreement could be turned into a final bill. They expressed confidence this would be done quickly.
Senator Max Baucus, a lead Democratic negotiator, said, “This is very important to a lot of people: 160 million Americans are now going to maintain their payroll tax cuts (and) a lot of folks who lost their jobs through no fault of their own are going to be receiving unemployment benefits.”
Their announcement capped a long day of fits and starts, political drama and high-level negotiating.
At one point, the deal seemed in jeopardy just hours after aides said it had been struck by lead negotiators.
Democrats complained that Senate Republicans were suddenly demanding that a new restriction on physician-owned hospitals had to be eased to gain their support.
Aides said some Democratic negotiators were also reluctant to sign off on the deal because of cuts in the pensions of federal workers.
The overarching issue, however, was the proposed extension for 10 months of the payroll tax cut set to expire on Feb. 29.
Many Republicans had initially balked at the extension while others insisted that its cost had to be offset by spending cuts to prevent an increase in the U.S. deficit.
Their positions drew fire from many fellow Republicans, who argued that the party had long been for lower taxes and that blocking a tax-cut extension could rile voters in advance of the November elections.
House Speaker John Boehner and fellow Republican leaders cleared the way for a deal on Monday when they dropped their demand that there be spending reductions to pay for the tax-cut extension.
The payroll tax was first reduced from 6.2 percent to 4.2 percent in the beginning of 2011 at the request of Obama as part of his bid to stimulate the economy.
The new deal would continue the 4.2 percent rate until the end of this year, during which it is projected to put an additional $1,000 in the pockets of the average American working family.
Analysts said opinion polls showing public disgust with a gridlocked Congress may have helped drive lawmakers, many of whom are up for re-election this year, toward a deal.