* Benefits expired in May due to partisan deadlock
* Latest skirmish in stimulus vs. deficit reduction debate
* New senator gave Democrats vote they needed (Adds final vote postponed until Wednesday)
By Andy Sullivan
WASHINGTON, July 20 (Reuters) - The U.S. Senate on Tuesday cleared the way to extend long-term unemployment benefits, breaking a partisan stalemate that has caused 2.5 million jobless Americans to lose the weekly checks that help them stay afloat.
Minutes after he was sworn in, Senator Carte Goodwin cast his first vote to give his fellow Democrats the 60 they needed to overcome a Republican procedural hurdle and move toward restoring the lapsed jobless benefits.
“It shouldn’t take the slimmest of margins to do what’s right,” Democratic Senator Harry Reid said at a news conference.
The Senate is expected to hold a final vote on Wednesday on the bill that Republicans criticized for deepening the federal deficit.
The House of Representatives could also approve the measure on Wednesday and send it President Barack Obama to sign into law.
“Americans who are struggling to find a job and get back on their feet deserve more than the same political game-playing and failed policies that helped cause this recession,” Obama said in a statement.
With congressional elections looming in November, the Senate had been locked in a partisan standoff for weeks over how to pay for extending benefits for those who have been out of work the longest.
Democrats, eager to show voters they are doing all they can to bring down the 9.5 percent unemployment rate, tried to extend the benefits when they expired at the end of May.
But they were blocked by Republicans who said the $34 billion price tag should be covered by cuts elsewhere rather than more borrowing, which would add to a trillion-dollar budget deficit.
“There’s no debate in the Senate about whether we should pass a bill — everyone agrees that we should,” Senate Republican leader Mitch McConnell said. “This debate is about whether in extending these benefits we should add to the debt or not.”
Nearly half of the 15 million Americans out of work have been jobless for more than six months, the highest level of long-term unemployment since the government began keeping track in the 1940s. Nearly a quarter of the unemployed have been out of work for more than a year.
Democrats broke the deadlock shortly after the 36-year-old Goodwin was sworn in to fill the seat of Robert Byrd, who died last month after 57 years in Congress.
Moderate Republicans Susan Collins and Olympia Snowe voted with the Democrats, while centrist Democrat Ben Nelson voted against the extension.
The fight over jobless benefits is the latest skirmish in a broader debate over whether Congress should spend more to stimulate the economy or start making the painful cuts needed to bring down record budget deficits, which hit 9.9 percent of GDP in the last fiscal year.
In normal times, benefits expire after 26 weeks, but after the recession hit in late 2007 Congress expanded the program to cover up to 99 weeks of benefits. The expanded program lapsed at the end of May and 2.5 million people have lost their benefits since then.
The Senate bill would pay retroactive benefits for those people and extend the program through November.
An April report by the San Francisco Federal Reserve concluded that the long-term benefits boosted the unemployment rate by 0.4 percentage points as some of the jobless were less likely to look for work.
But economists generally think unemployment benefits get a good bang for the buck because people who are out of work and scrambling to make ends meet are likely to quickly spend that money, putting it into the economy and stimulating growth.
Though Democrats will likely get a victory on unemployment benefits, much of the rest of their “jobs agenda” in 2010 has been sidelined. Due to unified Republican opposition and doubts within their own ranks, Democrats have been unable to secure more money to avert teacher layoffs, launch new construction projects and help states pay their health-care bills.
Further, the public seems little inclined to give them credit for the job-creation measures they have already passed.
Last year’s $862 billion stimulus package has saved more than 3 million jobs, according to the nonpartisan Congressional Budget Office, but most people think it has had no impact on the economy or actually made it worse, according to a recent CBS News poll.
The $152 billion that the government has spent on additional unemployment benefits since the recession began in late 2007 has boosted GDP by 1.7 percent and supported 1.7 million jobs that otherwise wouldn’t be there, according to the liberal-leaning Economic Policy Institute.
The government has also recaptured $92 billion through taxes generated by the additional economic activity and decreased expenditures on food stamps and other safety-net programs, the think tank estimated. (Additional reporting by Susan Cornwell and Charles Abbott; Editing by Vicki Allen and Stacey Joyce)