ANALYSIS - Row over U.S. jobs bill shows Democratic divisions

WASHINGTON Sat Feb 13, 2010 2:08am IST

U.S. Senate Majority Leader Harry Reid (D-NV) listens as U.S. President Barack Obama delivers his first State of the Union address on Capitol Hill in Washington January 27, 2010.    REUTERS/Tim Sloan/Pool/Files

U.S. Senate Majority Leader Harry Reid (D-NV) listens as U.S. President Barack Obama delivers his first State of the Union address on Capitol Hill in Washington January 27, 2010.

Credit: Reuters/Tim Sloan/Pool/Files

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WASHINGTON (Reuters) - A high profile effort at bipartisanship in the U.S. Congress has crashed and burned -- raising fresh doubts about President Barack Obama's ability to get lawmakers including fellow Democrats to deliver.

The rebuff is acute because it affects the president's top priority, cutting the 9.7 percent U.S. unemployment rate, in advance of November congressional elections at which Democrats expect losses.

And the setback appears personal because Obama's fellow Democrats, not Republicans, smashed the jobs-creation proposal after it received the White House's blessing.

"This hurts Obama," said Paul Light of New York University's Center for the Study of Congress. "People think he's a good guy, a smart guy. But there are a lot of questions about whether he can lead toward his promise of 'change in Washington.'"

Chris Krueger of Concept Capital, a private firm that tracks Washington for institutional investors, said: "Congress has had more than its fair share of train wrecks (but) this one takes the prize."

Senate Finance Committee Chairman Max Baucus, a Democrat, and the panel's top Republican, Charles Grassley, unveiled a $90 billion jobs package on Thursday -- but Senate Majority Leader Harry Reid promptly tore it to pieces.

Reid took the action after a meeting with fellow Democrats, during which many complained that the measure favoured business over labour, congressional sources said.

Other senators suggested that a smaller bill would have a better chance to win quick passage.

So Reid split the bill into pieces, with the initial portion, which he says would cost $15 billion, to be voted on when the Senate returns later this month from a week-long recess. The remainder would be voted on separately later, Reid said.

NONSTARTER

His decision riled a number of Republicans, baffled some Democrats and appeared to leave the White House hanging.

"The majority leader pulled the rug out from work to build broad-based support for tax relief and other efforts to help the private sector recover from the economic crisis," said Grassley spokeswoman Jill Kozeny.

To add to the sense that Democrats are in disarray on the bill, White House press secretary Robert Gibbs had earlier hailed the Baucus-Grassley effort.

"The president is gratified to see the Senate moving forward in a bipartisan manner on steps to help put Americans back to work," Gibbs said. A scaled-backed jobs bill can win bipartisan support, he said on Friday.

On Friday, a senior Democratic aide voiced confidence that the scaled-back jobs bill would pass. Others doubted it.

"It's not going to happen. It's a nonstarter," said congressional analyst Light.

"You can't get Grassley and the White House out in front on this, and then cut them off at the knees," Light said.

Senator Judd Gregg, top Republican on the Budget Committee, called Reid's $15 billion jobs bill a sham, telling CNBC that it would actually cost about $80 billion and provide "very little impact on employment in this country."

DIVISIONS AMONG DEMOCRATS

The split over the jobs bill underscored divisions among liberal, moderate and conservative Democrats -- all of whom have their own priorities and constituents as they look ahead toward the November election.

Obama made a fresh appeal for bipartisanship after a surprise Republican victory in a special Senate election in Massachusetts last month.

The Republican win ended the Democrats' Senate supermajority, which had enabled them, if they stuck together, to pass legislation without any single Republican vote.

They now need bipartisanship to move on any major front.

Early Thursday, at least some Democrats and Republicans were moving together on jobs bill as well as a long-sought measure to tighten regulation of the financial industry.

Senate Banking Committee Chairman Chris Dodd, a Democrat, announced he was working on the financial bill with Republican Senator Bob Corker, a member of his panel. Dodd voiced confidence that they would find common ground.

Yet the breakdown over the jobs bill could signal potential problems, said Anne Mathias, another congressional analyst at Concept Capital.

"This does not auger well for bipartisanship on financial services reform -- at least in the short term," Mathias said.

(Additional reporting by Andy Sullivan, editing by Matthew Bigg and Jackie Frank)

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