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Senate Democrats seek new economic stimulus

U.S. Senate Majority leader Reid makes remarks as Senator Schumer listens during a news conference on Capitol Hill in Washington
U.S. Senate Majority leader Reid makes remarks as Senator Schumer listens during a news conference on Capitol Hill in Washington

By Richard Cowan

WASHINGTON (Reuters) - Democrats in the Senate on Wednesday called on Vice President Joe Biden to include new economic stimulus spending in deficit-reduction talks as a way of lowering the 9.1 percent jobless rate that is hobbling the economic recovery.

Senate Majority Leader Harry Reid made the proposal to the White House, Richard Durbin, the No. 2 Democratic senator, told reporters.

"The Republicans are fixating on the budget deficit and it's a serious problem," Durbin said.

But citing the conclusions of a presidential deficit-cutting commission that he served on last year, Durbin added, "Get the recovery right before you get in this deficit cutting mode ... get people back to work. Let's start moving in that direction."

A senior Democratic aide said the job-creation idea Senate Democrats are now pursuing represented a pivot in the deficit-reduction negotiations.

He said the idea presented to the White House has three components to help create jobs: new infrastructure spending, a payroll tax cut and support for clean energy jobs.

He did not say how large the infrastructure spending proposal would be. In 2009, President Barack Obama won enactment of an $814 billion economic stimulus that Republicans opposed as wasteful spending.

The aide said the White House appeared to support extending the current payroll tax cut for employees, although there has been discussion on Capitol Hill of also expanding that tax cut to employers.

Biden is to return to the Senate on Wednesday for another meeting with the bipartisan group of lawmakers looking for ways to significantly reduce deficits. A deep cut in spending -- in the neighborhood of $4 trillion over a decade -- is a Republican requirement for allowing a vote to increase U.S. borrowing authority that is hitting up against a $14.3 trillion limit.

The group is facing an August 2 deadline for resolving the debt limit problem and thinks that it needs to make some decisions within the next few days in order to give the Senate and House of Representatives enough time to write and pass spending cut and debt limit legislation.

Durbin told reporters he thought that effort could become a "two-step" process containing a "serious down payment on the deficit" followed by more work on long-term savings.

"We're just not going to be able to accomplish (all of) it by August 2," Durbin said.

The Biden group has aimed to raise borrowing authority by enough to get through 2012 and next year's presidential and congressional elections.

"I hope Vice President Biden can get an agreement that takes us through the election. I don't know if he can," Durbin said.

(Editing by Jackie Frank)

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