By Paul Kane
Washington Post Staff Writer
Saturday, February 13, 2010; A03

Senate Democrats scrambled Friday to reassemble a bipartisan coalition for a jobs bill after Republicans defected over Majority Leader Harry M. Reid's decision to scale back the legislation to appease rank-and-file liberals.

Faced with possible defeat on President Obama's top agenda item for this year -- job creation -- Democrats privately discussed ways to regroup before a planned Feb. 22 vote on slimmed-down legislation totaling $15 billion. Such a small package probably would not create a large increase in hiring, some economists said. It is far less ambitious than the more than $150 billion legislation the House passed in December, which includes large increases in unemployment benefits and new spending on infrastructure.

"It is better than nothing, but it ought not be confused with a solution to the jobs problem," said Harley Shaiken, a professor at the University of California, Berkeley, who cited the need for incentives for businesses to raise wages and aid to cash-strapped states. "What the Senate is talking about is not in the ballpark of what needs to happen to address this problem."

The White House and Senate Democrats thought earlier this week that they had rounded up enough support to move an $85 billion legislative package, but they met fierce resistance from some liberals, who prefer something akin to the House legislation. On Thursday, after the package was announced, Reid (D-Nev.) hastily pared it back to four popular provisions totaling $15 billion, and he pledged to revisit the other issues in future legislation. But Republicans objected, thinking they had reached a deal with Reid and Finance Committee Democrats on the $85 billion legislation.

The critical battle might be determining what provisions would actually create jobs to help kick-start an economy that has lost more than 8 million jobs since the recession started. The White House projected this week that unemployment, now at 9.7 percent, would remain high this year.

The key provision in the Reid bill is $13 billion in credit for businesses that hire new employees, co-authored by Sens. Orrin G. Hatch (R-Utah) and Sen. Charles E. Schumer (D-N.Y.). The Congressional Budget Office estimated that the proposal, which would eliminate some payroll taxes on new hires and give businesses a $1,000 tax credit for hires that stay on at least a year, would result in 180,000 new jobs.

Lawrence Mishel, president of the liberal-leaning Economic Policy Institute, said the credit would benefit companies that bring on new hires, even if the businesses do not expand payrolls, so companies engaged in regular turnover might benefit as opposed to those that actually increase their number of employees.

There is no up-front cash incentive for businesses making a hire; instead, the cash comes later in the year, in the form of $1,000 for employers who retain new hires.

"You're spreading a small amount of money over a large amount of activity, so on average, you're not providing much incentive whatsoever," Mishel said.

Schumer said that the provision is "not a panacea" and that other measures would further boost hiring. Sen. Byron L. Dorgan (D-N.D.), who had been tapped to craft a jobs bill, said that too few of the provisions in the original $85 billion bill -- particularly a $31 billion extension of tax cuts for businesses -- would create no jobs.

Some GOP and Democratic aides suggested Friday that the Reid legislation could fall short of the 60 votes needed to proceed, possibly along the chamber's 59-41 partisan lines. Some Democrats remained optimistic that at least a few Republicans would support Reid's smaller legislation.

Staff writers Ben Pershing, Michael Fletcher, Alec MacGillis and Shailagh Murray contributed to this report.