The legislation would have extended the deadline to file for federal unemployment benefits to Feb. 28, sparing 4 million people from falling off the rolls. The deadline is currently Nov. 30.
Federal jobless payments, which last up to 73 weeks, kick in after the state-funded 26 weeks of coverage expire. These federal benefits are divided into tiers, and the jobless must apply each time they move into a new tier.
Congress has extended the deadline to file those applications four times in the past year. The last jobless benefits extension -- which lasted six months and cost $34 billion -- faced a lot of opposition on deficit conscious Capitol Hill before it finally passed in mid-July.
The $12.5 billion bill that was on the floor Thursday needed two-thirds approval, or 275 votes, a tough hurdle. The vote was 258 to 154.
Still, the bill was the opening salvo in what's likely to be a highly charged debate on extending the safety net for the nation's millions of unemployed. While the next step is unclear, it's possible the extension will resurface in a larger bill, such as one that would extend the Bush tax cuts.
But it's also likely lawmakers won't meet the Nov. 30 deadline, meaning hundreds of thousands of people will start losing benefits. In the past, Congress has made the extension retroactive, so the jobless ultimately received all their checks.
Both House and Senate Democrats have said they would have liked to extend the deadline by a year, but the House settled on three months in hopes that it would pass more easily.
A growing chorus of Republicans say they will only support an extension if it is paid for -- which it is not at this point. They point to unspent stimulus funds as a potential pot of money.
Lawmakers "ought to develop a consensus on how to extend these critical benefits in a fiscally responsible manner as we attempted to do in July," said Sen. Olympia Snowe, a Republican from Maine, who has supported previous extensions.
Those who support extending benefits are also racing to pass a bill before the Republicans take over control of the House in January, when it could become harder to bring the matter to the floor for a vote.
A $319 billion tab
The unemployed have collected $319 billion in jobless benefits over the past three years. Some $109 billion of that tab has been footed by the federal government, with the rest paid for by taxes levied on businesses.
The jobless now receive an unparalleled level of support while they look for new positions. Benefits last up to 99 weeks, far surpassing the previous record of 65 weeks during the recession of the mid-1970s.
"Terminating this emergency unemployment assistance will not only devastate families, but it also will hurt the entire economy by depressing consumer confidence and demand," said Rep. Sander Levin, a Michigan Democrat, the chairman of the House Ways and Means Committee,
Levin introduced the bill with Rep. Jim McDermott, a Washington Democrat, on Wednesday.
Some 8.5 million people are collecting unemployment benefits, including 4.8 million receiving federal benefits.
Lifelines for the poor are disappearing
Advocates argue that this assistance is vital because it's so tough to find work in today's weak economy. The number of long-term unemployed, who have been out of a job for more than six months, stands at 6.2 million.
They note that the federal government has never ended extended benefits when the unemployment rate was above 7.4%. It's now at 9.6%.
To bolster their position, lawmakers released two reports Wednesday that showed the importance of unemployment benefits to families and to the economy.
A non-partisan Congressional Budget Office report said that the benefits added a median contribution of $6,000 to families, meaning half received less and half received more, in 2009.
And a report by the Joint Economic Committee, a House-Senate panel now headed by Democrats, said ending the extended unemployment program would drain the economy of $80 billion and result in the loss of more than 1 million jobs over the next year. That's because the unemployed are usually living so close to the edge that they spend their benefits immediately, generating economic activity.
Those opposed to extending the deadline are concerned about the impact on the deficit and about whether prolonged benefits keep the jobless from looking for work.