Bush-era Tax Deal Could Include Jobless Benefits

* Bush-era cuts expire at year end with no action

* Democrats seek jobless benefit extension

* Leaders take temperature after election

By Kim Dixon and Richard Cowan

WASHINGTON (Reuters) - A deal on a temporary extension of the Bush-era tax rates could emerge that would also renew unemployment benefits for 2 million Americans about to lose them, top lawmakers said Tuesday.

A senior Republican in the House said he could back extending jobless benefits, favored by Democrats like House Speaker Nancy Pelosi, in exchange for an extension of all Bush-era tax cuts, including for the wealthiest groups.

"What we're going to do is sit down and talk with Mrs. Pelosi," Representative Pete Sessions, a Republican in leadership, told Reuters as he left a meeting of House Republicans. "I see nothing wrong with her winning as long as the American people do."

Jobless benefits for 800,000 Americans will expire on Nov. 30 if Congress fails to act. Two million in total would lose benefits by the end of December.

The benefits have been renewed several times as the country struggles with near 10 percent unemployment, but Republicans have sought to limit them.

Democrats are politically weakened following the Republican takeover of the House of Representatives and gains in the Senate in the Nov. 2 congressional elections.

President Barack Obama has asked congressional leaders to meet with him Thursday to discuss tax cuts. Legislation is not expected to come up for a vote until after next week's Thanksgiving break at the earliest.

A top Democrat also suggested a deal on taxes and unemployment benefits could be linked.

"It really strikes me as hard to explain why we would give charity to the richest people in America with additional tax cuts of $100,000 a year and deny the basic necessities of life to people who are out of work through no fault of their own," said Richard Durbin, the No. 2 Democrat in the Senate.

TAKING THE TEMPERATURE

Top lawmakers meet with rank-and-file members Tuesday when leaders for the first time will take the temperature on how to extend Bush-era tax cuts after the congressional elections.

Bush-era tax cuts for all individuals expire at year end and lawmakers have only a few weeks to make a deal with Republicans on extending them.

The parties agree on an extension of lower rates for individuals earning less than $200,000 but disagree whether to extend those rates for the highest earners. Republicans say the economy cannot stomach any higher taxes, while Democrats say the nation cannot afford the cost of lower rates for the wealthiest taxpayers.

Obama signaled willingness to compromise with Republicans following their election gains but says he wants to make the lower tax rates permanent for the middle class and signaled any extension for the wealthy must be temporary.

But Democrats, who now control both houses of Congress, were unable to broker a deal before the election, and may now have to settle for a temporary extension of all the rates to prevent taxes rising on Jan. 1 on nearly every American.

Still, the chances that lawmakers will not get in line to make a deal remain, especially with an empowered Republican conservative Tea Party movement.

The leader of the Republicans' Tea Party Caucus in the House rejected the idea of linking a tax cut extension to an extension of unemployment benefits.

"I don't think that the American people should have to pay for that by having to have some new massive spending tied to it," Representative Michele Bachmann said in an interview with ABC's "Good Morning America." "If that's the case, I don't think you are going to see the Republicans go along with it." (Additional reporting by Donna Smith and Thomas Ferraro; Editing by Peter Cooney)