An extension of jobless benefits enacted this summer expires Dec. 1, and unless they are renewed, two million people will lose benefits averaging $310 a week nationwide by the end of December.
The failed measure would have extended jobless benefits through the end of February at a cost of adding $12.5 billion to the nation's debt. Republicans opposing the legislation said the measure should be paid for by cutting unspent money from last year's economic stimulus bill.
The White House criticized Congress for voting to cut off unemployment benefits with the holiday break approaching.
"I don't think we want to leave here having fought for tax cuts for millionaires and against unemployment insurance for those that have lost their jobs," spokesman Robert Gibbs said.
Democrats brought the measure to the floor under fast-track rules that required a two-thirds vote to pass, so the measure fell despite winning a 258-154 majority. Republicans blasted the move since it denied them an opportunity to try to offset its cost.
"The fact is, we can both provide this help and pay for it by cutting less effective stimulus spending," said Rep. Charles Boustany, R-La. "That's what we should be debating today."
Efforts to renew federally paid jobless benefits for people who have been out of work for more than half a year has bedeviled Congress for much of the year.
Every recession since 1950 has featured an extended federal benefits program financed with deficit dollars. That's a precedent Democrats refused to break when battling with Republicans for months earlier this year to extend the program.
Republicans didn't pay any political price for stalling efforts earlier this year to extend jobless benefits that provide critical help to the unemployed - including a seven-week stretch over the summer when jobless benefits were a piece of a failed Democratic tax and jobs bill.
But allowing benefits to expire in the holiday season may draw negative attention to Republicans, especially when measured against their insistence that tax cuts for upper-income taxpayers not be allowed to expire.
"We have never cut off benefits for out-of-work Americans where the unemployment rates have been this high," said Rep. Jim McDermott, D-Wash. "Without this extension, temporary federal extended benefits will shut down ... denying benefits to two million of our fellow citizens over the holiday season."