The 215-204 vote to approve the measure capped a turbulent week for Democratic leaders, who were forced by party moderates and conservatives unhappy with continued deficit spending to kill $24 billion in aid to cash-starved states and $7 billion for health insurance subsidies for laid-off workers.
The unemployment insurance extension anchors a grab bag of unfinished business, including numerous spending measures and a renewal of more than 50 tax breaks for individuals and businesses.
Despite House action, Democrats will miss their self-imposed deadline of passing a jobless benefits measure before Memorial Day. The Senate left Washington Friday for a weeklong recess before the measure passed the House.
It'll be the third time this year that a program providing unemployment checks to people will have lapsed, though only a small fraction of the 11 million people receiving unemployment benefits have been affected.
The weeklong turmoil in the House reflected increasing anxiety among fiscally conservative "Blue Dog" Democrats unhappy about adding to the deficit as the national debt closes in on $13 trillion. A version circulated last week would have added $134 billion to the deficit and immediately came under assault.
Lawmakers also approved, by 245-177, a $22 billion provision to delay a scheduled 21 percent cut in Medicare reimbursements to doctors until 2012. That action brought the deficit cost of the bill to $54 billion, according to the Congressional Budget Office.
The move to drop the aid to states was a big blow to the nation's governors, who are desperate for fiscal relief as weak tax revenues are forcing painful cutbacks, including layoffs and furloughs of state workers. Many states had already incorporated the money into their budgets for next year.
Democrats say that continuing unemployment benefits would not only help the jobless but provide a boost to the economy since the money is typically spent immediately and spurs demand.
"With this vote, we can help families across the country and continue the path we set out on last year to help dig the country out of a terrible recession," said Rep. Louise Slaughter, D-N.Y.
Republicans countered that the $58 billion in tax increases to partially pay for the measure including $11 billion from quadrupling to 34 cents the per-barrel tax that oil companies pay into the Oil Spill Liability Trust Fund are job killers.
"This is not a jobs bill," said Rep. Wally Herger, R-Calif. "It is just another extension of the 'tax too much, spend too much, borrow too much' philosophy that we have come to expect" from Democrats.
About 200,000 people per week are set to begin losing jobless benefits when an extension of unemployment insurance expires next week, though lawmakers are likely to seek to restore them after the fact.
People who have been out of a job for more than six months will gradually lose eligibility for additional weeks of benefits that are fully financed by the federal government. The first six months of unemployment benefits would not be affected, since they are the responsibility of the states.
The cutoff of health insurance subsidies means that, starting next month the newly unemployed won't be eligible for a 65 percent subsidy under the COBRA program. People currently receiving the subsidy would remain eligible for a total of six months.
Democratic leaders had already cut the package of spending proposals and tax cuts Wednesday by about $50 billion to $143 billion. Friday's action eliminated more than $30 billion from the measure, since the Medicare doctor's payment plan survives.
The tax cuts the measure extends includes a property tax deduction for people who don't itemize, lucrative credits that help businesses finance research and develop new products, and a sales tax deduction that mainly helps people in states without income taxes.
But there are also a bevy of special interest tax perks, including tax breaks for biodiesel producers, domestic wool producers and NASCAR tracks.
The cost of the bill would be partially offset by tax increases on investment fund managers, oil companies and some international businesses. The tax increases total about $57 billion over the next decade. Changes giving underfunded pensions more time to improve their finances would raise $2 billion.