Trading was volatile - the Dow and the S&P indexes both rose more than 1 percent during the morning, but fell more than 1 percent in the afternoon.

The minutes followed comments from Chairman Ben Bernanke, who said the Fed could decide to scale back the pace of bond purchases at one of the "next few meetings" if the economic recovery looked set to maintain forward momentum.

The comments were a blow to a market that had accelerated after Bernanke said the central bank needed to see further signs of traction in the economy before it tapered stimulus.

"This is a very sensitive market and particularly sensitive to any notion that tapering will come too soon," said Quincy Krosby, market strategist at Prudential Financial in New York.

"No one wants to be selling if the data reaches the point when the Fed begins to specifically talk about tapering. The market doesn't wait for the Fed to move. It will move before. That's how it operates."

Krosby also added that Bernanke went off-script and in his effort to be transparent, "he confused the market."

According to the minutes of the April 30-May 1 policy meeting released on Wednesday, "a number" of officials were open to tapering large-scale asset purchases as early as the June meeting, but disagreement continued on what conditions would suffice to begin that move.

One official preferred to begin decreasing purchases immediately and another wanted to add more accommodation immediately, but ultimately most felt it was important simply to be prepared to adjust the pace up or down in response to incoming data.

Investors have increasingly turned their attention to when the Fed's current $85 billion-per-month bond purchase program might end or slow. The stimulus has been a major force behind a rally in U.S. equities that has helped the S&P 500 and Dow industrials gain about 16-17 percent so far this year.

The Dow Jones industrial average (.DJI) was down 80.41 points, or 0.52 percent, at 15,307.17. The Standard & Poor's 500 Index (.SPX) was down 13.81 points, or 0.83 percent, at 1,655.35. The Nasdaq Composite Index (.IXIC) was down 38.82 points, or 1.11 percent, at 3,463.30.

The S&P 500 rose as high as 1,687.18 and fell as low as 1,648.86 during Wednesday's trading session while the Dow rose as high as 15,542.40 and fell as low as 15,265.96.

"You have more volatility than you've had for a long time," said Uri Landesman, president, Platinum Partners in New York.

"The technician in me looks at a rocket shot straight up and says you could get a pretty good correction here without that much work. There aren't really solid levels of support on the way down because we broke through all of them so quickly."

All 10 sectors on the S&P 500 closed negative, with energy and utilities leading the decline. The energy sector index (.SPNY) fell 1.2 percent while the utilities sector (.SPLRCU) fell 1.6 percent.

After the market close, shares of Hewlett-Packard Co (HPQ.N) jumped 10 percent after the world's largest personal computer maker raised the lower end of its full-year outlook. The stock had closed up 0.6 percent at $21.23.

Bristol-Myers Squibb (BMY.N) shares rose 5.3 percent at $46.40 after a Citi note highlighted excitement surrounding so-called immunotherapy, in the wake of positive results from clinical trials conducted by companies such as Bristol-Myers and Roche Holding (ROG.VX).

Target Corp (TGT.N) cited unseasonably cold weather as it reported a 0.6 percent decline in first-quarter sales at U.S. stores open at least a year. Target cut its full-year profit forecast and shares slid 4 percent to $68.40.

Toll Brothers (TOL.N) shares rose 2.9 percent to $37.07 after the largest U.S. luxury homebuilder posted a 46 percent rise in quarterly profit, suggesting the housing recovery is picking up pace across the industry.

Volume was roughly 8.34 billion shares on the New York Stock Exchange, the Nasdaq and the NYSE MKT, exceeding the year-to-date average daily closing volume of about 6.4 billion.

Decliners outnumbered advancers on the NYSE by 2,362 to 648, while on the Nasdaq, decliners beat advancers 1,870 to 632.

That was the easy part.

Many of the almost two dozen Republicans identified as possible supporters by the Gang of Eight are demanding changes that would make the bill significantly more conservative. They want stricter border security, tighter control on government benefits for newly-documented immigrants and tougher requirements along the pathway to citizenship.

Go too far on any of those elements, and liberal Democrats — who aren’t thrilled with many aspects of the bill already — begin to pull away.

Meanwhile, a handful of conservative Democrats, who have been asked to cast several tough votes this year already, won’t commit to the bill unless they secure many of the same fixes that Republicans are seeking.

And even if the Senate approves a bill, the route through the House is a puzzle for reform proponents. Their only game plan, at this point, is to run up the numbers in the Senate, sending an emphatic message to the House that it needs to act.

“Our goal is to get 70 votes. It is going to take a lot of work,” said Sen. Chuck Schumer (D-N.Y.), a leader of the Gang of Eight. “This is one of the most important bills to pass for America. It’s one of the hardest bills to pass for America. And we got a long way to go, we don’t have any doubts about that. But so far, at each step of the road where it’s been difficult, we’ve been able to overcome.”

No one’s expecting final commitments until just before the vote as the senators look to extract compromises and concessions. But Schumer said the Gang of Eight would meet Thursday to begin plotting out a strategy for the floor debate, which is expected to begin soon after senators return from the Memorial Day recess.

(Also on POLITICO: Pol: Obamacare may kill immigration)

The group heads into the next phase of the fight with the strength that comes from sticking together.

Predictions that a drawn-out debate would kill the bill haven’t come to pass. It’s been more than four months since the Gang of Eight released its principles and more than one month since it offered the bill. And coming out of a three-week-long Judiciary Committee markup Tuesday, the legislation picked up one more Republican vote — Sen. Orrin Hatch of Utah — although his support isn’t guaranteed on the floor.

The debate has yet to turn unusually heated, in part because it’s been repeatedly overshadowed by a string of headline-grabbing news events including the Boston Marathon bombings, the Benghazi investigation, the IRS scandal, and the Oklahoma tornadoes.

This has all given the Gang of Eight a chance to start on favorable terrain, with undecided senators as open-minded as they may ever be to tackling the controversial issue.

“I want to see an immigration reform bill, I really do,” said Sen. Jim Risch (R-Idaho). “I think everybody up here does. I think that the gap between all parties is a lot narrower than it was.”

Senate Minority Whip John Cornyn (R-Texas) was non-committal Wednesday when asked if GOP leaders would try to defeat the plan and whip their conference against the measure. And although Cornyn himself voted against the measure in committee, he pointed to the desire of a significant number of GOP senators who want to see a bill pass the chamber.

“I would tell you that I think the overwhelming feeling of our conference is that status quo is unacceptable,” Cornyn said. “And while this bill that’s come out of the Judiciary Committee is not something I can support — and I think others will have similar objections — that the Senate is a place where we can offer improvements and hopefully fix some of those things. So we intend to see the process through.”

Such comments give reform proponents hope that the bill can win a super-majority, compelling the House to act on a similar measure.

“We certainly need 60, I think we’re close to that,” said Senate Majority Whip Dick Durbin (D-Ill.), a member of the Gang of Eight. “I think we will lose a handful at most on the Democratic side, but the Republican side will have to come through for us to get higher numbers.”

The roster of questionable Democrats include Max Baucus of Montana, Mark Pryor of Arkansas, Heidi Heitkamp of North Dakota, Jon Tester of Montana and Mark Begich of Alaska.

“Securing the border is important, making sure English is part of the equation is important, making sure the path to citizenship is a realistic one and is not just a gift, amnesty,” said Tester, who voted against an immigration overhaul bill in 2007.

But he sounded more open to the pathway to citizenship this time around.

“Right now, there’s amnesty by default,” Tester said. “It would be good to get the problem solved.”

On the Republican side, the list of targets identified by immigration advocates and congressional aides could be divided into tiers.

The Republican senators who appear most likely to support the bill other the than four GOP members of the Gang of Eight include Collins, Murkowski, Dean Heller of Nevada, Mark Kirk of Illinois, Rob Portman of Ohio and Kelly Ayotte of New Hampshire.

At the lower end of the first tier are senators like Hatch, Saxby Chambliss of Georgia, Pat Toomey of Pennsylvania, Lamar Alexander and Bob Corker of Tennessee.

The second tier of senators, who are less likely to back the bill but could be swayed, includes Risch, John Barrasso of Wyoming, John Thune of South Dakota, Mike Crapo of Idaho, Johnny Isakson of Georgia, John Hoeven of North Dakota and Mike Johanns of Nebraska. This is a group that could vote yes if Sen. Marco Rubio (R-Fla.), a key member of the Gang of Eight, is still on board and other conservatives are falling into line.

Then there is a coveted subset of tea party stars, including Rand Paul of Kentucky and Mike Lee of Utah, who would be as influential as anything else in wooing House Republicans but difficult to land.

The Republicans in the Gang of Eight will have to lean on their conference to back the bill, while trying to appease their concerns. Sen. Jeff Flake (R-Ariz.), a Gang of Eight member, said the group would divide up the list of targets to lobby for support.

“Obviously, we’ll be doing that,” Flake said. “It’s possible [to get to 70], but we’re going to have make some changes to the bill to do that — I think we know that.”

Indeed, swing vote senators are demanding a series of changes and votes on amendments before they can support the plan.

Portman said he needs to be “convinced the enforcement is real,” particularly on employers who hire illegal immigrants. Right now, he said, the bill lacks “teeth” in that regard.

“I’m convinced unless you deal with the magnet, which is jobs, you’re not going to be avoid repeating the same process again as we had to do after 1986,” Portman said.

Johanns said the pathway to citizenship remains a “tough issue” for him, but he said, “I haven’t closed the door yet” to supporting the plan.

“You get one chance at this every – 10, 20 years,” Johanns said.

Still, there are several positive signs for proponents of the bill that those who opposed the plan in 2007 were now signaling a new openness to the measure this time around.

“I believe that conservatives should be leading the charge to create a legal immigration system,” said Alexander, who opposed the 2007 bill but said he was “encouraged” by this proposal. “I’m doing my best to create an environment so we can succeed in June so I can vote for the bill.”

Alexander added there was “a lot of difference” between now and 2007, pointing to the involvement of Rubio and that that it’s “become more obvious that we have to deal with it.”

“I would like to be able to a cast a vote against de facto amnesty and a vote for a legal immigration system,” Alexander said.

The Senate labor committee voted Wednesday to advance a bipartisan slate of five nominees to the National Labor Relations Board, but the panel split largely along party lines on two Democrats who were recess appointees, signaling trouble ahead for their confirmations by the full Senate.

The split is the latest example of Congress's partisan divide that is threatening confirmation of several of President Barack Obama's agency nominees, including Tom Perez to head the Labor Department, Richard Cordray to head the Consumer Financial Protection Bureau, and Gina McCarthy, nominated to head the Environmental Protection Agency.

Last week, two committees voted along party lines to approve Mr. Perez and Ms. McCarthy. But a filibuster threat from Sen. David Vitter (R., La.) threatens Mr. Perez's confirmation since he would need to clear a 60-vote procedural hurdle in the full Senate to overcome it. Sen. Roy Blunt (R., Mo.) has a hold on Ms. McCarthy's nomination, and Mr. Cordray's confirmation vote, scheduled for this week, was postponed until July by which time they hope senators will have completed work on legislation overhauling immigration law.

Senate Democratic leadership aides said that once the immigration bill is finished, Democrats intend to hold votes on each of those nominees along with the NLRB slate and Penny Pritzker, who was picked to be commerce secretary. The cascade of confirmation votes might also include Rep. Mel Watt (D., N.C.), who was tapped to lead the Federal Housing Finance Agency, the regulator of mortgage-finance giants Fannie Mae FNMA -5.46% and Freddie Mac FMCC -7.19% .

If Republicans block a significant portion of those nominees, it remains unclear what Senate Democrats will decide to do. There is growing sympathy within the caucus to unilaterally change Senate rules to end the minority party's right to filibuster nominees, and require only a simple majority vote on presidential nominees and judicial appointees. But such a drastic move would undoubtedly infuriate Republicans.

On Wednesday, the 12 Democrats on the Senate Health, Education, Labor and Pensions Committee supported the two recess appointees, Sharon Block and Richard Griffin, who Mr. Obama installed in January 2012, bypassing Senate confirmation. Only one of the committee's 10 Republicans—Sen. Lisa Murkowski of Alaska—voted for them. A Washington, D.C., federal appeals court ruled this past January that their appointments were unconstitutional, because they occurred when the Senate was not in recess, and many Republicans said the two should have resigned after that ruling.

The committee also approved a third Democrat, Mark Pearce, the NLRB's current chairman whose term expires in August. Mr. Pearce, who had been confirmed and was renominated, won support from the Democrats and six Republicans, indicating he has a good chance of keeping his job.

The two GOP nominees—Harry I. Johnson III and Philip Miscimarra—received unanimous bipartisan support.

"It's now past time to act before the board loses its quorum," said Chairman Tom Harkin (D., Iowa). Without at least three members, the board can't issue rulings and conduct most business.

Republicans, citing the appeals court ruling invalidating Ms. Block and Mr. Griffin's appointments, say the board already lacks a quorum, and that two other should be nominated. The Obama administration has asked the Supreme Court to hear that case.

The new temporary worker visa program, which was worked out between the U.S. Chamber of Commerce and the AFL-CIO, has come under criticism from some quarters for not providing enough visas and for giving special treatment to the construction industry. 

Business groups looking to expand the number of visas have focused their lobbying efforts on the House, and were heartened by Thursday’s announcement that negotiators had an agreement in principle that includes consideration of dueling Democratic and Republican proposals on temporary workers.

“We are excited about the prospects for this deal. It is going to resolve some of the issues in the Senate bill for our industry,” said Geoff Burr, vice president of federal affairs for the Associated Builders & Contractors.

While the details of the House deal remain unclear — and Rep. Xavier Becerra (D-Calif.) still had yet to sign onto the agreement by Friday —  the lower chamber’s progress could help slow the Senate bill.

The Gang of Eight’s legislation is steadily marching through a markup of the Senate Judiciary Committee, and lobbyists had feared the House could be jammed into passing it.

“For them to say that they have a deal, that shows progress in the House and that taps the brakes on the Senate bill. That is the best thing to come out of their statements [Thursday] night,” said one business group lobbyist. 

Several business groups have backed the push for immigration reform, but some have wanted to change the Senate's proposed low-skilled worker visa program by boosting its number of visas.

Under the House deal, lobbyists expect lawmakers to offer two competing plans on the new temporary worker program — one by Democrats, the other by Republicans.

“It seems they have a decided to do a choose-your-own adventure when it comes to the guest worker program. It looks like there will be two plans when it comes to guest workers,” Burr said. “We are excited about the House Republican guest worker plan because it seems it like it will address the deficiencies of the Senate bill in a positive way.” 

That could postpone the looming battle over how to treat temporary workers until later this year. 

“We’re pleased by the bipartisan efforts in the House of Representatives to develop an immigration reform bill, and appreciative that neither side is in a rush to judgment on how to resolve some outstanding issues related to the guest worker program,” said Shawn McBurney, senior vice president of governmental affairs for the American Hotel & Lodging Association, in a statement. 

Construction industry representatives have been lobbying the House to change the new visa program proposed by the Senate, which caps visas for workers in the industry at 15,000 per year. Some anticipate that cap won’t make it into the House Republicans' temporary worker plan.  

“We are encouraged that the four Republicans in the House gang have expressed their intention is not to single out the construction industry. We think that will lead to an improved final product coming out of the immigration reform debate,” Burr said.

The Chamber has told lawmakers to stick to the deal it crafted with the AFL-CIO to create the new “W” visas for temporary workers. 

“As the Committee considers S. 744, the Chamber urges that the sound structure in the bill for W-1 visas be retained, allowing employers to participate in a program run by the Department of Homeland Security (DHS) for lesser-skilled occupations,” wrote Bruce Josten, the Chamber’s executive vice president for government affairs, in a letter on Monday to Senate Judiciary Committee members. 

The AFL-CIO would like to see the final immigration reform bill signed into law stick to the Senate bill's framework as well.

“The fact that House Republicans are unwilling to accept the bipartisan compromise crafted by the AFL-CIO and the Chamber shows they are still more wedded to extreme ideology than constructive legislating,” said Jeff Hauser, an AFL-CIO spokesman. 

The House lawmakers who announced the immigration reform deal have yet to release details to the press. 

“We've just got to finalize drafting and then we'll have to sit down and reread it and make sure that we're not screwing things up,” said Rep. Mario Diaz-Balart (R-Fla.). “Since we're done, it's just an issue of getting the bill back and rereading it."

Diaz-Balart predicted that staff would be working on the House bill’s language next week while Congress is in town, and then members can take the following recess week to review it and work out any kinks over the phone. 

“The good news is it looks like it's done, it's done. And again, even the vast majority of the drafting is done. So that's good news,” Diaz-Balart said.

Some in the business world had hoped the House bill would offer one option on the temporary worker issue. But the GOP proposal could still be an opportunity for lobbyists to win changes. 

“I would have preferred that they come up with a solution that improved on the temporary worker program in the Senate bill,” said Tamar Jacoby, president and CEO of ImmigrationWorks USA. “But I'm convinced in a Republican House, that Republican members will realize that the only way we can stop illegal immigration going forward is an improved temporary worker program and they will go with the House Republicans' version of that program.”

The Obama administration released its latest version of long-awaited rules proposed to govern hydraulic fracturing on public lands Thursday, angering environmental groups who say the government is selling out to the oil industry at the expense of public health.

The Interior Department's updated proposal, now open for public comments for the next 30 days, kept key components of the previous draft rules released in May 2012, but backpedaled on requiring companies to disclose the ingredients of fracking fluid, a cocktail of water, sand, and chemicals injected into well heads to break up shale rock and release trapped oil and gas.

While environmental groups argue the ingredients of fracking fluids should be publicly available for health reasons, the industry claims the formulations are proprietary information and publicly disclosing them would jeopardize a firm's potential competitive advantage.

With the new rules, firms would be required to log most ingredients on an industry-operated web site called FracFocus. While operators would not be required to submit components they consider "trade secret" information, the Bureau of Land Management reserved the right to require operators to submit the claimed trade secret information in cases where disputes arise.

The revised rules disappointed green groups who had hoped for stricter disclosure rules on the chemicals oil and gas companies use in fracking, as well as greater protections for groundwater supplies surrounding well sites.

"This was a big backslide from the proposal last year," says Jessica Ennis, legislative associate at Earthjustice. "More of the oil and gas industry's concerns were addressed than the concerns from the environmental and public health community."

Furthermore, while having companies disclose all chemicals except those considered trade secrets on FracFocus might seems like a consolation prize for green groups and public health advocates, many flaws exist with that approach, Ennis argues.

For starters, the site is industry funded, it's difficult to navigate, and doesn't allow users to aggregate well data in their region, she says, meaning they have to search well by well to learn about the composition of frack fluids used.

"The draft proposal would allow the industry to continue hiding behind a veil of secrecy," Ennis says.

The industry itself criticized the rules,too, arguing that regulation from the federal government would be duplicative of existing rules by states, which have historically regulated energy production.

"The states are the best regulators for the industry," Chris Faulkner, CEO of TK-based Breitling Energy Companies, said in an E-mail. "The Department of Interior doesn't need to take on another layer of regulation when they have no personnel or budget to support it."

Karen Harbert, president and CEO of the U.S. Chamber's Institute for 21st Century Energy said in statement: "BLM's rule is a solution in search of a problem. States are much better suited to regulate hydraulic fracturing and have done an effective job. The new rule is duplicative to state regulation and the Department of Interior's rule fails to provide a credible rationale as to why another set of regulations are needed."

But the hodgepodge of state rules, some of which are stricter or more lenient than others, is exactly why the federal government needs to step in and provide a baseline for regulation of the controversial practice, Ennis argues.

"Some states have highlights in their regs, and every state has lowlights in their regulations," Ennis says. "The BLM should establish a minimum federal floor. As more and more states are dealing with fracking now, we were hoping [the BLM rules] would be the gold standard, but that's not how it played out."

In an exclusive interview with National Journal, Nikola Swann, Standard & Poor’s top analyst for the U.S. government's rating, said that making big fiscal decisions in a crisis setting hurts the U.S. rating outlook and that continued “political brinksmanship” remains a major threat.

“So far we don’t see any good evidence that there is more cooperation between the two parties than there was in 2011, nor that the American policymaking system as a whole is any more effective, stable, and predictable than it was in 2011 based on the latest debate,” Swann said.

S&P’s current AA-plus rating with a negative outlook means there is at least a one-in-three chance that the agency will lower America’s rating by 2014.

Of the five criteria S&P uses to set the U.S. rating, “the political analysis and the fiscal analysis were really the two categories where we saw weakening in recent years and the main reasons why we put the rating down to AA-plus in 2011,” Swann said, explaining the basis for the continued negative outlook on the United States. “Those are still the areas where we see potential for further weakening.”

And while S&P would not provide policy advice, there are a few things it thinks lawmakers should know.

First, the sooner Congress can deal with the issue the better.

“It is certainly true that the further the U.S. can get away from making important decisions—especially about public finances—at the last minute in a crisis, the more that would help the credit rating,” Swann said.

Next, anyone who thinks that it would be no big deal if the United States defaulted on one or two Treasury payments is dead wrong. It would not only knock the U.S. rating down another notch—it would push the rating all the way down to a D.

And should any default appear likely—and Swann warns “this could happen imminently”—the rating would drop to a CCC with a negative outlook.

If Washington wants to avoid another downgrade, Swann said S&P needs to see a “credible,” roughly five-year plan that would “keep the debt-to-GDP ratios from continuing to rise as they have been for most of the past 10 years.” That deal would need to have substantial enough bipartisan support from lawmakers in both chambers to ensure that even if an election flipped the parties in power, lawmakers would still support the plan in place.

“We would have to see a reasonable basis for believing that this plan would actually be implemented,” Swann said.

The other event that could trigger a downgrade by S&P would be sudden jolt in real interest rates. But this seems less likely in the short-term given the Federal Reserve’s current path.

Although the debt ceiling is clearly an important metric to judge the likelihood of default, it is not S&P’s most important factor in determining whether to downgrade. “In general we do not see the debt-ceiling debate per se as the main point,” he said. “Our primary focus is on the longer-term dynamic.”

As for recent legislation passed by the House to prioritize debt payments, Swann argues it would not provide enough stability to prevent further downgrades if the U.S. had to rely on such an emergency plan to pay its debts, in lieu of raising or removing the debt ceiling.

“If we are talking about the scenario in which such legislation is actually getting used, we are already in more or less a political crisis,” he said.

“You could very well be having significant turbulence in the economy and in financial markets. This does not sound like a very comfortable scenario. So the point is, in a mechanical sense, yes, such legislation could potentially help avoid default, but that doesn’t mean that this overall scenario would not get so rocky that we wouldn’t downgrade from AA-plus anyway.”

Employers are increasingly recognizing they may be able to avoid certain penalties under the federal health law by offering very limited plans that can lack key benefits such as hospital coverage.

Benefits advisers and insurance brokers—bucking a commonly held expectation that the law would broadly enrich benefits—are pitching these low-benefit plans around the country. They cover minimal requirements such as preventive services, but often little more. Some of the plans wouldn't cover surgery, X-rays or prenatal care at all. Others will be paired with limited packages to cover additional services, for instance, $100 a day for a hospital visit.

Federal officials say this type of plan, in concept, would appear to qualify as acceptable minimum coverage under the law, and let most employers avoid an across-the-workforce $2,000-per-worker penalty for firms that offer nothing. Employers could still face other penalties they anticipate would be far less costly.

It is unclear how many employers will adopt the strategy, but a handful of companies have signed on and an industry is sprouting around the tactic. More than a dozen brokers and benefit-administrators in 10 states said they were discussing the strategy with their clients.

"There had to be a way out" of the penalty for employers with low-wage workers, said Todd Dorton, a consultant and broker for Gallagher Benefit Services Inc., a unit of Arthur J. Gallagher AJG -0.25% & Co., who has enrolled several employers in the limited plans.

Pan-American Life Insurance Group Inc. has promoted a package including bare-bones plans, according to brokers in California, Kansas and other states and company documents. Carlo Mulvenna, an executive at New Orleans-based Pan-American, confirmed the firm is developing these types of products, and said it would adjust them as regulators clarify the law.

The idea that such plans would be allowable under the law has emerged only recently. Some benefits advisers still feel they could face regulatory uncertainty. The law requires employers with 50 or more workers to offer coverage to their workers or pay a penalty. Many employers and benefits experts have understood the rules to require robust insurance, covering a list of "essential" benefits such as mental-health services and a high percentage of workers' overall costs. Many employers, particularly in low-wage industries, worry about whether they—or their workers—can afford it.

But a close reading of the rules makes it clear that those mandates affect only plans sponsored by insurers that are sold to small businesses and individuals, federal officials confirm. That affects only about 30 million of the more than 160 million people with private insurance, including 19 million people covered by employers, according to a Citigroup Inc. C +0.44% report. Larger employers, generally with more than 50 workers, need cover only preventive services, without a lifetime or annual dollar-value limit, in order to avoid the across-the-workforce penalty.

Such policies would generally cost far less to provide than paying the penalty or providing more comprehensive benefits, say benefit-services firms. Some low-benefit plans would cost employers between $40 and $100 monthly per employee, according to benefit firms' estimates.

"For certain organizations, it may be an ideal solution to minimize the cost of opting out," said David Ellis, chief executive of Youngtown, Ariz.-based LifeStream Complete Senior Living, which employs about 350 workers, including low-wage housekeepers and kitchen staff. Mr. Ellis, who was recently pitched a low-benefit plan, said it is one option the firm may consider to lower costs and still comply with the law, he said.

Administration officials confirmed in interviews that the skinny plans, in concept, would be sufficient to avoid the across-the-workforce penalty. Several expressed surprise that employers would consider the approach.

"We wouldn't have anticipated that there'd be demand for these types of band-aid plans in 2014," said Robert Kocher, a former White House health adviser who helped shepherd the law. "Our expectation was that employers would offer high quality insurance." Part of the problem: lawmakers left vague the definition of employer-sponsored coverage, opening the door to unexpected interpretations, say people involved in drafting the law.

The low-benefit plans are just one strategy companies are exploring. Major insurers, including UnitedHealth Group Inc., UNH -0.06% Aetna Inc. AET -1.03% and Humana Inc., HUM -0.41% are offering small companies a chance to renew yearlong contracts toward the end of 2013. Early renewals of plans, particularly for small employers with healthy workforces, could yield significant savings because plans typically don't need to comply with some health law provisions that could raise costs until their first renewal after Jan. 1, 2014.

Insurers and health-benefits administrators are also offering small companies a chance to switch to self-insurance, a form of coverage traditionally used by bigger employers that will face fewer changes under the law. Employers are also considering limiting workers' hours to avoid the coverage requirements that apply only to full-time employees.

"You're looking at ways to avoid being subject to the law," said Christopher F. Koller, health insurance commissioner of Rhode Island.

Regulators worry that some of these strategies, if widely employed, could pose challenges to the new online health-insurance exchanges that are a centerpiece of the health law. Among employees offered low-benefit plans, sicker workers who need more coverage may be most likely to opt out of employer coverage and join the exchanges. That could drive up costs in the marketplaces.

"The whole idea is to get healthy people in and not-so-healthy people in" the marketplaces, said Linda Sheppard, special counsel for the Kansas Insurance Department.

Experts worried that plans lacking hospital or other major benefits could leave workers vulnerable to major accidents and illnesses. "A plan that just covers some doctor visits and preventive care, I wouldn't say that's real health-insurance protection," said Karen Pollitz, a senior fellow at the Kaiser Family Foundation and former federal health official.

Officials at the Department of Health and Human Services said they haven't seen widespread evidence of such strategies. They said the health law would bring new options, including the subsidized exchange plans, to low-income workers, and that most employers who offer coverage now choose to provide much more robust benefits.

"Any activities that take place on the margins by a small number of employers would not have a significant impact on the small group or the individual market," said Mike Hash, director of the department's Office of Health Reform.

Limited plans may not appeal to all workers, and while employers would avoid the broader $2,000-per-worker penalty for all employees not offered coverage, they could still face a $3,000 individual fee for any employee who opts out and gets a subsidized policy on the exchanges.

But the approach could appeal to companies with a lot of low-wage workers such as retailers and restaurant operators, who are willing to bet that those fees would add up slowly because even with subsidies, many workers won't want to pay the cost of the richer exchange coverage.

A full-time worker earning $9 an hour would have to pay as much as $70 a month for a midlevel exchange plan, even with the subsidies, according to Kaiser. At $12 an hour, the workers' share of the premium would rise to as much as $140 a month.

Firms now offering low-cost policies known as mini-meds, generally plans that cap benefits at low levels, could favor the tactic. Companies sought federal health department waivers to cover nearly four million with mini-meds and other similar plans, which will be barred next year. Some employers are "thinking of this as a replacement for the mini-med plan," said Tracy Watts, national leader for health-care reform at Mercer, a consulting unit of Marsh & McLennan Cos. MMC -0.12%

San Antonio-based Bill Miller Bar-B-Q, a 4,200-worker chain, will replace its own mini-med with a new, skinny plan in July and will aim to price the plan at less than $50 a month, about the same as the current policy, said Barbara Newman, the chain's controller. The new plan will have no dollar limits on benefits, but will cover only preventive services, six annual doctors' visits and generic drugs. X-rays and tests at a local urgent care chain will also be covered. It wouldn't cover surgeries or hospital stays.

Because the coverage is limited, workers who need richer benefits can still go to the exchanges, where plans would likely be cheaper than a more robust plan Bill Miller has historically offered to management and that costs more than $200 per month. The chain plans to pay the $3,000 penalty for each worker who gets an exchange-plan subsidy.

But, "those are going to be the people who will be ill and need a more robust plan," and insuring them directly could cost even more, Ms. Newman said.

Many more workers, she expects, will continue to go without insurance, despite the exchanges and the limited plan. Currently, only one-quarter of workers eligible for the mini-med plan take it. Ms. Newman said, "We really feel like the people who are not taking it now will not take it then."

Tex-Mex restaurant chain El Fenix also said it would offer limited plans to its 1,200 workers, covering doctors visits, preventive care and drugs, but not hospital stays or surgery. "What our goal was all along was to make [offering coverage] financially palatable for the company as a whole, so we didn't do damage and have to let people go or slow down our growth," said Brian Livingston, chief financial officer of Dallas-based Firebird Restaurant Group LLC, owner of El Fenix.

Some benefits advisers worry that since the idea of the low-benefit plans is so new, they could yet invite scrutiny from regulators, and may run afoul of other health law requirements.

John Owens, a broker for the Lewer Agency in Kansas City, Mo., said a large Midwestern convenience store chain is considering signing up for such a policy and is awaiting guidance from regulators.

"What I'm telling people is, this may work, but you better have a plan B," said Andrew Ky Haynes, a Kansas City, Mo.-based benefits lawyer.

A senior House GOP leadership aide confirmed the outline of a deal, but did not provide any details of the agreement. Neither did lawmakers coming out of a closed-door meeting on Capitol Hill, according to reports.

The group of eight lawmakers, who have met on and off for years, are providing a counterpoint in the House to the “Gang of Eight” legislation produced by the Senate.

Just this morning, House Speaker John A. Boehner (R-Ohio) expressed concern that the reform effort in the House had stalled. Disagreements over health care for immigrants and  an agricultural guest-worker program had stymied the effort for weeks.

Jobless claims rose sharply last week, while housing starts tumbled in April and a gauge of underlying inflation pointed to weak demand.

The data could feed fears over the impact of a government austerity drive that began in January and could also raise pressure on the Federal Reserve to continue to buy bonds to support the economy.

The number of Americans filing new claims for unemployment benefits climbed last week at the fastest pace in six months, the Labor Department said on Thursday. Initial claims for state unemployment benefits jumped by 32,000 to 360,000. That was the biggest jump since November and confounded analysts’ expectations for a more modest increase.

“I think there’s plenty of slack in the labor market,” said Tanweer Akram, an economist with ING U.S. Investment Management in Atlanta.

Futures indexes for United States stocks turned lower after the data’s publication, and so did yields on government debt. The dollar weakened against the euro and the yen.

A Labor Department analyst said no states had estimated their data, and there were no signs that furloughs for government employees had played a significant role in last week’s increase in claims.

The economy has shown signs that growth slowed late in the first quarter and in April as Washington’s push to trim the budget deficit weighed on consumers and businesses. The federal government raised taxes in January, and sweeping budget cuts were initiated in March.

Many analysts have noted that a reluctance by employers to lay off workers has made an outsize contribution to recent improvements in employment levels. Last month, employers added 165,000 new jobs while the unemployment rate dropped to a four-year low at 7.5 percent.

Housing has also been an economic bright spot, but a separate report showed groundbreaking for new homes fell more than expected in April. The Commerce Department said starts at building sites for homes fell 16.5 percent last month. Still, permits to build new homes increased, a reassuring indication that the housing sector could still contribute to the economic recovery.

In a third report, a sharp drop in gasoline costs led consumer prices to tumble in April by the most in over four years, while a gauge of underlying inflation was also weak.

The Labor Department said its Consumer Price Index slipped 0.4 percent, the biggest decline since December 2008 when America was suffering some of the worst days of its financial crisis. Analysts had expected a more modest 0.2 percent decline in last month’s prices.

In the 12 months through April, consumer prices rose 1.1 percent. That is well below the Fed’s 2 percent inflation goal. Much of April’s decline in prices was because of an 8.1 percent dive in gasoline costs, the biggest since December 2008.

The idea gained traction in a closed meeting of the House Republican Conference this week, where the main topic was how the party should craft a plan to raise the nation’s debt cap.

Plans for the legislation are not finalized, but the outlines of a measure are beginning to take shape. In addition to hiking the debt limit, the legislation is likely to have three categories: spending cuts, a framework for tax reform and what will be called a “jobs” element, which will include energy legislation, which would likely be a provision related to the Keystone XL pipeline. Republicans are aiming to put the bill on the floor soon after the summer recess.

President Barack Obama has said he won’t negotiate with Republicans over hiking the debt ceiling but has remained open to a larger deficit deal. In a series of conversations between Capitol Hill Democrats and the White House, Obama’s team has been firm that he would only accept a clean debt ceiling bill.

GOP leadership will soon begin meeting with small groups of lawmakers to gauge exactly what kind of package could win enough Republican votes for passage. This week’s meeting saw leadership taking copious notes about what the rank and file wanted to see in the bill. Allowing members to sell the plan would create momentum for it in a Democrat-dominated Washington.

Separately, conservative Republican Reps. Jim Jordan of Ohio, Paul Ryan of Wisconsin, Steve Scalise of Louisiana, Jeb Hensarling of Texas and Tom Price of Georgia are trying to “refine” what they would like to see in the package. They’ll meet with Speaker John Boehner within the next few weeks to finalize a plan.

The idea of releasing legislation before the August recess is an important development for the House. It would — in essence — accelerate the debt ceiling debate by several months. The Congressional Budget Office this week said the nation would reach its borrowing limit in October or November. With Treasury’s extraordinary measures, aides say that deadline could slip to December — raising the specter of another year-end fight.

The effort is, in some ways, an attempt for Republicans to recapture their success from earlier this year, when they crafted legislation that made the debt ceiling hike almost a footnote. Republicans made that battle about forcing the Senate to pass a budget, not raising the debt limit, which allowed the bill to sail through the House.

The strategy here is the same.

Republicans say they’re trying to blunt opposition by allowing their members to go back to their districts and introduce the proposal over the monthlong summer break.

“I’d like to see us be able to unite around a plan that achieves the conservative results that we want to solve the spending problem, and then be able to go during the August recess and share that with our constituents and build a consensus across the country that we’ve got a plan that solves the spending problem, gets us to balance, gets our economy moving again and contrast that with the president who doesn’t have a plan at all, who’s just going to sit back and try to scare people, and that didn’t work for him during sequester because we actually laid out our plan,” said Scalise, who chairs the conservative Republican Study Committee.

The idea to sell their constituents on a debt hike — along with other conservative priorities — isn’t a completely foolproof plan. Republicans can go home and find that no one likes what they’re proposing. They could suffer politically, but then, they could get back to Washington and adjust.

Some would rather pass a debt ceiling agreement sooner.

“I’m a fan of doing stuff early rather than late because we get accused of the brinksmanship or management by crisis,” said Rep. Mick Mulvaney (R-S.C.), a member of the Budget Committee. “Sometimes that’s inevitable, but it’s not inevitable now.”

This plan doesn’t solve the lingering question as to whether Obama will engage in negotiations, or hope Republicans will fold. Most Republicans think he’s bluffing.

“Well, you know, it is easy to make a statement to that effect,” Boehner said Thursday. “But it is just not reality. The fact is, is that his Treasury Department needs to pay the bills. The debt limit has to be dealt with and should be dealt with in a responsible way. And you can’t continue to increase the debt limit without doing something about what is driving the increase in the debt limit. And that is out-of-control spending.”

Republicans recall that Obama has moved significantly toward them on recent government funding and previous borrowing limit fights. Obama got what he wanted on the fiscal cliff deal.

“The president said he wasn’t going to sign ‘no budget, no pay,’” Jordan said, referring to the debt ceiling deal that helped force the Senate to pass a budget. “The president said sequester would never happen. The president said a whole bunch of things.”

If Obama does, in fact, stick to his plan and not negotiate over the debt ceiling, and Senate Democrats stay with him, the nation could go into default. That would be politically catastrophic for Republicans, and would shake the U.S. economy.

If Obama does negotiate, Boehner of Ohio, Majority Leader Eric Cantor of Virginia and Majority Whip Kevin McCarthy of California will have to manage their members, who see that as perfect leverage against the Obama administration.

“If we got a little bit along the way, we should give a little bit of a debt ceiling increase,” Mulvaney said. “If we get further along the way, we get a bigger debt ceiling increase so that what we give is commensurate with what we get in return.”

This week, the gang will have to fend off amendments from both the right and left to fiddle with the program, either to appease businesses or insert stronger protections for labor. Much as they did with border security measures last week, the four members of the gang on the Judiciary Committee, who brokered the immigration deal will aim to band together and defeat changes that could prove fatal to the overall bill.

Gang members have already been working behind the scenes to ensure nothing happens in committee they don’t like. The senators and their aides are planning to meet before each markup — though Monday’s session was postponed to Tuesday night — to scour each amendment, determining which ones they support and which are deal breakers. The night before the first markup on May 9, the eight negotiators met for roughly an hour in the office of Sen. Chuck Schumer (D-N.Y.).

But the Gang’s rock-solid unity is already fueling anger from conservatives and critics of the immigration bill, who are accusing the bipartisan coalition of exercising undue influence on immigration policy behind closed doors.

“One of the things that most upsets the American people about Washington is drafting a bill with special interests in secret and jamming it across the finish line in a way that minimizes public involvement and input,” Sen. Jeff Sessions (R-Ala.) said recently. “This legislation needs improvement and openness.”

Starting Tuesday, the Judiciary Committee will take up several changes to programs designed to attract high-tech labor and lower-skilled workers. The worker provisions in the Gang of Eight bill span nearly 200 pages in the legislation and will be the primary focus in the two scheduled markups in the Senate Judiciary Committee this week.

Republicans have introduced a slew of amendments intended to make the legislation friendlier to businesses, such as a proposal from Sen. Mike Lee (R-Utah) that would allow U.S. businesses to ultimately hire up to 400,000 lower-skilled workers. That doubles the 200,000 cap in the Senate bill.

And on the Democratic side, Minnesota Sen. Al Franken will be pushing for a pair of pro-labor amendments to the bill. One would ban companies from hiring workers in certain regions of the country if that area has a jobless rate of more than 7.5 percent. The threshold is currently 8.5 percent in the Senate legislation.

Another Franken amendment would call on businesses to essentially double their recruiting efforts domestically before they hire foreign guest workers.

But any significant changes to the program could disturb the carefully calibrated agreement between the U.S. Chamber of Commerce and the AFL-CIO — two powerful Washington forces whose backing of the Senate legislation will be pivotal to its success.

On Monday, the Chamber upped the pressure on senators, urging members of the Judiciary Committee to keep the “sound structure” for the less-skilled worker program in place.

“The Chamber strongly opposes any amendments that would weaken this bill or upset the delicate balance the sponsors of this legislation achieved when they crafted it,” the Chamber’s top lobbyist, Bruce Josten, wrote in a letter to senators.

Last week, the Gang of Eight members who sit on the Judiciary Committee stuck together to kill amendments that could gut the core of their legislation.

On several of them, the two Gang of Eight Republicans on the committee — Sens. Lindsey Graham of South Carolina and Jeff Flake of Arizona — sided with the 10 Democrats on the committee that effectively ensured no dramatic changes to the bill would be made.

The biggest concession that the Gang made to border security hawks was approving an amendment from Sen. Chuck Grassley (R-Iowa) that would require “effective” control of the entire U.S.-Mexico border — not just high-risk areas.

But they beat back several GOP-sponsored moves on border security, such as a Sessions proposal to require 700 miles of double-layer fencing along the southern border and an amendment from Sen. Ted Cruz (R-Texas) that would triple border patrol agents and quadruple other resources, such as drones.

Another battle to watch in the immigration debate this week will be efforts to tweak provisions for visas for the high-tech industry — the bulk of which aren’t likely to come up until Thursday.

The issue of high-tech visas is a top priority for Sen. Orrin Hatch (R-Utah), widely seen as a potential swing vote for the Gang of Eight’s bill, and adopting some of his ideas could help lure his support. But Hatch’s proposals will most likely face resistance from Sen. Dick Durbin (D-Ill.), a Gang of Eight member who has been one of the toughest Hill critics of H-1B visas, which are intended to attract high-skilled foreign workers to the United States.

Still, observers say Hatch holds much power this week.

“He has historically played a pro-immigrant role,” Marielena Hincapié, executive director of the National Immigration Law Center, said of Hatch. “He has been reasonable on immigration reform. So he seems to be wanting to play that role again, and he has a lot of leverage, especially this week.”

Senate Democrats — usually on the winning side of the amendment battles — are so far pleased with the Gang’s strategy.

“The group of eight has adopted a very sensible and commonsense approach to making sure that their consensus is observed,” Sen. Richard Blumenthal (D-Conn.), a member of the Judiciary Committee, said Monday.

And opponents of the Senate immigration bill are all but resigned to the fact that the legislation is likely to emerge from the Judiciary Committee largely intact.

“The Republicans in the Gang of Eight are now an extension of the Democratic Caucus, at least on the immigration issue,” said Mark Krikorian, the executive director of the Center for Immigration Studies. “The whole committee process — to some degree — is phony because there’s no question that the votes are there to move the thing through.”

If pursued, new disclosure rules could have major ramifications for both political spending on elections and the increasingly influential regulator. 

Roughly half a million public comments about the proposal have poured into the agency, the overwhelming majority of which argue that shareholders have a right to know how companies involve themselves in politics. 

Opponents dismiss the outcry as the handiwork of a few partisan groups, and they contend the Securities and Exchange Commission (SEC) is ill equipped to wade into the campaign finance issues, which are usually the jurisdiction of the Federal Election Commission (FEC).

Enter White, a former federal prosecutor who took the helm of the SEC at a time when the agency already faces a daunting set of responsibilities. 

During her confirmation hearings, White vowed “bold and unrelenting” enforcement of the financial sector. But she has offered few clues about where she stands on the corporate campaign disclosure proposal and declined to be interviewed for this story.

How White proceeds will be seen as an indicator of the SEC’s direction under her leadership.

“If Mary Jo White wants her tenure to be one of leadership and results, she needs to demonstrate her commitment to put shareholder protection above politics and immediately enact a rule mandating full disclosure of corporate political spending,” said Bill de Blasio, founder of the Coalition for Accountability in Political Spending. 

The coalition has helped corral comments in favor of the proposal in the name of transparency and protection for shareholders. Roughly 500,000 comments were submitted, the most ever for an SEC proposal.

Business groups and an assortment of congressional Republicans are urging the SEC to drop the idea. 

“This rule-making petition is being pushed by groups who do not have the best interests of investors in mind,” U.S. Chamber of Commerce spokeswoman Blair Latoff Holmes said. “Instead, they are pushing for a rule because they ultimately want to drive the business community out of the political and public policy arena.”

The debate is rooted in the Supreme Court’s Citizen’s United decision, which allowed corporations to spend freely on politics from their general treasuries. Much of that spending has flowed to tax-exempt organizations that are not required to reveal their donors.

Currently, companies regulated by the SEC must file quarterly reports apprising shareholders of “material information” about their finances. Under SEC guidance, expenditures are generally not considered material unless they reflect at least 3 percent of a company’s value. There is no requirement that companies inform investors about political activity. 

“As shareholders, we have a right to know how companies are spending our money — especially when our investments are being used to bankroll a political campaign,” said de Blasio, a Democrat running for mayor in New York.  “The SEC has a core responsibility to protect shareholders and ensure adequate disclosure so that investors can make educated decisions and safeguard against risk.”

Corporate-disclosure advocates have pressed the SEC since August 2011 to consider the new requirements. In December, the agency revealed it was looking into the idea and said a decision was expected by May. 

Meanwhile, the agency is under pressure to finalize a slate of dozens of rules required by the 2010 Dodd-Frank Wall Street reform law and the year-old JOBS Act, which calls for regulations intended to aid small businesses. 

On Monday, SEC spokesman John Nester said the timing of any recommendation on the corporate spending proposal, “will be influenced by the ongoing workload of Dodd-Frank and JOBS Act rulemaking.”

Those responsibilities should trump consideration of a rule outside of the SEC’s traditional purview, a group of House Republicans argued in a letter to the agency last month. 

“The Commission appears to be allocating its limited resources on a discretionary project wholly unrelated to its mandate,” wrote Reps. Darrell Issa (R-Calif.), Jeb Hensarling (R-Texas), Jim Jordan (R-Ohio) and Patrick McHenry (R-N.C.). “In the meantime, mandatory reforms critical to our economic recovery are languishing.”

The lawmakers demanded that the agency supply information about the resources and time spent considering the disclosure rule. The SEC is in the process of producing the materials, Issa spokesman Ali Ahmad said. 

Opponents of the new requirements argue that the SEC does not have the expertise necessary to properly craft disclosure requirements. 

“Campaign finance reform is not, has never been, and should never be a function of the SEC,” Chamber spokeswoman Latoff Holmes said.

The Chamber, along with 30 other trade associations and other business groups, submitted extensive comments in opposition to the proposed regulations. Along with two other business heavyweights — the National Association of Manufacturers and the Business Roundtable — the Chamber also issued a joint letter calling on Fortune 200 companies to unite against the proposal. 


Opponents warn that additional disclosure rules would have a chilling effect on free speech, an argument likely to get more attention following the recent revelations that the Internal Revenue Service singled out conservative groups for added scrutiny of their tax-exempt status. 

Further, some contend that shareholders themselves are opposed to the rules. In several publicized votes, investors have rejected the plan, noted Allen Dickerson, legal director for the nonprofit Center for Competitive Politics, which promotes First Amendment protections. 

Dickerson said it is not the SEC’s place to promulgate rules that many investors don’t want. 

“It seems paternalistic, to put it lightly,” he said.

Unlike the FEC, which is composed of an even number of commissioners and can easily deadlock on decisions, the SEC has five commissioners: two Republicans and three Democrats, including White. 

Already two of the other four commissioners have spoken out on the disclosure rule. 

Luis Aguilar, a Democratic commissioner, voiced support for the measure during a February speech. A month earlier, Republican Commissioner Daniel Gallagher called the proposed rule a Democratic “political wish list item” that should not be a priority.

Most observers believe the decision will hinge on White. Though she has not made her views public, she has defended the SEC’s budget proposal, which contains a request for added funding to boost the agency’s rule-making operation and hire additional staffers.

Given the commission’s pressing duties, the ultimate decision is certain to attract fierce criticism from one side or the other. 

“Taking this up will say something about the agency’s priorities,” Dickerson said.

"Many of the initiatives that he passed are what are coming to bear now, including the Affordable Care Act," Pelosi said in an interview with MSNBC's Chris Hayes. "The Affordable Care Act is bringing the cost of health care in our country down in both the public and private sector. And that is what is largely responsible for the deficit coming down."

The CBO reported last week that the federal budget deficit declined in the first seven months of fiscal year 2013 compared to 2012.

Pelosi’s comments come as the administration begins to roll out their healthcare reforms amid controversy and pushback from GOP lawmakers who have vowed to undo the law.

Republicans and Democrats have sparred over the effect of the healthcare reform law on the nation’s budget, with GOP lawmakers warning it will increase the deficit.

A February report from the Government Accountability Office (GAO) cautioned that the law could either increase or decrease the deficit, depending on the success and implementation of numerous cost-cutting provisions in its language.

Republicans, however, seized on the report, arguing that its figures showed a likely $6.2 trillion deficit increase over the next 75 years, based on the end of cost-containment measures.

The administration, though, has cited estimates from the Congressional Budget Office (CBO) that the law will cut the deficit.

In February, the CBO said the law would cost $1.3 trillion over the next 10 years, but said that it would reduce the deficit through measures to raise revenue within the bill, including new fees on drug companies and savings from lower Medicare reimbursement rates.

In her interview, Pelosi also jabbed at lawmakers who have argued the best way to reduce the deficit is through cutting federal spending.

"So those investments are important. So when we turned away — if you want to call frugality, we're wise about how we spend, OK," Pelosi said. "If you want to, austerity, cut the public role, that does nothing except hurt the deficit.”

“I think a lot of us believed in this bipartisan group that we would have finished quite some time ago,” said RepresentativeXavier Becerra, Democrat of California and a member of the group. “I think you really make it tough for yourself, and I hope House Republicans would agree with me on that, that you make it difficult to believe that you’re for fixing the broken immigration system and getting our economy on track unless you really seriously try to start in May.”

Already, the House Judiciary Committee has begun introducing a series of bills pegged to certain parts of an immigration overhaul, in a move designed, in part, to press the bipartisan group to action.

One major block, aides say, is reluctance on the part of Republicans in the group to accept a deal between the nation’s leading business and labor organizations, which would establish a guest worker program, known as a W-Visa program, for low-skilled, year-round temporary workers, those who perform seasonal work but are allowed to stay in the country throughout the year.

Though the U.S. Chamber of Commerce and the A.F.L.-C.I.O. reached an agreement in late March on a guest worker program, which was incorporated into legislation drafted by a similar bipartisan group in the Senate, House Republicans believe the deal is too favorable to labor and are trying to rework it. The current agreement starts the number of available W-Visas at 20,000, capping it at 200,000 visas annually, and limits the number of visas available to construction occupations at 15,000 annually.

Democrats in the House group say there was an implicit agreement to accept whatever deal the business and labor groups agreed upon. But Republicans want to raise the overall cap, particularly on construction visas.

“From a 30,000-foot level, the concern is that construction is being treated differently than any other industry in the Senate bill,” said Geoff Burr, the vice president for federal affairs at theAssociated Builders & Contractors. “The 15,000 cap in the Senate bill is preposterous.”

Republicans and outside groups are pushing several options to increase the number of construction visas available: making those visas a percentage of the overall W-Visas, rather than imposing a hard cap; making it easier for employers who still face labor shortages after the quota is met to use a “safety valve” exemption to bring in more foreign workers; and creating a returning worker exemption, in which those workers are not counted under the cap.

But Democrats in the group think that trying to modify the already delicate business-labor agreement could harm the overall bill.

“The moment you pull the thread from one side on this fabric, this compromise, the moment it gets undone on the other side,” Mr. Becerra said.

Labor organizations have publicly and privately indicated that they will not support any changes to the existing W-Visa program. “We can’t accept any changes in the W-Visa program,” said Tom Snyder, the A.F.L.-C.I.O.’s immigration campaign manager. “We spent many months working and reworking and carefully crafting this agreement with the Chamber of Commerce, and succeeded in getting it into the Senate bill, and we just won’t accept changes.”

Whatever legislation does emerge from the Republican-controlled House, however, is expected to be more conservative than the Senate’s approach. The House bill would offer a 15-year path to citizenship, rather than the 13-year path in the Senate plan, aides say. Both bills, however, would allow people in the country illegally to earn a green card in 10 years.

Under the House plan, people would also be required, as part of their application progress for legal status, to sign an admission stating they had violated American immigration laws, aides said. That admission would lead to a probationary status, and if an immigrant was then found to violate the terms of probation, he or she would be subject to deportation.

Conservative groups have been critical of the Senate bill’s estimated costs. The Heritage Foundation issued a study estimating that the legislation would cost taxpayers roughly $6.3 trillion over the next 50 years, but members of both parties objected to it. The report also became a target when it was disclosed that the co-author, Jason Richwine, had written a doctoral dissertation in which he said immigrants’ I.Q.’s should be considered when shaping policy. On Friday, Mr. Richwine, a senior policy analyst at the foundation, resigned.

The Senate bipartisan group is eager for the House to produce legislation of its own — especially if it reflects principles in line with those already in the Senate plan.

“If the House eight of them came in with a bill very similar to ours, that would be helpful, and I would hope they could,” said Senator Charles E. Schumer, Democrat of New York and a member of the Senate group.

Political paralysis in Washington won't stall an economic recovery that's revving up across the rest of the country.

That's the consensus of economists surveyed by USA TODAY, who predict the recovery will accelerate late this year even without a deal by Congress and the White House to lessen the impact of automatic federal budget cuts.

The across-the-board spending cuts will cause growth to slow in the middle of 2013. But the negative effects will ease by the fourth quarter as the private sector gathers strength, according to the 43 leading economists surveyed May 6-9.

This year, the budget cuts are expected to pare federal spending by $65 billion and shave half a percentage point off economic growth, according to the Congressional Budget Office (CBO) and Moody's Analytics.

The economy expanded at a 2.5% annual rate in the first quarter. Economists' median estimates project growth is likely to slow to 1.8% in the current quarter and 2.2% in the third quarter.

Monthly job growth, which averaged 206,000 in the first quarter, will average 165,000 in the second quarter and 172,000 in the third quarter, the economists predict.

Many top economists, including Federal Reserve Chairman Ben Bernanke, have urged policymakers to put off much of the belt-tightening until the economy is on more solid footing. But with the Obama administration and a divided Congress making little progress in sporadic talks, more than two-thirds of the economists surveyed say it's unlikely even the fiscal 2014 budget cutbacks will be tempered.

An additional $40 billion in planned cuts next year will reduce 2014 economic growth by 0.3 percentage points, the CBO and Moody's say. Even so, the economists expect growth to pick up to 2.7% in the fourth quarter and approach 3% by early next year as job gains ratchet up to a 200,000 average monthly pace.

Since the labor market hit bottom in early 2010, the economy has grown about 2% annually and monthly job growth has averaged 162,000.

"There are some powerful positive forces to offset" the budget cuts, says Jim O'Sullivan, chief U.S. economist of High Frequency Economics.

The Federal Reserve's massive bond-buying initiative, he says, has held down long-term interest rates, juicing housing and driving up stock markets. Housing starts likely will total 990,000 this year and about 1.2 million in 2014, according to Standard & Poor's, up from 780,000 in 2012.

O'Sullivan says higher home and stock prices are making consumers feel wealthier so they'll spend more, adding 0.7 percentage points a year to economic growth. Continued job gains, he says, will further bolster spending. And the share of income that Americans are using to pay off debt has fallen to a historic low.

Meanwhile, 81% of the economists surveyed say the European economic slowdown will pose a lesser or unchanged risk to the economy this year vs. 2012.

Obstacles to a faster recovery remain. The economists say the new health care law will trim monthly job additions by 5,000 this year and 10,000 in 2014, as employers hire fewer full-time workers to avoid paying health insurance.

And Wells Fargo economist Mark Vitner says the stock market rally has mostly benefited the wealthy while wage gains for average Americans have languished.

"We're getting a recovery," he says. "It's just a slow recovery."

The documents, obtained by The Washington Post  from a congressional aide with knowledge of the findings, show that on June 29, 2011, IRS staffers held a briefing with senior agency official Lois G. Lerner in which they described giving special attention to instances where “statements in the case file criticize how the country is being run.” Lerner, who  oversees tax-exempt groups for the agency, raised objections and the agency revised its criteria a week later.

But six months later, the IRS applied a new political test to groups that applied for tax-exempt status as “social welfare” groups, the document says. On Jan. 15, 2012 the agency decided to target “political action type organizations involved in limiting/expanding Government, educating on the Constitution and Bill of Rights, social economic reform movement.,” according to the appendix in the IG report, which was requested by the House Oversight and Government Reform Committee and has yet to be released.

The new revelations are likely to intensify criticism of the IRS, which has been under fire since agency officials acknowledged they had deliberately targeted groups with “tea party” or “patriot” in their name for heightened scrutiny.

During an appearance on CNN’s “State of the Union” on Sunday, Sen. Susan Collins (R-Maine) described the practice as “absolutely chilling” and called on President Obama to condemn the effort.

House Oversight and Government Reform Committee Chairman Darrell Issa told NBC’s “Meet the Press” Sunday he’s not satisfied with the Obama administration’s handling of the controversy. The IG report was “leaked by the IRS. to try to spin the output,” Issa said, and lawmakers now need to go through the full report so they can “see what the instituted changes need to be to make this not happen again.The agency did not appear to adopt a more neutral test for social welfare groups — which file for tax-exempt status under section 501(c)(4) of the tax code — until May 17, 2012, according to the timeline in the inspector general’s report.

At that point, the IRS again updated its criteria to focus on “organizations with indicators of significant amounts of political campaign intervention (raising questions as to exempt purpose and/or excess private benefit.)”

Gene Sperling, director of the National Economic Council, told reporters that the president "simply is not going to negotiate on the debt limit." 

"It's the responsibility of Congress to authorize payment of debts," he said. 

On the debt limit, the president has been "crystal clear that the era of threatening default has to be over" and that using a potential of default for other gains also has to end, Sperling said.

But some Republicans have suggested they would like to extract more spending cuts and tax reform from an agreement to raise the limit and avoid default, although it is uncertain whether those demands would command enough support with their rank-and-file. 

Instead, Sperling said, Obama wants to work with lawmakers to craft "a pro-growth, pro-jobs, pro-confidence budget agreement" because "let's be clear, the status quo doesn't support any long-term objectives." 

"We need an honorable compromise and a sensible budget agreement without a threat of default," Sperling said. 

Sperling said the debt prioritization bill passed by the House on Thursday doesn't cut it and should be "a nonstarter to anyone serious about the U.S. economy," he said. 

"It's default by another name."

Every House Democrat opposed the bill in a 221-207 vote.

Obama is maintaining his so-called charm offensive by sitting down with a broad mix of congressional Democrats and Republicans in an effort to stockpile ideas that could be included in a budget deal. 

Sperling said those talks over dinner between lawmakers and the president "have instilled some significant trust," and "we're still working on that."

Part of any agreement would be to nix the $80 billion sequester that "does absolutely nothing to deal with long-term challenges" and was "designed to be so stupid it wouldn't take place," Sperling said.

The run up to the 2011 debt ceiling damaged the nation's confidence and economic recovery, he said. 

"Those serious about economic recovery should not even be contemplating putting country through that kind of countdown clock again," he said. 

Josh Earnest, a White House spokesman, said "it would be a nice change of pace" for Congress to work with the administration on policies that support the economic recovery. 

Congress voted in January to suspend the debt limit until May 19 with the understanding that the now $16.8 trillion limit would increase to reflect additional borrowing since then. 

Higher than expected tax revenues, a boost in payments from Freddie Mae and Freddie Mac, along with lower spending should give lawmakers more time to craft a compromise. The Bipartisan Policy Commission said, at this rate, the ceiling will be hit in mid-October. 

Only the two Republican co-authors of the bill, Senators Jeff Flake of Arizona and Lindsey Graham of South Carolina, voted with the panel's Democrats to defeat the Republican plan on a 12-6 vote.

The vote, which was not a surprise, came in the first hours of the first day of what is expected to be a weeks-long effort to agree on a comprehensive immigration bill that would be sent to the full Senate. The committee's 10 Democrats and eight Republicans were prepared to argue over as many as 300 amendments to the overhaul of U.S. immigration laws crafted by the bipartisan "Gang of 8" senators.

Some of the proposed amendments are designed to appeal to the Democratic majority as ways to improve the measure, while others are seen as ways to possibly kill it. Four of the senators who crafted the complex measure are on the committee, and these two Democrats and two Republicans have agreed to jointly oppose any amendment seen as a "poison pill."

The day began with a warning from the panel's top Republican that he would make the process as long and "arduous" as possible.

"I plan to ask many questions throughout this process," Iowa Senator Charles Grassley warned. "I want to know how the bill doesn't repeat the mistakes of the past." Grassley, in a statement, promised an "arduous" and "robust" debate.

Grassley followed up with an amendment to require that the Obama administration achieve full control against illegal immigration of every part of the U.S. border before any of the undocumented people currently in the United States could be considered for legal status.

As currently written, the legislation would begin the legalization process almost immediately after enactment, while the administration simultaneously begins a new border security program.

"This amendment would set a standard that would basically delay probably forever" the legalization of the 11 million, argued Democratic Senator Charles Schumer of New York, one of the Gang of 8.

This early test vote will not end what is expected to be a tense argument over the next several weeks over whether the southwestern U.S. border is adequately secured and whether illegal immigrants, many with deep roots in the United States, should be rewarded with a pathway to citizenship.

POLL BACKS IMMIGRATION POLICY OVERHAUL

The kick-off of Senate Judiciary Committee debate on the bill came as a new Pew Research Center poll found that 75 percent of Americans believe that immigration policy needs major changes and 73 percent say there should be a way for illegal immigrants to stay in the United States.

But less than half, 44 percent, said they favored allowing undocumented residents to apply for citizenship.

The opening day of the debate reflected both the deep divisions and high hopes surrounding a measure that would put 11 million illegal residents on a path to citizenship and totally revamp the criteria for w

Before the session began, a group of spectators with the words "Campaign for Citizenship" emblazoned across their white T-shirts stood in a circle in the hearing room, their hands raised above their heads, for a silent prayer.

The Rev. Alvin Herring of Washington, D.C., told Reuters: "It's going to take prayer and it's going to take us acting on our prayers" in order to get immigration legislation enacted.

Despite those prayers, senators quickly got into some heated exchanges.

Republican Senator Jeff Sessions of Alabama, a vigorous opponent of the bill, contended it would bring 30 million new immigrants into the United States over the next 10 years, costing Americans jobs and hurting the U.S. economy.

Schumer rejected that claim and invoking a phrase that haunted Republican presidential nominee Mitt Romney last year, asked, "Do you believe they should all be self-deported?" Romney had suggested that life for the 11 million should be made so uncomfortable that they would simply "self-deport."

The stance was seen contributing to Hispanic voters' overwhelming rejection of Republican candidates in 2012 elections.

At another stage in the debate, Graham caused a stir in the room when he said that immigrants cross the southwestern border with Mexico because they "live in hell holes and they want to live here."

Graham was making the argument that more border fencing will not deter them while the bill's move to improve foreigners' legal access to jobs would help fix security problems.

During a break, Schumer told reporters that he worries "all the time" about a Democratic amendment Judiciary Committee Chairman Patrick Leahy has offered that would cover same sex couples in the bill's new immigration reform policies. He said the Gang of 8 was evenly split over that amendment.

The panel's work could stretch through May, and if it agrees on legislation, the full Senate is likely to debate it throughout June.

But several Republicans on the committee - and in the full Senate - are skeptical of legalizing the millions of people who either came into the United States illegally over the past 27 years or overstayed their visas.

Instead, they want a more limited immigration bill that mostly concentrates on other aspects of the legislation, including further securing U.S. borders and creating more visas for skilled workers to help American high-tech companies.

Meanwhile, negotiations on a bill in the more conservative Republican-led House of Representatives slogged on.

According to one House source familiar with the negotiations, disagreements remained over several important policy matters, including how many low-skilled workers should be allowed into the United States for jobs ranging from cooks and hotel maids to construction workers.

This was one of the most contentious issues during negotiations between the AFL-CIO labor organization and the U.S. Chamber of Commerce in the run-up to introduction of the Senate bill.

Marshall Fitz, an immigration specialist at the Democratic-leaning Center for American Progress, said that besides policy disagreements, House members also face many political and strategic questions.

There is widespread belief that for a bill to pass the House, it will have to be significantly more conservative than the Senate bill, which some immigration advocacy groups already complain contains overly rigorous requirements

"Democrats in the (House) group are rightly wary of signing onto a bill that is significantly to the right of what the Senate is doing," Fitz said.