WASHINGTON (AP):

President Barack Obama's economic recovery plan is on track to be passed by the Senate after a handful of moderate Republicans and Democrats forced more than $100 billion in cuts in programmes they said wouldn't create many jobs right away.

But the group backed away from a confrontation that threatened to kill the legislation altogether after White House Chief of Staff Rahm Emanuel weighed in to urge Democrats to make a final round of concessions.

Architects of the compromise included Republican Senator Susan Collins of Maine and Democratic Senator Ben Nelson of Nebraska, who represented a broader group of moderates unhappy that so much money went into programmees they thought wouldn't create jobs. Eventually, every Republican except Collins and Arlen Specter, a Pennsylvania Republican, left the talks, which finally produced a deal with the White House late Friday afternoon.

Difficult negotiations

While ensuring passage of Obama's plan in the Senate within a few days, the deal sets up difficult negotiations with the House.

Officials put the cost of the bill at $827 billion, including Obama's signature tax cut of up to $1,000 for working couples. Also included is a tax credit of up to $15,000 for homebuyers and smaller breaks for people buying new cars. Much of the new spending would be for victims of the recession, in the form of unemployment compensation, health care and food stamps.

In a key reduction from the bill that reached the Senate floor earlier in the week, $40 billion would be cut from a 'fiscal stabilisation fund' for state governments. But the compromise package preserves aid to local school districts and an increase in the maximum grant available to college students from low-income families.

A plan to help the unemployed purchase health insurance would be reduced to a 50 per cent subsidy instead of two-thirds.

Senate Majority Leader Harry Reid, who had sought Friday to cut just $63 billion in spending from the bill, throwing a monkey wrench into the talks, called it an imperfect compromise. He warmly praised it nonetheless.

"But at the end of the day, we are passing a bold and responsible plan that will help our economy get back on its feet, put people to work and put more money in their pockets," Reid said.

Despite a 58-41 majority bolstered by the elections, Democrats need 60 votes to clear a key procedural hurdle on Monday and advance the bill to a final vote.