WASHINGTON - President Barack Obama met on Wednesday with the two top Democrats in Congress to discuss ways to spur the economy and reverse a climb in the U.S. unemployment rate, which is now at a 26-year-high.

Tax cuts for businesses that hire new workers was one idea that came up in the White House meeting, according to a congressional source.

Also raised in the discussion were the possibility of extending social safety-net programs, such as unemployment insurance, and spending for new construction programs.

Obama's meeting with Speaker of the House of Representatives Nancy Pelosi and Senate Majority Leader Harry Reid came as the president and his Democratic allies in Congress are facing pressure from within their party to do more to revive the economy and stem job losses.

Obama has touted the unprecedented $787 billion economic stimulus package passed by Congress earlier this year as having helped to rescue the economy from its worst crisis since the Great Depression.

While some Democrats are pushing for additional measures to boost growth, Republicans have taken aim at the stimulus package. They contend it has done little jump-start growth but has added massively to the U.S. budget deficit.

Republicans stepped up their criticism of Obama's handling of the economy after government figures showed the unemployment rate inched upward to 9.8 percent, the highest since 1983.

Today's meeting with the president reinforces our shared commitment to creating more jobs and providing relief to the millions of Americans who are out of work, Reid said in a statement.

We also need to think about creative, innovative ways to encourage businesses to create new jobs, and we're committed to working with the president to do that.

STIMULUS?

Obama's aides said they are examining various ideas but have rejected the label stimulus to describe what is under consideration.

A day after the jobs report was released, Obama said in his weekly radio and Internet address that he and his economic team would explore additional options to promote job creation, a comment that spurred speculation that a second stimulus package was in the works.

But the White House has emphasized that no decisions have been made.

There was not an intention to send a signal that putting Americans back to work is a new agenda item. That's always been a priority, said White House spokeswoman Jen Psaki. Any notion that we are farther along than preliminary stages of discussion is incorrect.

Democrats are eager to put the economy on a sounder footing before next year's congressional election. Republicans reject Democratic charges that they are rooting for an economic meltdown that could help their party politically.

Republicans are on the side of the American people, said Representative Mike Pence, a member of the House Republican leadership. We are demanding that this administration and Democrats in Congress focus on more jobs.
The White House has floated the suggestion of establishing a tax credit for companies that create new jobs, something Obama had proposed earlier, a Democratic aide said.

A job-creation tax cut was discussed this year during the debate on the stimulus package, but lawmakers found it difficult to figure out how to accurately measure new job-growth among various industries and individual companies, the aide said.

Some congressional Republicans have voiced interest in it, saying it could win rare bipartisan approval.

Democratic Representative Louise Slaughter said she favors funding for new transportation projects but questioned the wisdom of a jobs-creation tax credit.

I don't think handing out money to corporations is the way to go. We handed out money to banks so they would lend, and they didn't do it, Slaughter said.

House Transportation Committee Chairman James Oberstar has proposed a blueprint for spending more than $400 billion over six years on highway and transit construction. But the measure has been slowed by wrangling over a number of issues.

White House economic advisers are also mulling whether to propose extending the $8,000 tax credit for first-time homebuyers. It expires at the end of November.

(Additional reporting by Kim Dixon and John Crawley)

(Reporting by Thomas Ferraro, editing by Philip Barbara and Chris Wilson)

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