By Andy Sullivan

WASHINGTON (Reuters) - Jobless benefits were due to lapse yet again for hundreds of thousands of Americans after an effort to extend them failed in the U.S. Senate on Tuesday.

Hours before beefed-up benefits were set to expire at midnight, Democrats sought to extend them for another year. But they were blocked by Republican Senator Scott Brown, who said Democrats should have taken time to work out a compromise.

"It's not the way to do business in the United States Senate, and if it is it needs to change," Brown said. "We just found out today, or late yesterday, that we were even going to talk about this."

With the unemployment rate stuck at around 9.6 percent, the two parties have been sharply divided over how to cover the cost of weekly checks, averaging around $300, that help jobless people stay afloat.

Congress has let jobless benefits lapse twice already this year as Republicans insist the cost -- $160 billion in the last fiscal year -- be offset by cuts elsewhere to prevent the nation's $13.8 trillion debt from growing further.

Democrats point out that Republicans are not concerned about the deficit when fighting to extend tax cuts for the wealthiest 2 percent of U.S. households.

"I think we have to deal with the immediate crisis. I think we have to deal with the families that are struggling today," said Democratic Senator Jack Reed.

If the measure is not renewed, 2 million people by the end of the year will lose their benefits, according to the National Employment Law Project, which advocates for workers' rights.

Jobless benefits usually expire after six months, but since the recession took hold in 2007 Congress has voted to extend them for up to 99 weeks.

Nearly half of the 15 million unemployed people in the United States have been out of work for more than six months, the highest level of long-term unemployment since the government began keeping track in the 1940s.

An April report by the San Francisco Federal Reserve concluded that long-term benefits boosted the unemployment rate by 0.4 percentage points as some of the jobless were less likely to work for work.

But economists generally think unemployment benefits get a good bang for the buck because people who are out of work and struggling are likely to spend the money quickly, putting it into the economy and stimulating growth.

(Reporting by Andy Sullivan; Editing by Cynthia Osterman)