A frustrated, sharply divided Senate yesterday temporarily laid aside its jobs bill after failing twice--once by a dramatic one-vote margin--to break a week-long deadlock over an amendment to repeal withholding of taxes on interest and dividends.

It took all the muscle the Republican leadership could exert to prevent Sen. Robert W. Kasten Jr. (R-Wis.), who is leading the fight for repeal, from choking off debate and moving toward a vote on repeal. A repeal is powerfully backed by the banking industry and has strong support in both houses of Congress.

"We used what we had," said a Senate Republican leadership aide. "We held our own today. We didn't get rolled."

In a cliff-hanging roll call, Kasten stalled at 59 votes, just one short of the 60 necessary for cloture, as his powerful foe, Senate Finance Committee Chairman Robert J. Dole (R-Kan.), worked to persuade four senators who had lined up with Kasten previously to switch sides.

After a long pause, three Republicans--Sens. Larry Pressler (S.D.), James Abdnor (S.D.) and James A. McClure (Idaho)--did switch. Then, as Dole glowered in his direction, Sen. Thomas F. Eagleton (D-Mo.) also voted Dole's way, and Kasten lost, 59 to 39.

But Dole had already failed, on a vote of 50 to 48, in an earlier effort of his own to shut off debate in a way that would have made it more difficult for Kasten.

So the stalemate remained, and Majority Leader Howard H. Baker Jr. (R-Tenn.) finally gave up and went on to the Social Security rescue bill, at least until Friday. Barring an unexpected compromise, the next chance for a break in the impasse will come on a third cloture vote Friday, which is when the Labor Department estimates that unemployment benefits will dry up in 27 states and the District of Columbia unless the jobs legislation or some alternative is passed in the meantime. The bill includes $5 billion to continue jobless benefits after Friday as well as $5.2 billion for job-creating programs and humanitarian aid for victims of the recession. Both these elements of the legislation are expected to pass quickly if the Senate can find a way to act, one way or the other, on the withholding repeal "rider" that Kasten is pushing.

As of late yesterday, Kasten was holding out for a six-month delay in the July 1 date for implementation of interest and dividend withholdings as a condition for agreeing to a leadership proposal for a vote on the issue in mid-April in connection with a pending trade bill. But Dole rejected Kasten's condition and predicted his own victory on Friday, when the Senate leadership, in the third cloture vote, attempts to limit debate on the legislation.

Although Kasten couldn't muster enough votes to shut off debate on his proposal or to demonstrate he had the two-thirds needed to override a threatened presidential veto, he contended that yesterday's votes showed that it was Dole and Baker who were holding up the bill. "If it hadn't been for pressure by the leadership on a few Republicans, we'd have won," Kasten contended.

The American Bankers Association also interpreted the vote as a mandate for repeal of withholding. "Today's action demonstrates that the Senate wants a chance to vote to repeal the withholding tax on interest and dividends, as well as vote on a jobs and unemployment benefits bill. The majority clearly wants action, not stalemate. So do we," said the bankers in a statement. Still unresolved is what Congress will do if the legislation has not passed in time to keep unemployment benefits from running out this weekend. Sen. Carl Levin (D-Mich.) told reporters that Baker has assured him privately that benefits will not be jeopardized. Levin interpreted this to mean that a separate bill for jobless benefits would be passed if necessary on Friday.