By Andrew Taylor

Democratic and Republican leaders on Wednesday cut a deal on a Senate bill to buck up the slumping housing market and help families threatened by foreclosure.

The scaled-back proposal released by Majority Leader Harry Reid (D-Nev.) and GOP leader Mitch McConnell of Kentucky is a mix of ideas aimed at boosting demand for homes and helping homeowners with subprime mortgages avoid foreclosure.

''It is a robust package,'' Reid said. ''This is good news for the American people.''

Republicans forced Democrats to drop measures that some economists said might have proven more effective in easing the crisis, including a plan opposed by banks to change bankruptcy laws to help people trapped in subprime mortgages keep their homes.

Sen. Dick Durbin (D-Ill.) said he will offer the bankruptcy provision as an amendment ''as soon as this bill is brought to the floor."

''The mortgage bankers have been working overtime to try to kill'' the provision, Durbin said.

Republicans said the bankruptcy changes would have forced lenders to recoup losses by raising interest rates on other borrowers.

The GOP also won a scaled-back version of a plan by Sen. Johnny Isakson (R-Ga.) to provide a tax credit to people buying foreclosed or newly built homes. Isakson sought $15,000 in tax credits -- aimed at boosting demand for homes -- but GOP negotiators settled for a $7,000 credit.

Liberals and conservative economists alike questioned the merits of the idea, however, saying it would have little effect on demand.

''There's ample incentive to buy foreclosed homes,'' said conservative economist William Niskanen.

''Basically, you're giving money to builders that overbuilt and banks that issued bad loans,'' said Dean Baker of the Center for Economic and Policy Research. ''It's giving money to the villains in this story.''

Altogether, the tax provisions in the measure would cost $10.8 billion over the next decade.

If the Senate bill passes, it would go to the House. The measure has political momentum, reflecting voters' fears about the economy in an election year. And there's even more pressure on lawmakers to help regular Americans after the government weighed in to prevent the collapse of Bear Stearns, the Wall Street investment house.