Small-business bill could be Democrats' last hope on jobs

As lawmakers return from a month-long break this week, Democrats aim to pass their small-business bill out of the Senate by the end of the week and send it to the House of Representatives for final approval.

The House has backed a version of the bill previously.

If the bill clears Congress, it would be a rare victory on the job-creation front for Democrats who have seen many of their other efforts torpedoed by Republicans this year.

The 2010 jobs agenda for the Democrats has been a total failure both in terms of policy, perception and politics, said Ethan Siegal, an analyst with The Washington Exchange who tracks Congress for investors.

With the unemployment rate stuck at 9.6 percent, Republicans are poised to rack up big gains in the Nov. 2 elections, possibly winning control of the House and the Senate, due in part to public perceptions that Democrats have not done enough to create jobs.

The small-business bill gives Democrats a chance -- perhaps their last -- to change voters' minds.

The bill would create a $30 billion fund that the government would invest in independent community banks to encourage lending to small firms. It also includes $12 billion in tax breaks for small businesses.

President Barack Obama and other Democrats have argued that the lending measure would lead to more loans to small businesses, enabling them to hire more workers. Industry groups back the bill.

TROUBLE GETTING A LOAN

Smaller firms have complained that they have had trouble getting financing following the 2007-2009 financial crisis, when many banks pulled back their lending activity.

Republicans have called the proposal a junior version of the government's controversial bailout of Wall Street. They blocked action on the bill at the end of July, shortly before Congress started its break.

Democrats accuse Republicans of deliberately obstructing the bill to score points in an election year, and with Congress out of town, Obama has hammered Republicans for blocking it.

There are small businesses right now who are putting off plans to hire more workers because this bill is stalled, Obama said at a news conference on Friday.

Democrats picked up needed support last week when Republican Senator George Voinovich said he would break ranks with his party and back it.

Voinovich would give Democrats the crucial 60th vote they need to overcome a Republican procedural hurdle and pass the bill.

Voinovich said Democrats would need to consider a measure that would roll back a requirement that small businesses file tax forms on every purchase above $600.

One Democratic aide predicted that the Senate will pass the bill by the end of the week, but another was more cautious.

We hope to complete action as early as next week. This will of course depend on how cooperative Republicans are, said Regan Lachapelle, a spokeswoman for Senate Democratic leader Harry Reid.

Reid could have trouble rounding up enough Democratic votes if debate lasts much longer than a week, as many lawmakers facing tough re-election battles will be eager to return to the campaign trail.

If the bill passes, it will join the ranks of several other relatively small-scale stimulus efforts that Democrats have managed to pass this year after last year's $814 billion stimulus package.

Those include a $17 billion measure that provides tax breaks to businesses that hire unemployed workers, more aid to the unemployed, and money to help cash-strapped states avoid layoffs of teachers and other public employees.

Both the House and the Senate have passed larger job-creation bills, but have been unable to reconcile them in the face of Republican opposition and rising public concern about spending. (Additional reporting by Donna Smith; editing by Mohammad Zargham)