In a win for President Barack Obama and his political allies, Senate Democrats on Tuesday won a crucial vote to clear the way for a bill to create a $30 billion government fund to help open up lending for credit-starved small businesses.
Democrats cracked a GOP filibuster of the bill with the help of two Republicans: Sens. George Voinovich of Ohio and George LeMieux of Florida.
The 61-37 tally sets the stage for a final vote later this week to return the measure to the House, which is likely to approve it for Obama's signature.
The bill is probably the last piece of Democrats' ambitious jobs agenda that would become law before midterm elections, which will determine whether Democrats keep their majorities in the House and Senate. Democrats started the year with ambitious plans for a series of bills designed to boost the economy and job creation but have relatively little to show for it. The nationwide unemployment rate ticked up to 9.6 percent last month.
Obama welcomed the vote.
"This is a bill that would cut taxes and help provide loans to millions of small business owners who create most of the new jobs in this country," Obama said in a statement. "Small businesses across the country have been waiting for Washington to act on this bill for far too long."
The new fund would be available to community banks with less than $10 billion in assets to encourage lending to small businesses. The bill would combine the fund with about $12 billion in tax breaks aimed at both large and small businesses over the coming decade.
Democrats say banks should be able to use the lending fund to leverage up to $300 billion in loans, helping to loosen tight credit markets. Some Republicans, however, have likened it to the unpopular bailout of the financial industry.
Democrats say the measure is needed to help small businesses cope with a credit crunch that worsened dramatically after the financial crisis two years ago.
"This bill is about righting a wrong that was done to small business when Wall Street closed Main Street down and cut off access to capital," said Sen. Maria Cantwell, D-Wash.
"Small businesses are holding off on hiring while they wait for us to act," said Senate Majority Leader Harry Reid, D-Nev. "Banks large and small are holding onto their capital while they wait for us to act."
On Tuesday, Republicans focused their attention on amendments to ease a requirement in Obama's health care overhaul bill that businesses file tax forms called 1099s for every vendor that sells them more than $600 in goods. Business groups say it would create a paperwork nightmare for small businesses. Competing Democratic and GOP measures to address the matter each failed.
Democrats had hoped to pass the bill in July, but Democrats couldn't win any GOP converts and fell just short of defeating a filibuster that was called because Democrats blocked Republicans from offering unrelated amendments.
The small business tax cuts in the bill include breaks for restaurant owners and retailers who remodel their stores or build new ones. Larger businesses could more quickly recover the costs of capital improvements through depreciation. Long-term investors in some small businesses would be exempt from paying capital gains taxes. And loan caps under the Small Business Administration's chief lending program would be significantly raised.
The measure also would allow small business owners to deduct the costs of health insurance for themselves and their families from self-employment taxes, but only for the 2010 tax year.
Much of the bill would be paid for by allowing taxpayers to convert 401(k) and government retirement accounts into Roth accounts, in which they pay taxes up front on the money they contribute, enabling them to withdraw it tax-free after they retire. Taxpayers who convert accounts this year would pay the taxes in 2011 and 2012, generating an estimated $5.1 billion.