WASHINGTON -- In a win for President 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.
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."
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.
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.