Actual finance blog

Commerce Bancshares saw profits per-share jump 39 percent in the first quarter, despite a 10 percent drop in lending compared to a year ago.

Commerce, the region’s biggest locally based bank, earned $44.2 million, or 53 cents per share, in the quarter ended March 31 compared to $30.8 million, or 38 cents per share a year earlier.

Commerce blamed the big drop in lending on weak demand from borrowers. Loans fell in all categories except consumer credit cards easy pay day loans.

David Kemper, CEO, credited the rise in profits in part to a decline in money put aside to cover bad loans. The amount of problem loans and foreclosed property fell, as did loan charge-offs. Problem loans and foreclosed property made up 0.61 percent of assets, a low figure compared to most banks.

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Over the last week, retail gasoline prices throughout Texas shot up an average of eight cents, amid speculation that gas is cruising back toward the $3 mark, according to AAA Texas.

The statewide average price of gas is $2.75. This is up eight cents from last week.

San Antonio’s average retail price for gas is currently $2.68 a gallon. This is up seven cents from last week.

Higher retail prices are being blamed for rising commodity prices. Oil has been trading at or above $85 a barrel for the past week, its highest level since October 2008. AAA Texas says that last week’s jobs report stating that employers added 162,000 jobs in March is a major reason why gasoline demand will increase.

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Mesa officials insist a Cactus League ticket tax to help pay for a new Chicago Cubs ballpark is still alive at the Arizona Legislature.

An official familiar with the Cubs stadium financing plan said Major League Baseball and Commissioner Bud Selig are trying to trying to put the brakes on the bill at the Legislature. The official, who asked not to be identified, said MLB wants Mesa, the Cubs and other teams to look at funding options beyond a tax on all Arizona spring training games. Other Cactus League teams, including the Arizona Diamondbacks, object to a ticket tax being used for the Cubs stadium.

MLB has been talking to Arizona lawmakers and others about setting up special tax districts to help finance stadiums. MLB officials did not respond to requests for comment. But the unnamed official said the league was asking the Cubs and Mesa to extend their timetables for a new stadium, and for various sides to take the summer and fall to find a new plan for the 2011 session.

The Cubs want a new a stadium by 2013 and have threatened to move to Florida without one. MLB also is telling the Cubs to back down from that threat, according to the official.

The bill with the Cubs ticket tax has been stripped down and passed by the Arizona House of Representatives without a $1 car rental fee in Maricopa County. And, while the ticket charge is part of the approved measure, it did not include a specific amount for the charge. Previous plans included an 8 percent charge on all Cactus League tickets to help pay for an $84 million new stadium for the Cubs.

Mesa government relations director Scott Butler said the ticket plan and the bill are not dead, and the city is trying to work out a plan that can pass this legislative session.

"The version of (House Bill) 2736 that passed out of the House yesterday was intentionally stripped down as a show of good faith to all of the stakeholders. By and large, most members of the Legislature want to see the Cubs remain in Mesa and provide an ongoing revenue source for other Cactus League facilities. The only question has been what is the appropriate mixture of revenue sources to make this happen," Butler said.

"I’m still 110% confident that we could push a surcharge-only bill through the Senate and to the governor, but we don’t want to fight the 14 other teams and MLB at each step of the process no teletrack payday loans. The Senate will give all parties the opportunity to renew discussions and find a revenue mixture that most can support. The alternative is that the Cubs leave Arizona and the $130-plus-million annual economic impact is relocated to Naples (Fla.)," Butler said.

House Speaker Kirk Adams, R-Mesa, and Majority Leader John McComish, R-Ahwatukee, are the main proponents of the ticket tax, along with Mesa Mayor Scott Smith. They argue that the ticket tax revenue will go to other projects besides the Cubs stadium and that before the House vote, the bill included language to use some of the money to help Pima County with stadium debt.

Thus far, the trio has opposed other funding ideas including some proposed by lobbyist John Kaites, who represents the Chicago White Sox. Kaites has talked about taxes on restaurants, satellite television communications as well as special tax districts. Butler and Mesa lobbyist John MacDonald contend those ideas either won’t raise enough revenue or lack political support.

MLB has talked about special property tax districts around the proposed stadium to capture revenue for various teams, not just the Cubs.

Phoenix Mayor Phil Gordon supports similar sales tax districts that could be used in downtown Phoenix. Arizona Rep. Jerry Weiers, R-Glendale, proposed a special tax district bill that could have been used to help the Phoenix Coyotes at Jobing.com Arena, as well as US Airways Center in downtown Phoenix, but that bill has gone nowhere.

The D-backs back a countywide public vote on a sales tax increase to pay for the Cubs ballpark. Mesa officials point out a similar vote was not held to get a sales tax increase to pay for Chase Field in Phoenix.

McComish previously said he was open to other ideas, but he has not supported other options. The lawmaker did not respond to a request for comment.

The Cubs’ financing battle comes in the wake of funding shortfalls for the Arizona Sports and Tourism Authority, which previously funded Cactus League stadiums via hotel and car rental taxes. But the recession has hurt tourism and resulted in a $10 million shortfall for AZSTA, forcing alternative plans for the Cubs.

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India’s food-inflation rate stayed at around 18 percent for a sixth week, a sign that farm prices may have peaked and will start declining soon.

An index measuring wholesale prices of lentils, rice, vegetables and other food articles compiled by the commerce ministry rose 17.81 percent in the week ended Feb. 27 from a year earlier after a 17.87 percent gain the previous week, according to a statement in New Delhi today.

New crops of wheat, sugar and lentils will ease pressure on farm prices, Montek Singh Ahluwalia, a top economic adviser to Prime Minister Manmohan Singh, said this week. Sugar prices in India have dropped 19 percent from a record on Jan. 8 as production rose and the government took steps to boost supplies.

“Food inflation is already showing some early signs of rolling over,” said Rajeev Malik, a Singapore-based regional economist at Macquarie Group Ltd. “Monsoon rainfall remains a key risk that is too early to call.”

Agriculture prices surged in India after last year’s monsoon rains between June and September, the main source of irrigation in the country, were the weakest since 1972.

To ensure enough supplies, the government extended duty- free purchases of white sugar until Dec. 31 and banned export of wheat and rice.

Food Output

Sugar buyers in India, the world’s biggest user, may renegotiate some import contracts as a decline in domestic prices to a four-month low makes overseas purchases unprofitable, Michael McDougall, a senior vice president at Newedge USA, told Bloomberg News on March 5.

Sugar output in India, the world’s biggest buyer of the commodity, will be higher than forecast as cane yields improve, the Indian Sugar Mills Association said March 9. Production may total 16.8 million metric tons in the year ending Sept. 30, up from an earlier estimate of 16 million tons, the group said.

The wheat harvest will also reach a record this year and the government may consider lifting a ban on its exports, Indian farm minister Sharad Pawar said March 4 free credit report and score.

Even so, India’s benchmark wholesale-price inflation may accelerate to 9.67 percent in February, the highest in 16 months, according to the median estimate of 11 economists in a Bloomberg News Survey. The commerce ministry will release the inflation data on March 15 at noon in New Delhi.

Excise Tax

Sixty percent of the January inflation reading of 8.56 percent was contributed by food prices.

Food inflation “won’t be a cause for concern” in the next fiscal year starting April 1, Ahluwalia said March 9.

“Food-price inflation has moderated over the last couple of weeks,” central bank Governor Duvvuri Subbarao told reporters in Basle, Switzerland, on March 8. He said manufacturing inflation is showing signs of accelerating though.

Subbarao said he expects “some impact” on inflation after Finance Minister Pranab Mukherjee raised excise tax on fuel on Feb. 26 to mobilize revenue and cut the budget deficit.

Mukherjee imposed a one-rupee levy on every liter of gasoline and diesel while increasing the excise tax on almost all products to 10 percent from 8 percent.

The yield on India’s 10-year government bond touched 8.00 percent this week, the highest in 17 months, on concern inflation will erode the value of the debt’s returns. The yield has gained 36 basis points since Feb. 1.

“The increase in oil prices will push the inflation rate to double digits by March,” said Rahul Bajoria, an economist at Barclays Capital in Singapore.

Companies such as Steel Authority of India Ltd., the nation’s second-largest producer, and Maruti Suzuki India Ltd., India’s biggest carmaker, raised prices after the taxes were raised.

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Municipal bond investors are piling into Treasuries as state and local government finances worsen and the yield advantage for tax-exempt securities evaporates.

Local government bonds due in three years with AAA ratings yielded 66 percent of similar maturity Treasuries last month, about the lowest level since Bloomberg began compiling the data in 2001. If the ratio moves closer to 60 percent, investors in the 38.3 percent federal tax bracket would lose all the benefits of sheltering income that comes from municipal debt.

Muni bonds are losing favor as state and local governments raise taxes to fund the record $18.5 billion in budget gaps estimated in a National Governor’s Association survey. Increased buying by tax-exempt investors would sustain a rally in short- term Treasuries, already benefiting from demand for a refuge from sovereign credit concerns and rising purchases by banks.

“Treasuries are safer and more liquid investments, especially given the quality issues with many municipalities of late,” said Jeffrey Schoenfeld, partner and chief investment officer in New York at Brown Brothers Harriman & Co., which manages $33 billion in assets. “In this low-rate environment Treasuries can be huge pickup and very good value on an after- tax basis in the shorter-end.”

The Build America Bond program, an Obama Administration plan that subsidizes 35 percent of interest expense for state and local issuers when they sell taxable debt, is also making municipal securities less attractive relative to Treasuries.

Build America Bonds

Almost $80 billion in Build America Bonds have been sold since the program began in April 2009, and taxable bond sales totaled $97 billion, or about 28 percent of long-term, fixed- rate municipal issuance during the last 11 months, data compiled by Bloomberg show. During the six years through 2008, taxable sales made up an average 5 percent of issuance.

More tax-exempt bonds may be replaced with Build America debt, because the federal budget for the fiscal year starting in October calls for an expansion of the program to allow refunding. It also calls for making the stimulus initiative permanent with a lower interest subsidy of 28 percent for new issues beginning Jan. 1, 2011.

Treasuries due in one to three years have returned 0.78 percent since December, after gaining 0.79 percent in 2009, according to Bank of America Merrill Lynch index data. Similar maturity state and local securities returned 0.57 percent this year, extending 2009’s 4.2 percent gain.

Relative Returns

Government securities fell last week after a Labor Department report showed payrolls dropped by less-than-forecast 36,000 in February. Two-year note yields increased 4 basis points to 0.85 percent.

Municipal debt became more expensive as investors bought longer-maturity debt with money stored in short-term tax free money market accounts that yielded as little as 0.02 percent. Assets in the funds dropped by $148.76 billion from the record $528.36 billion in August 2008, according to iMoneyNet of Westborough, Massachusetts.

“Demand for munis is mostly coming from retail investors who have been sitting on a mountain of cash and wondering what to do with it,” said Christine Todd, a managing director and head of the group that oversees $26 billion in tax-sensitive fixed-income portfolios at Standish Mellon Asset Management Co. in Boston. “AAA munis are rich versus Treasuries.”

Baltimore County, Maryland’s AAA rated general obligation bond due in three years yielded as little as 58 percent of comparable Treasuries last week, according to Bloomberg data. The ratio of AAA rated Arlington County, Virginia, debt due in three years dipped as low as 50.7 percent last week, according to Bloomberg data. That means that buyers would be better off buying Treasuries even if they’re in the highest tax bracket.

‘Great Opportunity’

“Most people with wealthy clients think about taxes first, and that usually means munis, even when munis are overvalued,” said Jonathan Lewis, founding principal of New York-based Samson Capital Advisors LLC, which manages more than $4 billion. “Right now there is a great opportunity to go up in quality and increase liquidity by building allocation in Treasuries.”

Municipal bonds may get even more expensive with a proposal in Congress by Oregon Democrat Ron Wyden and New Hampshire Republican Judd Gregg seeking to replace the tax exemption for state and local bonds with a more limited tax credit.

“Supply concerns will continue to be the major issue, even as quality concerns are not emerging to be real issues,” said George Friedlander, municipal strategist for Morgan Stanley Smith Barney in New York. “Add to that the prospect of the possibility for Congress ending tax exemption and it points to more demand for munis going forward. There is still room for munis to get richer.”

Economic Outlook

Even if municipal yields fall, investors can still benefit by switching into U.S. government debt given the relative low level of interest rates and slow economic recovery, said Gary Pollack, who helps oversee $12 billion as head of fixed-income trading at Deutsche Bank AG’s Private Wealth management unit in New York.

Federal Reserve Chairman Ben S. Bernanke, who slashed the central bank’s target rate for overnight loans between banks to a range of zero to 0.25 percent in December 2008, has flooded the economy with more than $1 trillion in the largest monetary expansion in U.S. history.

In his semi-annual testimony to Congress last month, Bernanke reiterated that rates will remain low for “an extended period” because the economy’s “nascent” recovery isn’t strong enough to bear higher borrowing costs.

Market Performance

Shorter-maturity Treasures are outperforming longer-dated debt with the Fed in no hurry to raise rates and investors’ concern increasing that inflation will accelerate because of the record borrowing and stimulus measures. Yields on 10-year notes rose to a record 2.94 percentage points more than two-year notes on Feb. 18, and were 2.79 percentage points higher on March 5.

For all the concern about a record federal budget deficit and the rising supply of Treasury debt, U.S. bonds are the place to be so far in 2010, with returns topping equities and commodities. Bank of America Merrill Lynch’s U.S. Treasury Master Index has increased 1.56 percent, compared with a gain of 0.17 percent for the MSCI World Index of stocks and a 0.33 percent increase in the Standard & Poor’s GSCI Index of 24 raw materials.

“Smart investors are doing the math by buying short-term Treasuries, which are giving more after tax returns and adding quality and liquidity to their portfolio,” said Deutsche Bank’s Pollack. “A combination of extremely low rates, lack of muni supply and the prospect of higher income taxes are making munis look extremely rich. If ratios go lower the after tax return will still be there.”

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The dollar slipped against other major currencies Wednesday after Greece announced measures to reduce its deficit by four percentage points this year.

What prices are doing: The dollar fell 0.6% against the euro to $1.3694, and dropped 0.8% against the pound to $1.5131. The greenback edged 0.4% lower against the yen to ¥88.47.

The dollar was first higher Tuesday but then lost steam and ended lower, as the euro rose on hopes that debt-choked Greece would make decisions about its deficit.

What’s moving the market: Greece announced plans to make steep cuts in civil servant salaries and raise taxes to save the debt-challenged country more than $6.5 billion this year, according to a report in the Wall Street Journal’s online edition.

Greek officials expect the cuts to lower Greece’s budget deficit to 8.7% of the country’s gross domestic product from its current level of 12.7%, according to the report.

Investors also digested some U free credit report and score.S. economic data ahead of Friday’s all-important February jobs release. Traders took in labor market reports from outplacement firm Challenger, Gray & Christmas and payroll data firm Automatic Data Processing, which showed job losses continue to slow.

The employment component of the Institute of Supply Management’s report on the service sector also rose to its highest level since April 2008 as the service sector expanded.

What analysts are saying: "The dollar is trading lower today as Greece’s austerity package lifts demand for European currencies," said Kathy Lien, director of currency research at Global Forex Trading, in a research note.

But the rally in the euro may be limited because there is still a lot of back and forth on whether Germany and other strong European countries will offer aid to Greece, she added. 

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The Senate on Wednesday approved a $15 billion job-creation bill that would give businesses tax breaks for hiring the unemployed and states more money for infrastructure projects.

The four-prong bill would:

• Exempt employers from Social Security payroll taxes on new hires who were unemployed;
• Fund highway and transit programs through 2010;
• Extend a tax break for business that spend money on capital investments, such as equipment purchases;
• Expand the use of the Build America Bonds program, which helps states and municipalities fund capital construction projects.

The legislation, approved by a 70-28 vote, is a scaled-down version of an $85 billion bipartisan draft bill that was crafted by Sens. Max Baucus, D-Mont., and Charles Grassley, R-Iowa.

Some 13 Republicans, including newly elected Sen. Scott Brown, R-Mass., voted for the measure Wednesday.

"Today’s progress is a small step forward but an important one," said Senate Majority Leader Harry Reid, D-Nev., who surprised many lawmakers last week when he announced the slimmed-down measure. "This morning’s vote is a victory for hard-working Americans, especially those trying to find work. This will help our economy grow."

It now moves to the House, which may take it up as soon as Friday, said a Democratic aide at the House, which passed a more comprehensive $154 billion bill in December.

However, the bill does not extend the deadline to apply for unemployment benefits or the Cobra health insurance subsidy. Some 1.2 million people will run out of benefits after Feb. 28 if the deadline is not extended cash advance. Lawmakers are looking to pass a separate, shorter extension by the end of the week in order to give them time to enact a longer fix.

Also, unlike the House’s bill, the Senate’s jobs measure does not provide additional assistance for states. Many governors want the Obama administration to send more federal dollars so they can cope with yawning budget gaps.

The administration said on Monday that it strongly supports the $15 billion jobs measure but indicated it is only one step in the job-creation effort. The president wants lawmakers to take up a bill that would increase small businesses’ access to credit.

Reid said the Senate will vote on extending tax provisions and small business job measures in the near future. The majority leader also said lawmakers will consider providing additional Medicaid money for states, which governors have been requesting.

"We have other things in mind," Reid said. "Remember, we don’t have a jobs bill, we have a jobs agenda."

Still, labor leaders and left-leaning think tanks say the Senate must do more to spur job creation.

"We need to create 11 million jobs to get back to the level of unemployment we had before the recession began," said Lawrence Mishel, president of the Economic Policy Institute. "Yet the Senate jobs bill would create no more than a couple hundred thousand jobs."

CNN Radio Correspondent Lisa Desjardins contributed to this report. 

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The Federal Reserve raised the rate it charges banks that borrow from the central bank when they run short of funds.

The Fed said late Thursday it is raising its discount rate by a quarter percentage point, or 25 basis points, to 0.75%. The central bank said in a statement it made the move in response to improving financial market conditions.

The move is largely symbolic, because banks do little borrowing at the discount window.

The unanimous decision to boost the discount rate also has no effect on the more widely watched federal funds rate, which measures the rate banks charge each other for overnight loans. That rate is expected to remain between 0% and 0.25% for the foreseeable future, given the slack in the labor market and the still fragile state of the economy.

But raising the discount rate allows Federal Reserve chairman Ben Bernanke to take another small step toward normal monetary policy, after the past two-plus years were consumed in a financial firefight.

"The modifications are not expected to lead to tighter financial conditions for households and businesses and do not signal any change in the outlook for the economy or for monetary policy," the Fed said in a statement.

The Fed also shortened the term of some discount window loans and raised the minimum bid in the term auction facilities it uses to supply overnight funds to banks. Those facilities were among the many innovations Bernanke introduced since the onset of the credit crunch in mid-2007 to supply U.S. banks with funding.

As the recession deepened, the Fed moved to support the housing market by buying more than $1 trillion of mortgage-related securities. When buying those securities, the Fed credited the selling banks with reserves at the Fed. This huge sum of so-called excess reserves has led to worries that any upturn in the economy will be met with an inflationary lending spike from banks.

Bernanke has emphasized that the Fed will use multiple new tools to prevent the excess reserves from fueling inflation, including the payment of interest on reserves at the Fed and the sale of Fed assets.

But as eager as policymakers are to show that policy is on a track toward normalization — that is, a nonzero fed funds rate and a smaller Fed balance sheet — the process is clearly going to take time.

The Fed suggested as much Thursday, in explaining why it may be a while before the spread between the federal funds rate and the discount rate may return to its pre-crisis level of 1 percentage point. Following Thursday’s increase, the spread is now half a percentage point.

The central bank said Thursday’s increase should "encourage depository institutions to rely on private funding markets for short-term credit and to use the Federal Reserve’s primary credit facility only as a backup source of funds" and added that it will "assess over time whether further increases in the spread are appropriate." 

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ST. LOUIS — People attending the first day of the St. Louis Auto Show filed past a shimmering lime-green Ford Fiesta — a fuel-sipping car that will roam 40 miles for every gallon of gas.

Ford was among a handful of automakers inside America’s Center to give prominent display to their eco-friendly, fuel-efficient cars at the start of the four-day event Thursday. Ford launched its strategy three years ago — before $4-a-gallon gas — and it’s still a top priority, said Cory Miller, a Ford zone manager in Kansas City.

"The Nineties was a decade where people didn’t necessarily care so much about fuel consumption; they cared more about style of the vehicle they wanted," Miller said. "Since the spike in the gas prices — even though the prices have stayed relatively moderate — people are once-bitten, twice shy.

"People remember having to dip into their pockets quite deeply to fill up."

While gasoline prices have returned to Earth, many car owners are still jittery about future price swings, Miller said. But they also want cars that are fun to drive, safe and of good quality. The Fiesta — a top seller in Europe — will be available in U.S. showrooms this spring.

Despite a dismal two-year stretch that resulted in the

government bailout of General Motors and Chrysler, industry officials said Thursday that there is guarded optimism that the worst may be over for the beleaguered auto industry.

"Really, I think we’ve turned the page," said Brian Sullivan, executive producer of the St. Louis Auto Show.

Still, not all manufacturers have been able to shake bad news entering the show.

Toyota was forced to suspend U.S. sales of top sellers because of problems with the gas pedals. Toyota representatives staffing the St. Louis display declined to talk about the halt to sales or a related recall, referring questions to company officials in California.

A federal judge on Thursday rejected the United Auto Workers’ request for a temporary restraining order that would have allowed the union to pass out leaflets in the lobby of the America’s Center. The UAW sought to draw attention to Toyota’s recent product problems and Toyota’s decision to close a plant in California.

Honda touted its entry-level Fit and its hybrid Insight alongside its Accord Crosstour, CR-V and Element, although Joe Duco of Meyer Honda in O’Fallon, Ill., said fuel efficiency isn’t the only thing driving today’s car buyer.

"There are still a lot of people inquiring about fuel efficiency," Duco said. "I think right now they’re kind of looking for that in-between vehicle."

Jeff Blair of Festus crawled behind the wheel of the Insight but concluded it would be too small for his family of four. While he’s not in the market for a new car right now, Blair said fuel efficiency is important when deciding to buy a car.

Blair is a copy machine technician in St. Louis who spends a lot of time on the road. His wife drives 45 miles each way to work at Barnes-Jewish Hospital.

"Gas mileage is definitely a big thing when you buy a car," said Blair, who owns a Honda Civic.

Not far away, Volkswagen’s display boasted that its TDI clean-diesel vehicles would make owners the toast of "tree-huggers and road-huggers alike."

While the blending of green technology and vehicle performance has been a theme at auto shows nationwide, so has one of relief among automakers who believe the worst is over, said Jeff Schuster, executive director of global forecasting for J.D. Power and Associates.

To that end, Schuster said, there is a correlation between attendance at auto shows and the public appetite to buy cars.

"Fuel economy … raises itself in importance more when fuel prices are high," said General Motors spokesman Craig Eppling. "They’re moderate now. We would have thought maybe three or four years ago $2.50 or so was high. Now, we’re generally accustomed to it."

Eppling said General Motors tracks why people buy cars. Style now rates high — along with safety and price. GM expects vehicle sales to track with the U.S. economy, Eppling added, so 2010 should be a good market but not necessarily a great one.

"This past year, the motivation has been value," Eppling said. "With the economy and the mind-set of ‘Do I have a job?’ and so forth, people are looking for a value."

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The road for another stimulus bill just got tougher following Tuesday’s election of Republican Scott Brown to the Senate in Democratic stronghold Massachusetts.

After health care, Congress’ next big priority is to pass something that shows voters in an election year that they’re on top of the nation’s unemployment scourge.

But the Democrats’ loss of a filibuster-proof super-majority in the Senate throws hurdles onto an already rocky path toward a new stimulus bill aimed at saving jobs.

Given how controversial the first stimulus package remains, passing a new jobs bill, or "second stimulus," was never going to be easy. Republicans have especially targeted the first stimulus package as a prime example of the kind of big government spending they aim to end.

"There is a reason the nation was focused on this race," said Senate Minority Leader Mitch McConnell, R-Ky. "The American people have made it abundantly clear that they are more interested in shrinking unemployment than expanding government. They are tired of bailouts."

Experts and policy analysts say the Republican win in Massachusetts will shore up Republican opposition to anything that looks like big spending.

"I think it’ll be very hard," said Julian Zelizer, a professor of history and public affairs at Princeton University. "Democrats will be under more pressure to pass a jobs bill, because if they don’t do something about the economy, voter dissatisfaction will increase. But Republicans are going to be more emboldened not to vote for it." (Democrats scramble on health care - CNN.com.)

The bills: The House passed a $154 billion jobs bill in December, but Senate Democrats are planning to debut their own jobs-creation bill in coming weeks.

The two bills were developed independently but share some components, like infrastructure spending to build roads and bridges, as well as state aid to plug budget holes and keep teachers and police officers employed.

Senate Democrats have been brainstorming in backrooms since last summer to come up with a package that incorporates ideas from all parts of their caucus, according to congressional aides. Party leaders Dick Durbin of Illinois and Byron Dorgan of North Dakota have been running the negotiations.

The final package will offer something for the left, like spending for green sector jobs, and something for the right, like tax breaks for small businesses that hire new workers.

On the tax breaks, Senate leadership is considering a proposal that Sen. Robert Casey, D-Pa., plans to introduce this week incorporating ideas Republicans have touted.

Casey wants to give a one-year payroll tax break to companies that create new jobs offering wages up to $50,300. Small companies would qualify for a 20% tax break and larger companies with more than 100 employees would qualify for a 15% break fast cash loans.

Another way to make a jobs bill more palatable to both fiscally conservative Democrats and Republicans is to craft a bill that pays for itself and doesn’t add to the deficit. That’s a big goal of the jobs proposal, Democratic aides say. But they wouldn’t spell out how.

The bill may try to take advantage of money freed up in the budget by the fact that the Troubled Asset Relief Program is coming in under budget.

Wooing Republicans: Will such fiscal carrots be enough to woo any Republicans?

"Small business tax breaks are great," said Brian Darling, director of Senate relations at the conservative Heritage Foundation. "But when they’re basically being used just to get some Republican support and the balance of the proposal is just federal spending, this sounds very similar to the first stimulus plan."

Douglas Holtz-Eakin, a former Congressional Budget Office director, said that the Massachusetts win should send a signal to Democrats to start from scratch on the jobs bill and start working with Republicans. He said Republicans would prefer a bill that focuses more on bigger and more effective tax cuts, like blanket breaks on payroll taxes and capital dividend taxes.

"The landscape has changed," said Holtz-Eakin, who advised 2008 presidential candidate Sen. John McCain. "They’re going to have to go back and think about what policies are going to get the Republicans on board."

Indeed, a couple of Republican senators’ offices said they can’t imagine a Democratic proposal on jobs that could win them over.

"A second stimulus bill, packed with more spending, is the wrong way to approach this," said Jeff Sadosky, spokesman for Sen. Kay Bailey Hutchinson, R-Texas. "Obama’s budget has already ballooned the debt. More spending is not the answer."

But Democrats may be able to peel off someone like Sen. Susan Collins, R-Maine, one of three Republicans who last February voted with Democrats to pass the original stimulus package. But she’d only be game if the jobs bill really didn’t add to the deficit, a spokesman said.

"Senator Collins has said that she is open to considering the possibility of a jobs bill but her main concern is how it would be paid for?" said Collins spokesman Kevin Kelley. "She believes that the debt levels we are accumulating now, and that are projected, are simply not sustainable and pose a considerable threat to the health of our economy." 

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