First of several job-creation bills clears Congress

People wait in line to enter the NYCHires Job Fair in New York in New York in this February 24, 2010 file photo.

WASHINGTON (Reuters) - A package of tax breaks and highway spending cleared Congress on Wednesday, the first of what Democrats hope will be several efforts to bring down the 9.7 percent unemployment rate.

The Senate passed the $17.6 billion measure by a vote of 68 to 29 and sent it to President Barack Obama, who will sign it into law on Thursday.

"It is the first of what I hope will be a series of job packages that will help to continue to put people back to work all across America," Obama said.

With congressional elections looming in November, Democrats hope to show they are committed to reducing an unemployment rate that has remained stubbornly high even as the economy has begun to recover from the worst recession in decades.

None of their efforts is likely to approach the scale of last year's $863 billion stimulus package, which has created up to 2.1 million jobs but spurred a backlash among voters concerned about record budget deficits.

"We have a long way to go -- I'm not sugar coating where we are in this economy -- but we are moving forward a step at a time and this is a very good step," said Democratic Senator Barbara Boxer.

The bill sent to Obama would exempt businesses from paying the 6.2 percent payroll tax on new employees who had previously been out of work. Employers would also get a $1,000 tax credit if those workers were still on the job a year later.

Some economists and liberal lawmakers question that approach, saying it will only go to businesses that planned to expand anyway.

The bill also subsidizes state and local construction bonds and allocates $19.5 billion to shore up a highway-construction program and extend it through the end of the year.

The bill's costs, other than the highway fund, are offset by a crackdown on offshore tax shelters.

Obama hailed the 11 Republicans who voted with the Democratic majority to pass the bill, though some had opposed it in previous procedural votes.

OTHER BILLS PENDING

Both the House and the Senate have passed larger job-creation bills but they have yet to resolve their differences.

The Senate passed a $140 billion package of tax breaks and unemployment aid last week, but House Democratic leaders have indicated they are likely to change it.

That bill closes several tax loopholes to bring down its price tag by roughly $37 billion, but Obama wants to use some of those loopholes to help pay for his massive healthcare overhaul.

The House passed a $154 billion jobs bill in December centered on increased highway spending and state aid, but the Senate has ignored it so far. House lawmakers may try to move those approaches separately or attach them to other bills.

Meanwhile, centrist Democrats want to cut spending or raise taxes elsewhere in the budget to avoid adding further to the budget deficit, which is projected to hit a record $1.5 trillion this fiscal year, according to the nonpartisan Congressional Budget Office.

It could take several weeks to resolve the issue, as healthcare is expected to dominate the agenda before the spring break, which begins March 29. The House was scheduled to vote on a short-term extension of unemployment benefits to avoid disruption when they expire in coming weeks.

Separately, the House could vote later this week on a bill that would cut capital-gains taxes on certain small-business stocks and further expand subsidies for state and local construction bonds.

(Additional reporting by Thomas Ferraro, Steve Holland and Jeff Mason, editing by Alan Elsner)