Factbox: Banking reform, unemployment on Congress agenda

(Reuters) - Lawmakers return to Congress on Monday after a two-week break, facing a backlog of work and a bitterly partisan atmosphere soured by Democratic tactics in passing healthcare reform over united Republican opposition.

With congressional elections looming in November, lawmakers have limited time to take care of business on their calendar before being caught up in campaigning for all 435 seats in the House of Representatives and more than a third of the Senate's 100 seats.

Republicans are expected to pick up seats, eroding the Democrats' majority in both chambers. Here are some of the issues Congress will confront as it returns from its two-week recess:

BANKING REGULATORY REFORM

Senate aides over the recess continued to seek a bipartisan compromise on financial reform, and senators are expected to begin formal debate soon on a Democratic bill that was approved last month by the banking committee in a party-line vote. The House approved a bill in December.

President Barack Obama, hoping to build on this year's healthcare reform victory, is making financial reform his top post-recess domestic policy priority, pressuring lawmakers to produce a bill.

UNEMPLOYMENT BENEFITS

Some 200,000 Americans saw their jobless benefits expire in the first week of April because Congress allowed the program to lapse before the recess. Both Democrats and Republicans say the program should be renewed and the Senate is scheduled to vote on Monday. But most Republicans are likely to vote against a one-month extension on the grounds that its $9 billion cost should be offset by spending cuts elsewhere.

With the unemployment rate stuck at 9.7 percent, moderate Republican senators like Olympia Snowe and Scott Brown could give the Democrats the support they need to overcome Republican opposition.

NUCLEAR ARMS CONTROL

The Senate Foreign Relations Committee plans to hold hearings on the new START nuclear arms-control treaty signed by Obama and Russian President Dmitry Medvedev in Prague on Thursday.

BUDGET RESOLUTION

Congress is required to approve a budget blueprint by April 15 to outline its spending and revenue plans for the fiscal year that starts on October 1. But the process has already been delayed by the healthcare debate, and Democrats could be reluctant to sign off on any plan that acknowledges the record $1.5 trillion deficit projected for this year.

"I know they would prefer not to take a vote on a budget resolution because they're voting on the deficit, but I don't think they have a choice." budget expert Stan Collender said.

Congress faces no penalty if it does not pass a budget resolution, as happened in 2006 when Republicans were in control, and appropriators will begin parceling out money to government agencies next month no matter what.

But a failure to approve a budget resolution would undermine Democrats' fiscal bona fides and could unsettle investors who already question whether Washington has the courage to bring its yawning deficits under control.

Perhaps more importantly, the budget resolution also sets the rules by which the Senate can pass legislation with a simple majority, rather than the usual 60-vote threshold. Those rules helped Democrats pass their healthcare bill and could come in handy when they want to extend the middle-class tax cuts that otherwise will expire on December 31.

JOB CREATION

With the economy slowly recovering from the worst recession since the 1930s, Democrats hope to show voters that job creation is also a top priority and have suggested a variety of approaches, from increased small business lending to a "cash for caulkers" program to boost buildings' energy efficiency.

So far, Obama has signed into law a measure that would give a payroll tax break for businesses that hire new workers and continue existing highway-construction programs.

Both the House and the Senate have passed additional job-creation efforts, but they are likely to be modified substantially before they become law.

The Senate last month approved a measure that would renew expired tax breaks and extend unemployment benefits through the end of the year. It also would close a loophole that allows paper mills to claim a tax credit on an industrial byproduct, but Congress used that measure instead to bring down the cost of the healthcare bill.

Lawmakers are now looking for other ways to bring down the bill's cost, according to a Senate aide.

Separately, the House approved a $19.3 billion package of small-business incentives and construction subsidies, but it faces an uncertain fate in the Senate.

WAR SPENDING

The Obama administration wants Congress to approve $33 billion in extra spending for the war in Afghanistan. Lawmakers may be less keen on the war following recent anti-Western remarks by Afghan President Hamid Karzai. House Appropriations Committee Chairman David Obey has proposed a surtax to pay for the war, but it is not supported by House Speaker Nancy Pelosi and thus not likely to become reality.

CLIMATE CHANGE

A compromise bill to battle global warming could be unveiled in the Senate in coming weeks. The central goal is to reduce smokestack emissions of carbon dioxide and other greenhouse gases by 17 percent by 2020 from 2005 levels.

An analysis of the economic impact of such a bill is likely to take several weeks and supporters say it could reach the Senate floor in June or July -- too close to the election for such a contentious issue.

In June 2009, the House narrowly passed its version of the pollution-control bill, but it has gone nowhere in the Senate.

SUPREME COURT

If Supreme Court Justice John Paul Stevens retires as expected, the confirmation battle to replace him could push other items off the agenda. Obama is expected to nominate a fellow liberal to replace Stevens and then push hard to win the required Senate confirmation for the lifetime appointment.

IMMIGRATION REFORM

Obama, under pressure to keep a campaign promise to overhaul the immigration system, has said he would like Congress to move quickly on a bipartisan compromise outlined by Republican Senator Lindsey Graham and Democratic Senator Charles Schumer. Experts say support from both parties will be needed, but Graham has said that the divisive healthcare battle has "pretty much" killed any chance for cooperation.

(Reporting by Andy Sullivan, Richard Cowan, Susan Cornwell, Thomas Ferraro and Kevin Drawbaugh in Washington; editing by Mohammad Zargham)