WASHINGTON - Democrats want increased lending to small businesses and funding for shovel ready transportation projects included in a job-creation bill they hope to pass in Congress next month to address the high U.S. unemployment rate.

The proposals were discussed on the eve of a forum convened by President Barack Obama to address the highest jobless rate in 26 years, which has undermined his popularity as he struggles to keep the economic recovery on track.

Key Democrats in the House of Representatives said $69 billion worth of highway construction and other infrastructure projects could be underway within months if the money is included in a jobs bill, which lawmakers hope to pass by January.

Given my druthers, $69 billion would be a nice down payment, Transportation and Infrastructure Committee Chairman James Oberstar said.

Democrats hope their jobs package will reduce the 10.2 percent unemployment rate before the November 2010 congressional elections.

In the Senate, Democrats Byron Dorgan and Dick Durbin, suggested that money left over from the $700 billion Troubled Asset Relief Program could be used to help small businesses expand at a time when banks are reluctant to lend them money.

We have used the TARP program last year to keep financial institutions solvent, and now we want solvency in family budgets, Durbin, the Senate's No. 2 Democrat, told Reuters.

Details of the package are still up in the air, but Durbin said it will include four central elements: small business aid; infrastructure spending; aid to local governments to avoid layoffs of public employees; and programs to increase buildings' energy efficiency.

OBERSTAR: FUNDING COULD KEEP WORKERS ON THE JOB

Congress included $34 billion for state-led transportation projects in its $787 billion stimulus bill passed in February. Those projects have created 340,000 jobs in construction and related industries, Oberstar said, but most will have run their course by May.

Those workers could stay on the job if the new list of projects is funded, he said.

Oberstar's call for increased transportation spending is also backed by Appropriations Committee Chairman David Obey.

In the Senate, several small-business owners testified that their efforts to expand their operations had been frustrated by their inability to get loans from banks which have benefited from last year's financial-industry bailout.

That drew a sharp response from Dorgan.

It just makes me furious that the same institutions to which we threw a lifeline, the same institutions whose selfishness and greed steered us into the ditch, have now decided ... they're going to turn their back on providing lending needs to small and medium-sized businesses, he said.

Congress could get credit flowing by raising the Small Business Administration's loan limits from $2 million to $5 million and raising its loan guarantees from 90 percent to 97 percent, economist Mark Zandi of Moody's Economy.com said.

Congress could also eliminate the interest-rate cap on SBA loans, which at its current rate of 6 percent is not enough to offset the risks of the current environment, he said.

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