R.E.
For the 3 year old, maybe a power wheel car if you can swing it in your budget. Or maybe a bike or scooter or any outdoor toys are always a hit with my boys - baseball tees, balls, bats, basketball goal, bubble stuff, sidewalk chalk. Those are fun for any age, and really can "grow" with the child. My sons also like cars, action figures, view master, magna doodle, etch and sketch, legos (you can get Disney Cars, Diego, MIckey Mouse sets or just plain sets), magnetix. Last year, my youngest son had just turned 3, and his favorite was the Crash Em Up Race Track. Board games are fun at 3. At that age, my kids liked Candy Land, Lucky Ducks, Let's Go Fishing, Hullabaloo, and Don't Wake Daddy.
For the baby, at that age, my sons got duplo blocks (the kind that are bigger for babies hands), Little People, musical instruments.
I'd browse the aisles at Toys R Us and see what there is to offer. If you're like me, you'll get more than enough ideas!