Exclusive: "Blue Dog" Democrats outline fiscal agenda

WASHINGTON (Reuters) - Conservative-leaning Democrats in the House of Representatives plan to push spending caps and other deficit-cutting measures ahead of the November elections, one of the group's leaders told Reuters on Monday.

Their proposals were outlined shortly before President Barack Obama is expected to emphasize deficit reduction in his State of the Union speech on Wednesday.

The Blue Dogs' plan, provided to Reuters, aims to balance the budget within 10 years and stabilize the national debt at a ratio of 60 percent of gross domestic product, which many experts consider sustainable.

Though the 54 centrist members of the Blue Dog Coalition are outnumbered by liberals in the House, their agenda could play a large role this year as nervous Democrats try to position themselves as responsible stewards of taxpayer money.

"It's politically a tough year for anyone who wants to defend the status quo," said Representative Jim Matheson, one of the group's leaders, in a telephone interview.

Republican Scott Brown's surprise Senate victory in Massachusetts last week has prompted Democrats to emphasize economic concerns, as ambitious efforts to overhaul healthcare and pass climate-change legislation become stalled.

The Blue Dog plan drew praise from House Majority Leader Steny Hoyer, a frequent ally on fiscal issues.

"The initiatives included in their plan are a welcome addition to the conversation as Democrats remain focused this year on bringing down the deficit," Hoyer said in a statement.

Obama's budget proposal for the fiscal year that starts in October, due to Congress next week, is likely to provide an austere contrast to 2009, when his administration spent nearly $1 trillion to boost the economy out of recession.

The government spent a record $1.4 trillion more than it collected in the past fiscal year thanks to the worst economic downturn since the 1930s.

The total amount of U.S. debt has more than doubled over the past decade to $12.27 trillion, due to tax cuts and wars in Afghanistan and Iraq as well as the recession.

The Blue Dogs have managed to attach some of their proposals to unrelated legislation as a condition of their support.

For example, this week the Senate is expected to vote on their proposal that would require new spending to be offset with cuts elsewhere.

Other proposals on the Blue Dog agenda include:

* Hard spending caps on defense, housing, education and other programs that are authorized by Congress each year.

* A requirement that Congress promptly vote on spending cuts proposed by the president for existing programs.

* Requiring lawmakers to propose new ideas to balance the budget in 10 years if progress is not made each year.

* Amending the U.S. Constitution to require the government to run a balanced budget each year, starting in 2020, as most states are required to do, except for in times of war and other national emergencies.

* Strengthen oversight programs designed to eliminate waste, fraud and abuse.

* Require Congress to promptly consider presidential proposals to reorganize the government to eliminate duplication.

* An audit of the Defense Department.

* A commission that would recommend eliminating federal programs that have outlived their usefulness.

(Editing by Philip Barbara)