Congress to back Obama spending freeze: Hoyer

WASHINGTON (Reuters) - The U.S. Congress will enact President Barack Obama's proposed three-year spending freeze on some government programs, House Majority Leader Steny Hoyer predicted on Thursday in an interview with Reuters.

But the No. 2 Democrat in the House of Representatives said he did not think the freeze should be extended to the military programs that make up a much larger portion of the budget, contradicting remarks earlier in the day by House Speaker Nancy Pelosi.

Hoyer agreed with Obama, who in his State of the Union speech to Congress on Wednesday proposed the freeze only for some domestic programs.

"I would be much more reticent in looking at spending on our national security, because I think that we need to make sure we have the funds to get the job done," Hoyer said in a phone interview.

His remarks outline the challenge ahead for Obama's Democrats as they try to bring down record budget deficits and create jobs at the same time.

With congressional elections in November, Democrats face a voter backlash over the sluggish economy and the aggressive spending measures Democrats have taken to improve it.

Democrats must stay united to overcome disciplined Republican opposition, but some liberal members have balked at Obama's suggestions to tame the deficit and create jobs through tax breaks and increased lending to small businesses.

Pelosi broke with Obama in saying the proposed spending freeze should also apply to defense expenditures.

Other House Democrats who chair the committees that handle taxing and spending did not applaud when Obama proposed the domestic spending freeze on Wednesday night, even as the rest of the chamber leapt to its feet.

Meanwhile, some liberals have balked at Obama's job-creating proposals, such as a tax credit for businesses that take on new employees.

A House Democrat who has jurisdiction over small-business programs had "some reservations" about Obama's proposal to direct $30 billion to smaller banks to boost lending to small businesses, Hoyer said.

He said he will meet next week with that member, Representative Nydia Velazquez, to discuss her concerns.

Hoyer said he was confident that jobs legislation will not get bogged down on Capitol Hill, as has happened to other Obama priorities like climate-change legislation and healthcare reform.

He said Congress would be able to show that it has brought the unemployment rate down from its current level of 10 percent by the mid-term elections.

"I think the president's ideas will certainly be looked at closely and will have currency," Hoyer said.

Individual proposals, such as Obama's suggestion to reduce capital-gains taxes on small-business investments, could move on their own but Congress would have to find a way to pay for them, he said.

"We've shown the ability to move and move decisively in a relatively short period of time," he added.

(Editing by Paul Simao and Chris Wilson)