For Congress, plenty to hate in Obama budget

WASHINGTON (Reuters) - President Barack Obama's budget proposals seem to have given every lawmaker in Congress a little something to hate.

After a first year of epic battles over healthcare, climate change and the economy, Obama has handed Congress another thorny battle with an uncertain fate.

Although Obama submits the budget to Congress, actual decisions about how the government raises and spends money are made on Capitol Hill in a process of horse trading that can last most of a year.

"After a year in office that has put us on a pace to double the debt by 2013, the president should have a tougher plan to address our fiscal crisis, because this budget will solve nothing," said Senator Judd Gregg, the top Republican on the Budget Committee.

Republicans, feeling a wind at their backs ahead of elections in November that could seriously alter the makeup of the two Democratic-led houses of Congress, may not support any of the budget.

But Obama's fellow liberals also took issue with his plans, some assailing his proposal to freeze many government domestic programs for three years. The toughest questions in Congress may center on how Democrats resolve their differences.

'HOUSTON, WE HAVE A PROBLEM HERE'

With unemployment hovering around 10 percent, lawmakers of all stripes were certain to challenge cuts that might lead to layoffs back home, such as Obama's plans to cancel a NASA space program to send astronauts back to the moon.

"You could say: 'Houston, we have a problem here,'" said Dan McLaughlin, a spokesman for Democratic Senator Bill Nelson, whose state of Florida, like Texas, is home to space program jobs.

With Republicans united in opposition, Obama will need to rely on his fellow Democrats to get his proposals, or something like them, passed into law.

That could be tricky. Democrats are desperate to show voters they are taking steps to reduce unemployment. They also face a growing voter backlash over the aggressive spending measures they have taken to boost the economy.

Obama's budget aims to address both concerns, laying out additional spending and tax incentives to boost hiring, while setting in place a spending freeze on many programs to demonstrate fiscal responsibility.

Ideally, Congress approves a budget blueprint in April, but the Democratic lawmakers responsible for overseeing the process acknowledged that is a tougher task in an election year.

HARD CHOICES AHEAD

"On both the budget and the economy there are hard choices ahead of us, but the budget sent up by the president today marks one more step toward moving the economy up while bringing the deficit down," House Budget Committee Chairman John Spratt, a Democrat, said in a statement.

But divisions remain. House Speaker Nancy Pelosi suggested that the spending freeze be extended to some defense programs. The No. 2 House Democrat, Majority Leader Steny Hoyer, thought otherwise, telling Reuters that national security should not be subjected to spending caps.

Republicans meanwhile said the freeze did not go nearly far enough and suggested that it take place immediately.

The Obama administration projects the spending freeze will save $250 billion over the coming decade, not nearly enough to get budget deficits down to a level that economists view as sustainable.

Democrats hope that two other approaches can show voters that they are responsible stewards of tax money. One would set up a bipartisan White House commission to figure out ways to bring down deficits in the long term.

But the "bipartisan" part may be in doubt as key Republicans say the commission would give Democrats the political cover to sign off on tax increases.

Will they participate?

"I'd have to see how it's structured, but I doubt it," Gregg told Reuters in a phone interview.

The other approach, known as "paygo," would require new spending programs to be offset elsewhere in the budget, to avoid adding further to the deficit. The House is expected to approve it this week and send it on to Obama to sign into law, after the Senate passed it last week.

(Editing by Howard Goller)