Plenty for Congress to hate in Obama budget

WASHINGTON Mon Feb 1, 2010 3:00pm EST

WASHINGTON (Reuters) - U.S. 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.

"I only hope the debate can be more focused on policy than politics," said Representative Charlie Rangel, a Democrat like Obama who chairs the tax-writing House Ways and Means Committee.

Good luck with that.

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, are trashing the proposal. None voted for last year's proposal and they are unlikely to support this year's effort.

"I don't see, given the level of spending, the level of debt, the level of taxation, that this will receive much Republican support," said Representative Dave Camp, the top Republican on Ways and Means.

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 are 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.

There are incentives for cooperation.

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.

Approving a budget blueprint that contains these goals could help Democrats hold onto their jobs in November and portray Republicans as obstructionists unwilling to compromise for the good of the country, said budget expert and former congressional staffer Stan Collender.

"It looks to me that the budget was put together to put Republicans on the defensive," Collender said, pointing to tax cuts and deficit-reduction efforts contained in the plan.

DIVISIONS REMAIN

Democrats disagree also. House Speaker Nancy Pelosi said on Monday that the Defense Department should not be exempt from spending cuts, while the No. 2 House Democrat, Majority Leader Steny Hoyer, told Reuters last week he opposed subjecting national security to a freeze.

House Appropriations Committee Chairman David Obey, who oversees spending, said he would stay within the overall levels in Obama's proposal but might cut defense to minimize cuts in domestic programs.

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.

Other proposed savings, such as cuts to certain weapons programs, were rejected by Congress last year.

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," Senator Judd Gregg, the top Republican on the Budget Committee, 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.

Voters will elect all 435 members in the House of Representatives and more than a third of the 100 Senate members in November.

(Additional reporting by Donna Smith, Editing by Howard Goller)

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