UPDATE 2-Obama faces voter policy doubts in backyard meeting
* Tough questions from middle-class voters
* Businessman sees "strangling" of job creation
* President defends tax plan (Adds comments from Richmond, analyst)
By Patricia Zengerle
DES MOINES, Sept 29 (Reuters) - President Barack Obama defended his economic policies on Wednesday in the face of tough questions from skeptical Americans less than five weeks before congressional elections that threaten his fellow Democrats' grip on Congress.
Holding the latest in a series of backyard meetings with middle-class voters, Obama heard one small businessman's fears that his tax plans could "strangle" job creation. The president also fielded concerns about high unemployment and the impact of his healthcare overhaul.
It was a marked contrast to the enthusiastic university crowd that greeted Obama on Tuesday in Wisconsin when he sought to fire up his youthful base of support, and showed the obstacles his Democratic Party faces in the Nov. 2 elections.
Obama stood up for his agenda but acknowledged the country faced "hard decisions" as he works to shore up the struggling economy and rein in huge budget deficits. "We're not going to be able to solve our big problems unless we honestly address them," he told about 70 people at an Iowa home.
One questioner brought up her 24-year-old son, who graduated from college and campaigned for Obama in 2008 but has been unable to find a full-time job. "He and many of his friends are struggling. They are losing their hope, which is a message that you inspired them with," she said.
A small businessman expressed concern about Obama's proposal to extend Bush-era tax cuts only on families with personal income of less than $250,000, and bemoaned policies he said would discourage hiring.
"As the government gets more and more involved in business and gets more involved in taxes to pay for an awful lot of programs, what you're finding is ... you're sort of strangling the engine that does create the jobs," the man said.
Obama said his tax proposal will help middle-class earners and avoid what he sees as unneeded tax breaks for wealthier Americans. The issue has sparked heated debate between Democrats and Republicans.
'PAYING OUR BILLS'
"I'd like to keep taxes low so that you can create more jobs. But I also have to make sure that we are paying our bills and that we're not ... putting off debt for the future generation," Obama told his questioner.
Representative Eric Cantor, a Republican whose Virginia district Obama also visited on Wednesday, sought to pre-empt the president's arrival with a call for him to support a bill that "will stave off tax hikes for every American."
In Virginia, Obama blasted Republicans - referring to Cantor without using his name -- for, he said, failing to offer concrete ideas and making a political calculation to refuse to work with him to address the country's problems.
"It's been a pretty successful strategy," Obama said. "Because right now, people are frustrated. All the good feeling we had coming in... has dissipated. That means a lot of the people who were supporting me are talking about maybe just staying home in the election. And meanwhile the other side's all ginned up: 'We can take power back,'" he told supporters crowding a community center to avoid a rainstorm.
Obama drew more than 26,000 people on Tuesday at the University of Wisconsin, where he appealed to young voters -- who tend to favor Democrats but are less likely to go to the polls -- to back his party. The mood was reminiscent of triumphant rallies late in his 2008 presidential campaign.
William Galston of the Brookings Institution called Obama the "best card that Democrats can play" to energize voters to stave off potentially steep losses in November. Polls show an enthusiasm gap, with Democrats less likely than Republicans to vote in the mid-term elections.
"If you see the enthusiasm gap ... cut significantly between now and election day, I think the president can claim some victory," said Galston, a veteran of the Clinton White House.
Questioners in Des Moines were polite and respectful; some expressed appreciation for Obama's hard work. But some questions were more pointed than at other such events.
Iowa traditionally stages the first nominating contest for presidential candidates and is in many ways a bellwether for the national mood. A poll in the Des Moines Register found 55 percent of likely voters in Iowa, which Obama won in 2008, said they were dissatisfied with him, while 42 percent approved of his job performance.
Richmond, Virginia, was the last stop on Obama's four-state trip meant to reinvigorate his party's base.
He appealed to Hispanics in weekend interviews on Spanish-language television and an education-focused backyard event in New Mexico. He targeted young voters in Madison and talked economics and the middle class in Iowa and Virginia. (Writing by Patricia Zengerle and Matt Spetalnick; Editing by Peter Cooney and Todd Eastham)
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