UPDATE 2-White House to release budget on Feb 14

Fri Jan 28, 2011 8:42pm EST

* Budget sets up fight with Republicans over spending

* Release date set for Feb. 14

(Adds background, writes through)

By Alister Bull

WASHINGTON, Jan 28 (Reuters) - President Barack Obama's budget proposal for fiscal 2012 will be released on Feb. 14, an administration official said on Friday, setting up a tough fight with Republicans who vow to cut spending.

Democrat Obama wants a 5-year, non-security discretionary spending freeze as a downpayment toward curbing the huge U.S. budget deficit, while also promoting investment that he says will boost U.S. growth and ease high unemployment.

Republicans say this represents spending the country cannot afford, and pledge deeper cutbacks to help control a federal deficit the nonpartisan Congressional Budget Office estimates will hit $1.48 trillion in fiscal 2011.

The U.S. funding gap grew sharply after Obama agreed with Republicans to extend Bush-era tax cuts for all Americans for two years, pumping $858 billion into the economy over time as it slowly recovers from a deep recession.

Data released earlier on Friday showed the U.S. economy grew by a 3.2 percent annualized clip in the fourth quarter, up from a 2.6 percent pace in the previous 3 months.

The president's budget lays out the cost of the administration's policy proposals, together with revenue and debt projections over 10 years.

It will likely face stiff opposition in the House of Representatives, which Republicans now control after elections in November, where they campaigned vigorously for stern measures to bring down the deficit and quell rising debt.

These are expected to hit a $14.3 trillion federal debt ceiling by the end of March, risking an unprecedented default by the U.S. government unless Congress votes to lift the limit as the Obama administration has urged it to do.

The White House says the spending freeze, which the president proposed during his State of the Union address on Tuesday, will lower the deficit by $400 billion over 10 years.

But the freeze will not apply to massive U.S. entitlement programs such as social security and Medicare, which represent the core of the country's fiscal problems.

Obama left the details of what his investment initiatives will cost to be explained in the budget, which will also contain provisions to set up an infrastructure bank to aid the modernization of U.S. roads, railways and bridges.

(Reporting by Alister Bull; Editing by Philip Barbara)