WRAPUP 2-US House puts spending-cut knife to Pentagon

* Bipartisan vote to end 2nd engine for F-35 airplane

* Republican plans would cut current spending by 14 pct

* Proposed cuts 'arbitrary' and based on politics - Inouye (Adds vote on engine, details)

By Richard Cowan

WASHINGTON, Feb 16 (Reuters) - Republicans pressed ahead on Wednesday with legislation to immediately slice more than $61 billion from domestic spending but found their budget-cutting unity shaken in a House of Representatives vote to kill a big weapons project.

After refusing on Tuesday to trim other military spending for this year, the House voted 233-198 to deny immediately $450 million for the continued development of a second engine for the F-35 Joint Strike Fighter. Republicans were almost evenly split on the project, which was opposed by the Pentagon, but Democrats voted nearly two-to-one to kill it.

If the Senate concurs in eliminating the program, the bipartisan measure could end up saving the government around $3 billion over the next few years.

Military brass, who oversee around $700 billion in Pentagon spending just this year, called the engine project an "unnecessary and extravagant expense." But it has defenders in Congress whose home-state jobs are tied to the project.

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While the Obama administration will be heartened by the House vote to pull the plug on the engine being developed by General Electric (GEA.N) and Britain's rolls-Royce (RR.L), the overall bill to cut about $61.5 billion in domestic spending faced strong opposition.

The White House issued a veto threat on Tuesday and the bill has been harshly criticized by Senate Democrats.

Nevertheless, the Republican-controlled House was on pace to pass a measure that would cut non-defense spending by 14 percent by approving slightly more than $1 trillion to keep federal agencies operating through September.

Budget debates later this year could tackle broader issues not in this measure, such as long-term funding for the Social Security retirement program and healthcare for the poor and elderly under Medicaid and Medicare.

House Speaker John Boehner has characterized the cuts in the bill to fund the the government from March 4 until Sept. 30 as a downpayment on deficit-reduction that will go further next fiscal year.

But Senate Appropriations Committee Chairman Daniel Inouye lashed out at the House bill, signaling he would kill it before it could reach President Barack Obama's desk.

"Many of the reductions proposed by the House were made not because programs were ineffective or wasteful, but out of desire to meet an arbitrary dollar figure cited during a political campaign," Inouye, a Democrat, said.

In coming weeks, Inouye's panel will produce its version of a spending bill for the rest of the fiscal year.

Inouye particularly scorned the House bill's cuts to nuclear weapon safeguards, transportation investments and environmental programs.

Nevertheless, conservative House Republicans were trying to make this year's cuts even deeper.

Most of those efforts were failing. But the House on Wednesday did go along with shifting some funds. For example, it voted to move $298 million back to local law enforcement programs by taking the money from the NASA space agency.

Similarly, $510 million was put back into local fire fighting programs with the funds to come out of Homeland Security research programs.

'DANGEROUS AND UNSTABLE WORLD'

Obama, in the fiscal 2012 budget proposal he sent to Congress on Monday, called for $78 billion in Pentagon savings over five years.

Defense Secretary Robert Gates warned Congress on Wednesday against pursuing even deeper spending cuts in next year's budget, saying "we still live in a very dangerous and often unstable world."

Congress also was admonished against cutting foreign aid in the drive to reduce budget deficits that have been hovering around $1.5 trillion annually.

Admiral Mike Mullen, chairman of the Joint Chiefs of Staff, told a congressional hearing that U.S. military aid to Egypt, which runs about $1.3 billion annually, has been of "incalculable value" in helping its armed forces become a capable, professional body that is dealing with the aftermath of the ouster of Egypt's long-time president, Hosni Mubarak.

Meanwhile, Senate Democrats embraced Obama's call for a five-year freeze on most domestic spending.

Top Senate Democrats were to meet with Obama at the White House later on Wednesday to discuss plans for job creation through "smart investments" in education, innovation and infrastructure, Senate Majority Leader Harry Reid said.

But Senate Republican leader Mitch McConnell had nothing but scorn for Democrats' budget initiatives.

"Americans are screaming at us to do something about a $14 trillion dollar debt, the president proposes a budget that nearly doubles it and Democrats clap their hands in approval," he said. (Additional reporting by Thomas Ferraro, Phil Stewart, Tom Doggett, Andrea Shalal-Esa, Donna Smith and Susan Cornwell; Editing by Vicki Allen and Cynthia Osterman)