Obama wants deficit legislation this year

WASHINGTON (Reuters) - President Barack Obama's upcoming proposals to cut the U.S. deficit could produce "real" legislation and tangible results before the 2012 presidential election, the White House said on Monday.

Obama will offer a long-term plan for deficit reduction on Wednesday afternoon, less than a week after sealing a deal with Republicans in Congress to cut some $38 billion in spending during the current fiscal year.

Congress and the White House are now shifting to bigger battles over the budget for the 2012 fiscal year, which starts October 1, and raising the $14.3 trillion limit on government borrowing authority.

Those conflicts are likely to dominate the political agenda for the coming months and echo into Obama's 2012 re-election race, overshadowing Friday's 11th-hour budget deal.

Since last year's congressional elections handed control of the House of Representatives to Republicans, the White House has signaled it would not try to push through major legislative proposals in the second two years of Obama's term.

That may change with the deficit issue.

Republicans charge that the president, a Democrat, has not shown leadership in reducing the deficit. They put forward a proposal last week to tackle the problem, but the White House panned it as unworkable.

White House spokesman Jay Carney said Obama's own proposal could be turned into legislation ahead of next year's sure-to-be heated presidential campaign.

"He very much believes that this can produce real legislation, tangible results," Carney told reporters. "I'm not saying it's going to happen, I'm saying that he very much believes it can and should happen."

Republicans, whose election gains last year came largely on the back of pledges to cut spending and rein in government, are skeptical of Obama's sincerity.

"For the last two months we've had to bring this president kicking and screaming to the table to cut spending," said Representative Eric Cantor, the No. 2 Republican in the House, on Fox News. "In my opinion, it's really hard to believe what this White House and the president is saying."

MORE FIGHTS TO COME

Senior White House adviser David Plouffe said Obama's plan will explore savings in defense spending and the government-run Medicare and Medicaid health programs for the elderly and poor in an effort to reduce the $1.4 trillion annual deficit.

The plan also will revisit the issue of tax increases for the wealthy and spell out specific deficit-reduction targets and a timeline, he said.

"He's going to be clear about the type of deficit reduction we need in terms of dollar amounts, over what period of years," Plouffe told CNN on Sunday.

The unveiling of Obama's plan follows a deal on spending cuts for the rest of this fiscal year struck with barely an hour to spare before Friday's midnight deadline. It stopped a shutdown the White House feared would hinder the economic recovery and idle more than 800,000 federal workers.

The Senate and House are expected to approve that agreement this week, although lawmakers on both sides of the political aisle have criticized it.

Fiscal conservatives aligned with the Tea Party movement pressured Republican House Speaker John Boehner for even deeper cuts, while liberal Democrats fear the cuts will hurt social programs for Americans dealing with the lingering effects of a recession.

Later in the week, the House takes up the Republican 2012 budget plan proposed by Representative Paul Ryan, head of the House Budget Committee. His plan would save $6 trillion over the next decade partly by cutting Medicare and Medicaid.

"The president is not going to support a lot of what's in that plan," Plouffe said on NBC. "It may pass the House. It's not going to become law."

Republicans and Democrats also expect another tough political fight in the next few months over raising the debt ceiling.

Administration officials warn a failure to raise the debt limit could put the United States into a debt default that would risk global economic havoc, but Republicans said it must be accompanied by budget reforms or spending caps.

(Additional reporting by Susan Cornwell, Alister Bull, Caren Bohan and Dave Clarke; Editing by Eric Beech)