Obama asks fellow Democrats to back budget plans

By Jeremy Pelofsky and Richard Cowan

WASHINGTON (Reuters) - President Barack Obama lobbied fellow Democrats on Wednesday to support major initiatives in his $3.55 trillion budget proposal and the White House played down differences as lawmakers sought to trim the plan to reduce long-term deficits.

"It went great," a smiling Obama told reporters after meeting with Democrats, who control Congress, for nearly an hour on Capitol Hill. Doubts have been rising among some Democrats over Obama's huge spending plan for fiscal 2010, which begins on October 1.

The meeting was aimed at bolstering support for budget priorities that would set national policy for the next five years. On Tuesday, Obama called the budget "inseparable" from his broader effort to pull the U.S. economy out of recession as the financial crisis continues to bite.

While any budget Congress passes would be nonbinding, it sets the funding parameters for such Obama initiatives as alternative energy development, the expansion of healthcare and how to control the size of budget deficits.

That, in turn, has an impact on everything from bond rates and the value of the dollar traded on Wall Street.

The budget also outlines tax policy, as Democrats are moving to maintain middle-class tax cuts established by former President George W. Bush while letting some of his tax cuts for the rich expire. Democrats rejected a request by Obama to make permanent a $400 tax break for individuals and $800 for working couples that passed in the stimulus plan last month but expires in 2010.

'TIDAL WAVE OF SPENDING'

Republicans have criticized Obama's budget for too much spending and large tax increases on the wealthy and some small businesses. They pointed to the nonpartisan Congressional Budget Office's analysis that showed the president's budget would balloon the deficit by $9.3 trillion over the next decade.

The House Budget Committee Democrats outlined a $3.45 trillion budget for fiscal 2010 -- slightly below Obama's proposed $3.55 trillion plan.

"Instead of simply righting the ship, this budget steers it in a radically different direction -- straight into the tidal wave of spending and debt that already is building," said Representative Paul Ryan, the House Budget Committee's top Republican.

House Republicans offered several amendments aimed at freezing domestic spending except for defense, preventing the expiration of tax cuts and expanding oil and gas exploration. They all failed on party-line votes.

They were particularly incensed the House budget plan included instructions for Congress to address healthcare reform and education, which would allow Democrats to put such legislation on a fast-track path to pass.

Senate Budget Committee Chairman Kent Conrad left the meeting with Obama proclaiming to reporters that the budget he will usher through the Senate "preserves the president's key priorities." Conrad said those included expanded spending on education, developing alternative energy and bringing healthcare reform, all the while cutting annual deficits way down from the astonishing $1.8 trillion expected this year.

But the House and Senate proposals leave to other committees the difficult task of crafting those initiatives without adding to deficits.

Despite the fact that Conrad's budget plan would reduce the cost of Obama's proposals by $600 billion over five years, Conrad said Obama made "no complaints to me" about the direction he was going.