Obama pushes Senate Democrats on stimulus, bailout

By Richard Cowan

WASHINGTON (Reuters) - President-elect Barack Obama huddled with his fellow Democrats in the U.S. Senate on Tuesday, trying to build support for upcoming votes on economic stimulus legislation and releasing $350 billion in unspent Wall Street bailout funds.

Obama's visit came exactly one week before he returns to Capitol Hill, where he will be sworn in as the 44th president on Jan 20. His success or failure on these two massive initiatives will set the tone for his presidency as he moves into the White House.

More than $1 trillion in government money is in play with the two measures -- one that would provide around $775 billion to jolt the U.S. economy out of its recession and another allowing the Treasury Department to spend the second half of the $700 billion in Wall Street bailout funds Congress provided in October.

Following an hour-long meeting with Obama, Senate Majority Leader Harry Reid, a Nevada Democrat, predicted he would be able to round up enough votes to free up the bailout funds despite bipartisan concerns about how the money is spent.

"I think we will get the necessary votes," Reid told reporters. That seemed likely as Senate Minority Leader Mitch McConnell of Kentucky said despite reservations among his fellow Republicans, some would vote to release the money.

But earlier in the day, senior Democratic and Republican senators were predicting a tough fight leading up to the vote that could come by week's end. Many senators are demanding more information on how the first $350 billion was spent. They also want more conditions on the next batch, along with more transparency on the spending.

BETTER ACCOUNTING

Sen. Carl Levin, a Michigan Democrat, left the meeting with Obama saying the president-elect promised a better accounting of how the money will be spent and limits to keep it from being used to pad executive salaries or pay out stock dividends.

Sen. Joseph Lieberman, a Connecticut independent who actively backed Republican Sen. John McCain of Arizona for president instead of Obama, said the incoming president made a strong case "and he answered every element of frustration that senators have about how" the first $350 billion in bailout money for financial institutions and automakers was used.

Besides the fight over bailout money, the Senate and House of Representatives are hoping to present Obama with an economic stimulus bill by mid-February that would give workers new tax breaks, fund billions of dollars in construction projects and help states -- all with an eye toward creating or maintaining 3 million jobs.

Sen. Charles Schumer, a New York Democrat, said he expected the price of the bill to be in the range of $750 billion to $850 billion, with about $300 billion of that in tax breaks.

During their meeting, some senators lobbied Obama for including tax credits to encourage renewable energy projects, while Schumer said he is pushing a college tuition tax credit.

An Obama initiative giving businesses tax breaks for hiring new employees is "on its way out" of the legislation, Schumer said. While the idea was aimed at luring Republican support for the bill, many Democrats criticized it, saying the tax break was not likely to achieve its job-creating goal.

(Additional reporting by Jeremy Pelofsky, Thomas Ferraro, Susan Cornwell, Patrick Rucker and Donna Smith; editing by Mohammad Zargham)