WASHINGTON U.S. President Barack Obama sought to rally support for his emerging economic rescue package on Saturday, as he stood by his latest cabinet nominee to run into tax problems that could impede confirmation.
Obama, in his second weekly radio address since taking office, pledged to help lower Americans' mortgage costs under a new plan to be unveiled soon to help revive the financial system and "get credit flowing again."
But even as he moved to confront the economic crisis, Obama was facing a new political distraction -- the disclosure that Tom Daschle, picked to spearhead U.S. health care reform, failed to pay more than $128,000 in taxes.
It was the latest glitch in Obama's effort to complete his cabinet and focus on top priorities, including a mid-February target for Congress to pass an economic stimulus bill with more than $800 billion in tax cuts and spending.
Treasury Secretary Timothy Geithner's nomination was held up earlier by criticism over late payment of $34,000 in taxes.
The White House said Obama expected Daschle, a former Senate Democratic majority leader and one of his key early supporters, to be confirmed by the Senate as secretary of Health and Human Services.
"The president has confidence that Senator Daschle is the right person to lead the fight for health care reform," Obama's press secretary, Robert Gibbs, said when the news broke. The White House reiterated that position on Saturday.
Obama has made accountability a key thrust of his approach since his election on a platform vowing sweeping change in the way Washington operates.
Daschle recently filed amended tax returns to pay back taxes, interest and penalties involving unreported consulting income, charitable contributions and use of a car service provided by a prominent businessman and Democratic donor.
Republicans could use Daschle's tax troubles to try to slow his confirmation, given that filling the job to reform health care is not considered as urgent as was getting a new Treasury chief in place to lead economic policymaking.
With the recession and financial crisis topping his agenda, Obama urged the Senate to approve the stimulus bill that the House of Representatives passed this week.
But as conditions worsen, the president said new strategies were in the works.
"Soon my treasury secretary, Tim Geithner, will announce a new strategy for reviving our financial system that gets credit flowing to businesses and families," Obama said.
"We'll help lower mortgage costs and extend loans to small businesses so they can create jobs."
Obama did not give specifics about the plan but said he would work with both parties to ensure a strong stimulus bill.
Republicans say they oppose the package largely because of spending priorities. Senate Republican leader Mitch McConnell said the bill passed along party lines in the Democratic-led House "looks more like a $1 trillion Christmas list."
Obama might be able to soften that resistance if he adds Republican Senator Judd Gregg to his cabinet as commerce secretary.
Gregg, a fiscal conservative from New Hampshire, emerged on Saturday as the top candidate, with an administration official saying a decision could come as early as Monday.
New Hampshire's Democratic governor, John Lynch, could then name a Democrat to replace Gregg, giving the 60 seats needed in the 100-seat Senate to overcome Republican procedural hurdles and allow Obama a clearer path for key legislation.
Daschle's tax woes are expected to cast a shadow next week. A Senate Finance Committee meeting has been called for Monday to discuss pending nominations, an aide said.
Senator Charles Grassley of Iowa, ranking Republican on the committee, wants committee members to weigh "all the facts of a nominee's record," a spokeswoman said.
"Some members might get tired of what they see as a pattern" among Obama's nominees a congressional aide said.
But Senator John Kerry, a Democrat on the Finance Committee, said Daschle had taken "all necessary steps to correct his innocent error" and called for his "speedy confirmation."
(Editing by John O'Callaghan)