* White House playing down deficit problem
* Less willing to agree to more cuts
* May reassure Democrats heading into fall fights
By Caren Bohan
WASHINGTON, July 31 (Reuters) - President Barack Obama will seek to rally Democrats behind an aggressive approach to the fall budget showdowns with Republicans, as he makes a rare visit to Capitol Hill on Wednesday.
If his speeches over the past week are any indication, Obama will urge Democrats to take a hard line against Republican attempts to make further cuts in the federal budget, arguing that they’ve cut enough already and that it’s time to shift the focus to spending that will benefit America’s middle class.
His comments may reassure Democrats in Congress, some of whom have been critical of concessions Obama has offered in past confrontations with Republicans, including entertaining a cut in cost-of-living increases for beneficiaries of the Social Security retirement program.
Obama’s meeting with his Democratic allies comes as he and congressional Republicans gear up for two deadlines.
By Oct. 1, they must agree on a stopgap measure to fund the government or face a shutdown. In a fight that has the potential to rattle financial markets, Congress must also raise the legal limit later in the fall on the country’s borrowing authority or risk a debt default.
The meeting with Democrats, which takes place just before Congress begins a five-week summer recess, will cover a range of issues, including the budget, the economy, immigration reform and the implementation of Obama’s signature healthcare law, known as Obamacare.
But Democrats said they are expecting the budget to be a top issue.
In showdowns over spending in 2011 and 2012, Obama tended to agree at least rhetorically with Republicans on the need to rein in deficits and spoke of negotiating “balanced” plans to achieve reductions.
Neither Obama nor top members of his administration have used similar language in the run-up to the confrontations expected this fall.
In television interviews on Sunday, Treasury Secretary Jack Lew noted that with the deficit reduced “very substantially” in recent months due to higher tax revenues and lower spending, “we’re not in the same place” anymore.
Democrats are increasingly worried about the impact on the economy of automatic across-the-board budget cuts - known as the “sequester” - that were triggered in March after the White House and Congress failed to agree on more targeted budget cuts.
Both Obama and congressional Republicans came away politically tarnished from a 2011 showdown over the debt limit and another budget fight at the end of 2012 that ultimately led to the sequester.
Democrats say Obama is determined this time to get the upper hand in the upcoming budget battle and is prepared to take a tough line.
Obama is refusing to negotiate with Republicans over the debt-limit increase. In the fight over government spending, he has cast himself as a champion of the middle class, arguing that his proposal for spending on infrastructure and other government programs will help create jobs.
Neera Tanden, president of the Center for American Progress and a former domestic policy adviser to Obama, said after the drawn-out talks in 2011 that resulted in a credit downgrade for the United States, the White House believes such negotiations are counterproductive.
“They’re approaching it differently from the first debt-limit negotiation,” Tanden said. “They’ve learned from that experience that the surefire way to hurt economic growth is to have the entire country in the grips of some ‘will they?’ or ‘won’t they?’ That should be avoided at all costs.”
In the fight over a stop-gap spending measure for the new fiscal year that begins Oct. 1, Democrats say Obama may be more willing than in prior budget battles to allow a government shutdown if Republicans don’t give ground on spending levels.
“I think it should be under serious consideration,” said David Kamin, a former special assistant to Obama on economic policy who is now on the faculty of New York University School of Law. “I think it makes sense to try to set up an aggressive stance going into the next few months.”
Kamin and Tanden both said a tough line is also warranted because of the need to pressure Republicans over the sequester.
Democrats believe that Republicans would likely bear the brunt of the blame if there were to be a government shutdown. Republicans are already bickering in public over whether to demand a delay or defunding of Obamacare as part of their strategy in the fall, and a show of Democratic unity would give Obama’s party a strategic advantage.
Dick Durbin, the No. 2 Democrat in the Senate, said there was a risk of a government shutdown but said he thought it could be avoided.
“Republicans have come to the realization that this is a killer for them,” Durbin said. “If they are seen playing games, shutting down our economy or our government, it’s disastrous for them politically.”