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* Obama needs breakthrough success on healthcare bill
* Democrats remember fallout from ‘94 failure
* Obama slipping in polls as economy still falters
By John Whitesides
WASHINGTON, July 12 (Reuters) - For President Barack Obama, failure on healthcare is not an option.
With the economy struggling and his poll numbers dipping, the president who made "change" his campaign mantra cannot afford to come up empty on his top legislative priority — a long-sought overhaul of the costly and complex U.S. healthcare system.
The gathering debate in the Democratic-controlled Congress will be the biggest test yet of Obama’s ability to work with lawmakers and deliver on promises. Failure would spark new doubts about a president still seeking a signature accomplishment.
"The guy made big promises and said, ‘Yes, we can,’ but the question still is, ‘Can he?’" Democratic consultant Doug Schoen said. "Failure begats failure, and failure here would raise questions about his ability to lead on a lot of issues."
He takes his effort to win public backing for his plan to a town hall meeting in Warren, Michigan, on Tuesday, a state where closed factories and the highest unemployment rate in the country have left many without private health insurance and struggling to pay healthcare bills.
Analysts said the dire consequences for Obama and his fellow Democrats of not passing a healthcare measure make it very likely a bill will be passed in some form, even as the political battle heats up over its cost and scope.
Obama and his administration have jacked up expectations with optimistic proclamations "the stars are aligned" for reform, and congressional leaders have been working for months to fashion a proposal.
"The Democratic leadership and the president cannot end all this fervor without having some sort of healthcare reform bill," said Bob Blendon, a health policy and political analysis professor at Harvard University.
"The bill could be more modest than some of the things being discussed but there has to be a bill because the Democratic Party would pay a huge price if there isn’t. They learned that lesson in 1994," Blendon said.
That year’s collapse of the healthcare reform effort, led by then-first lady Hillary Clinton, is still fresh in the minds of many Democrats, who lost control in both chambers of Congress later that year in a Newt Gingrich-led Republican landslide.
All 435 members of the House of Representatives and one-third of the 100 senators are up for re-election next year.
‘FIRST GINGRICH, NOW LIMBAUGH’
"The last time they failed on healthcare they got Gingrich," said Len Nichols, director of the Health Policy program at the New America Foundation.
"This time if they fail they might get Limbaugh," he said in a reference to influential conservative radio host Rush Limbaugh, a harsh Obama critic. "So they are highly motivated."
Obama wants lawmakers to curb costs and expand health insurance coverage to many of the 46 million uninsured Americans. In a shift of strategy from the Clinton effort, however, he left it to Congress to put the bill together.
But keeping Democrats happy while attracting Republicans has proven a difficult balancing act. Congressional leaders have struggled to trim costs and find ways to cover its estimated price tag of at least $1 trillion.
Republicans object to plans for a government-run healthcare option that would compete with private insurers, fearing its impact on the insurance industry and the employer-based insurance model used by most Americans.
Obama aides have signaled they would be willing to reduce or change the public plan to win support from at least a few Republicans, drawing criticism from liberal Democrats.
A group of fiscally conservative Democrats, meanwhile, objected to the House bill on Thursday because it did not have enough cost savings. They said it should be revamped before they can support it, creating the latest in a series of challenges.
"There are going to be some tough negotiations in the days and weeks to come but I’m confident that we’re going to get it done," Obama said while traveling in Italy on Friday.
The healthcare debate comes at a critical juncture for Obama, who faces growing criticism that his economic prescriptions are failing.
He managed early victories in Congress on a $787 billion economic stimulus package, a financial rescue package and bailouts for endangered firms and industries, but his approval ratings have slipped in recent polls as unemployment rises and the economy continues to stumble.
The latest Gallup poll put Obama’s approval rating at a still-high 57 percent, down from 64 percent in early June. In other polls, it ranges from the mid-50s to mid-60s.
"The Obama administration is desperate for accomplishments on the big issues," said Schoen, the White House pollster under former President Bill Clinton.
"The reason he is trying to do as much as he can as quickly as he can is he knows his approval rating is a depreciating asset. As soon as that goes below 50 percent he is in trouble." (Reporting by John Whitesides; editing by Bill Trott)