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Obama to set big goals in first budget

WASHINGTON (Reuters) - President Barack Obama’s budget this week will set out big goals: to rescue the economy from freefall, expand U.S. health care coverage and move within a few years to slash huge deficits.

The budget, due out on Thursday, will indicate Obama’s timeline for achieving many of the domestic priorities he pushed during the campaign.

Sources familiar with the administration’s thinking have said the blueprint will reflect Obama’s interest in moving forward on a pledge to expand health care coverage to the 46 million Americans who lack it.

Health care will be an important theme all week, including in Obama’s address to a joint session of Congress on Tuesday night in which he will sketch out his major domestic and foreign policy goals.

Steps to tackle global climate change could also be incorporated in the budget for the 2010 fiscal year that begins on October 1.

At the same time, it will show the impact on the budget deficit of the recently passed $787 billion economic recovery package, the largest fiscal stimulus in history.

The stimulus is the centerpiece of initiatives Obama has put forth to jolt the economy out of a year-long recession.

While acknowledging the stimulus added massively to the government’s red ink, Obama will promise budgetary discipline in the future, a theme he will highlight at a bipartisan “Fiscal Responsibility Summit” at the White House on Monday.

‘STICKER SHOCK’

As he rolls out the budget, one of Obama’s challenges will be to overcome skepticism about what he can achieve. Many doubt there is political will to tackle bold initiatives like health care reform while Washington grapples with the more immediate problems of the recession and the financial meltdown.

“All of these goals are extremely challenging,” said William Galston, a former domestic policy adviser to President Bill Clinton. “Universal health coverage and a major assault on climate change would have been a tough sell in best of times, but these are the worst of times.”

There is already “sticker shock” at the cost of the stimulus and the $700 billion financial bailout. Galston, a professor at the University of Maryland, said “members of Congress are going to be more reluctant than they would have been otherwise to go along with big-ticket spending items.”

An administration official said Obama’s budget would show a reduction in the deficit to $533 billion by 2013.

Private economists project that the deficit will swell to $1.5 trillion or higher in the 2009 fiscal year that ends September 30. That would be more than triple the $455 billion deficit recorded in 2008.

Obama inherited a more than $1 trillion deficit from President George W. Bush but that number will increase as a result of the two-year stimulus package.

Officials said that Obama would reduce the deficit in future years through increases in taxes on wealthier Americans and spending cuts.

His budget projects that the drawdown of U.S. troops from Iraq will yield savings, though it is unclear how much of that might be offset by a buildup of troops in Afghanistan.

To lay the groundwork for the legislative efforts ahead, Obama, a Democrat, is continuing to try to reach out to opposition Republicans.

Despite an effort to court Republican support for the stimulus package, it got the backing of just three Republican senators and no members of the House of Representatives from the opposing party.

Obama has invited lawmakers of both parties, business people, union leaders and economists to Monday’s fiscal summit to discuss long-term issues such as health care, entitlement programs and federal contracting in areas like defense.

Prominent Republicans including House of Representatives Minority Leader John Boehner and Arizona Sen. John McCain, Obama’s rival in last year’s presidential campaign, have said through their aides that they will attend.

Boehner and other Republicans have offered scathing criticisms of the stimulus bill, labeling the spending proposals wasteful and warning that it would bloat the debt.

A Boehner aide said the Ohio Republican is attending to the fiscal summit to see how “the administration plans on tackling our skyrocketing debt.”

Douglas Holtz-Eakin, a former director of the Congressional Budget Office and an adviser to McCain during last year’s campaign, also will attend the summit.

While critical of the stimulus, Holtz-Eakin said he is eager to hear what the administration says about health care reform, an area where he said there is some potential for common ground between Republicans and Democrats.

“There’s common ground on some of the reforms to the practice of medicine,” he said. But Holtz-Eakin added, “There’s a huge difference in what has been said on the approach to enhancing coverage, insurance reform and things like that.”

Additional reporting by Thomas Ferraro, Editing by Jackie Frank

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