House panel approves $3.45 trillion budget

By Richard Cowan and Jeremy Pelofsky

WASHINGTON (Reuters) - A key congressional committee on Wednesday approved a $3.45 trillion budget framework for next year that embraces many of President Barack Obama's priorities but spends slightly less than he sought.

After a long debate that went well into the night, the House of Representatives Budget Committee approved the blueprint along party lines 24-15 in response to the $3.55 trillion plan Obama submitted last month.

While Obama did not get everything he wanted, Democrats who control the committee included most of his priorities, including significant new investments in education and reforming the $2.5 trillion healthcare system to cover millions of uninsured Americans.

Obama, speaking at an evening Democratic Party fund-raiser, challenged his opponents to present alternatives instead of just criticizing.

"To a bunch of the critics out there, I've already said, 'Show me your budget!' I'm happy to have that debate." The Democratic president argues the investments he seeks, while expensive, will help pull the economy out of recession.

The House budget measure, which Republicans opposed because of its price tag and tax hikes on the rich and some small businesses, also endorses the development of alternative renewable energy. But like the healthcare provision, other committees in Congress would have to work out the details and find a way to pay for those plans.

"The president's major initiatives -- those in health care, energy, education, and the environment -- are all implemented," said committee chairman Representative John Spratt. He called it a "bold beginning."

The panel cleared the budget several hours after Obama visited Capitol Hill to personally lobby for his proposals.

"Instead of simply righting the ship, this budget steers it in a radically different direction -- straight into the tidal wave of spending and debt that already is building," said Representative Paul Ryan, the committee's top Republican.

The nonpartisan Congressional Budget Office last week estimated that Obama's budget would balloon the deficit by $9.3 trillion over the next decade.

Next up is the Senate Budget Committee, which on Thursday will try to pass its own five-year blueprint and attempt to make more progress toward shrinking deficits that have hit $1.8 trillion this year alone.

If all goes according to Democrats' plans, the full House and Senate will pass their budgets next week, with or without Republican support, and work out a final compromise sometime next month.

Both chambers are trying to slice some of Obama's proposed spending because of public nervousness over the size of the projected deficits and in the face of Republican attacks.

Among items deleted by the House panel were Obama's request for $250 billion in case additional money is needed to bail out banks and other financial firms. A new $400 tax cut for workers would vanish after next year unless Congress finds a way to pay for it.

Committee Democrats said their proposal would cut the deficit to $586 billion in 2013, an attempt to reach Obama's pledge to cut the budget deficit in half. But it would grow again to almost $600 billion in 2014.

The plan sought by Senate Democrats would see the deficit drop to $570 billion in 2013 and down to $508 billion in 2014.

During the 12-hour debate, Republican amendments to freeze domestic spending except for defense, prevent tax cuts from expiring and expand oil and gas exploration failed on party-line votes.

(Editing by Alan Elsner)