President Barack Obama is seeking to revive a version of theso-called grand bargain with congressional Republicans that wouldcombine long-term U.S. deficit reduction through entitlementbenefit cuts and tax increases with immediate steps to boost jobgrowth.

Obama plans to press Congress for billions of dollars in freshspending to reduce unemployment as he also pursues a compromise onlong-term deficit cuts. He will begin by laying out his ideas in aspeech shortly after the U.S. Labor Day holiday, which is Sept.5.

With the U.S. unemployment rate at 9.1 percent and economicgrowth slowing, Obama's aides are working on a mix of tax cuts andinfrastructure spending beyond the measures he has been promotingover the last several weeks, an administration official said,speaking on condition of anonymity because details for the speechhaven't been completed.

Separately, Obama will present to a special 12-membercongressional committee charged with coming up with at least $1.5trillion in deficit reduction his own proposal for making deepercuts in the nation's debt. It will include raising governmentrevenue as well as cutting entitlement programs such as SocialSecurity and Medicare, along the lines of the scuttled deal hetried to strike with House Speaker John Boehner in July.

“I don't think it's good enough for us to just do it part way,”Obama said yesterday at a town hall event in Atkinson, Illinois.“If we're going to do it, let's go ahead and fix it. And if we'regoing to fix it, the only way I believe to do it in a sensible wayis you've got to have everything on the table.”

Slowing Growth
The administration isseeking a larger long-term deficit deal to make room for short-termspending aimed at boosting the economy at a time when growth hasslowed and consumer confidence is lagging.

Morgan Stanley & Co. yesterday lowered its forecast foreconomic growth next year to 2.25 percent from 3 percent, citingdeclines in business and consumer confidence.

The benchmark Standard & Poor's 500 Index rose 0.1 percentyesterday to close at 1,193.89. The index had rallied 7.5 percentover the three days through Aug. 15 amid a decline in joblessclaims, an increase in retail sales and better-than- estimatedprofits. The S&P 500 is still down 12 percent from April 29 onconcern about Europe and an economic slowdown.

“More stimulus would benefit the economy, and that would surelybe a good thing,” said Paul Dales, senior U.S. economic adviser forCapital Economics Ltd. in Toronto. The impact “would depend on thesize of the overall measures as well as what they are and when theytake place.”

Getting Through Congress
“The great issueis whether any such proposals would get through Congress,” hesaid.

Republican congressional leaders are already lining up inopposition to more federal spending.

“The American people understand that Washington can't keepspending money it doesn't have,” Boehner, an Ohio Republican, andMajority Leader Eric Cantor of Virginia wrote in an opinion articlepublished in USA Today. “They want to see less government — notmore taxes.”

Senate Republican leader Mitch McConnell of Kentucky said in astatement yesterday that Obama has “finally” reached the conclusionthat reducing the deficit will help the economy.

“But continuing the spending spree on failed stimulus programswon't shrink the deficit,” he said.

Obama said the country doesn't have to choose between deficitreduction and measures to stimulate the economy and createjobs.

'We can do both in a sensible way,” he said.

Grand Bargain
Steps to spur jobs and raiserevenue were part of the discussion on a deal for deficit reductionand raising the debt ceiling between the White House andRepublicans before talks broke down in July.

In an interview yesterday with CBS News, Obama said that hewished Boehner “had taken me up on a grand bargain to deal with ourlong-term debt and deficit.”

“I will be putting forward a plan that will be similar to theplan I put forward to the speaker,” Obama said in the interviewbroadcast last night.

To offset the cost of the new initiatives, Obama will seekadditional long-term deficit reduction.

The administration wants “aggressive” steps on the deficit“because it helps you pay for the kinds of things you need to do inthe near term to grow the economy and create jobs,” White Housepress secretary Jay Carney said on MSNBC's “The Daily Rundown”program yesterday, without giving specifics.

Bus Tour
Obama yesterday wrapped up athree-day bus tour through Minnesota, Iowa and Illinois and isscheduled to leave for a 10- day vacation at Martha's Vineyard,Massachusetts, later today.

The president used his trip through the Midwest to repeatedlycall on voters to pressure Congress to embrace measures that couldimprove the economy. At a forum on the rural economy in Peosta,Iowa, on Aug. 15, he questioned “the refusal of a faction ofCongress to put country ahead of party” and the “politics of theshort term.”

“I need you to send a message,” Obama said yesterday inIllinois. “I need you to send a message to folks in Washington:Stop drawing lines in the sand, stop engaging in rhetoric insteadof actually getting things done.”

He also sought to counter Republican opposition to raising taxesfor the wealthiest Americans, citing a New York Times opinionarticle written by billionaire Warren Buffett. The BerkshireHathaway Inc. chairman and chief executive wrote that the nation'srichest individuals have been “coddled” and that he paid a smallerpercentage of his taxable income to the government than anyone elsein his office.

Tax Rates
“These days, the richer you are,the lower your tax rate,” Obama said. “That can't be something thatis defensible regardless of party.”

Adding to the political hurdles in front of any administrationproposals, voters are skeptical of both Obama and Congress. Obama'sjob approval rating was 40 percent in a Gallup daily tracking polltaken Aug. 14-16 and it hit 39 percent the day before, the lowestsince he took office. Congressional approval was at 13 percent,tying an all-time low, in a Gallup Aug. 11-14 poll.

That was the sentiment of Jerry Smith, a dairy farmer and aregistered Republican who was among the crowd that got a surprisevisit from Obama yesterday at the Whiteside County Fair inMorrison, Illinois.

“It's a big mess,” he said. “You can blame it on everybody.”

Bloomberg News

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