WASHINGTON- Gloomy budget forecasts will shadow President Barack Obama as he takes his economic message on the road on Tuesday, seeking to reassure Americans he has a plan to tackle high unemployment and surging debt levels.

Obama will propose using $30 billion in funds from the TARP bank bailout scheme for use as a small business lending fund to spur job growth in a critical sector of the U.S. economy.

I think we should make it easier for them to open their doors, expand their operations, and hire more workers, he will say, according to speech excerpts released by the White House.

Obama will outline the plan during his visit to Nashua, New Hampshire, for an event that will feature a town hall question and answer session.

The trip comes as Obama seeks to rebound from political setbacks and a drop in his popularity among middle-class voters anxious over the economy and wary of parts of his agenda, such as the push for a healthcare overhaul.

New Hampshire, a northeastern state known for fiscal conservatism, is next to Massachusetts, where a Republican handed Obama's Democrats an embarrassing defeat last month in a pivotal Senate race.

On Monday, Obama sent Congress a $3.8 trillion budget for the 2011 fiscal year that begins on October 1. The document painted a bleak fiscal picture, prompting Republicans to accuse Obama of pursuing big-spending, fiscally reckless policies.

The White House counters that Obama inherited enormous deficits and a deep recession from the Bush administration and had to try to revive the economy with a large stimulus package when he took office in January 2009.

The budget forecasts a record $1.6 trillion deficit for the 2010 fiscal year. The shortfall is expected to ease slightly to a still-high $1.3 trillion in 2011 and Obama has set a goal of halving it by the end of 2012, when he faces re-election.


With U.S. unemployment stuck at a nearly 26-year high of 10 percent, Obama has made jobs growth his most pressing near-term priority.

Obama is seeking $100 billion in the current 2010 fiscal year for a package of business tax credits and other steps aimed at creating jobs and giving a boost to struggling middle-class families.

His proposal to use $30 billion from the unpopular TARP bank bailout fund is aimed at rapidly increasing lending to credit-worthy small businesses.

Senior Obama administration officials, briefing reporters, said the program would be limited to smaller or community banks, those with $10 billion in assets or less. Banks would be able to take capital at attractive terms that would become better as they increase small business lending.

These are the small, local banks that work most closely with our small businesses -- that provide them their first loan, and watch them grow through good times and bad, Obama will say.

The more loans these banks provide to credit-worthy small businesses, the better a deal we'll give them on capital from this fund.

Obama is also giving new emphasis to a promise to put the United States on a firmer fiscal footing in the longer term as he seeks to cast off the big spender label Republicans have tried to pin on him.

He proposed a three-year freeze on some domestic spending and said he would establish a bipartisan commission to come up with recommendations for tackling the long-term debt problem.

Part of Obama's job will be to try to sell the budget to the public and the Democratic-led Congress, where ideas such as a spending freeze are likely to meet some resistance.

But budget analyst Stan Collender, a former congressional aide now with Qorvis Communications, said Obama struck the right balance in his budget by putting the top focus on jobs.

The president was faced with a choice between paying attention to the deficit and paying attention to jobs and he chose jobs, Collender said.

Consumers aren't spending a whole lot yet. Businesses still aren't spending a whole lot. So under those circumstances, there's only one arrow left in the quiver and that's fiscal policy.

(Additional reporting by Steve Holland; Editing by John O'Callaghan)