Obama Stands By Daschle Pick Despite Tax Problem

U.S. President Barack Obama sought Saturday to rally support for his emerging economic rescue package, as he stood by his latest cabinet nominee to run into tax problems that could impede Senate confirmation.

CNBC.com President Barack Obama

Obama, in his second weekly radio address since taking office, pledged to help lower Americans' mortgage costs under a new plan he said would be unveiled soon and would help revive the financial system and "get credit flowing again."

And most Republican governors have broken with their GOP colleagues in Congress and are pushing for passage of President Barack Obama's economic aid plan that would send billions to states for education, public works and health care.

Their state treasuries drained by the financial crisis, governors would welcome the money from Capitol Hill, where GOP lawmakers are more skeptical of Obama's spending priorities.

The 2008 GOP vice presidential nominee, Alaska Gov. Sarah Palin, scheduled meetings in Washington this weekend with Senate Republican leader Mitch McConnell of Kentucky and other senators to press for her state's share of the package.

Florida Gov. Charlie Crist worked the phones last week with members of his state's congressional delegation, including House Republicans. Vermont Gov. Jim Douglas, the Republican vice chairman of the National Governors Association, planned to be in Washington on Monday to urge the Senate to approve the plan.

But even as Obama moved to confront the mounting economic crisis, he was facing a new political distraction—the disclosure that Tom Daschle, picked to spearhead U.S. health care reform, failed to pay more than $128,000 in taxes.

It was the latest glitch in Obama's effort to complete his cabinet and focus on his administration's top priorities. Treasury Secretary Timothy Geithner's nomination was held up earlier by criticism over late payment of $34,000 in taxes.

The White House said Obama still expected Daschle, a former Senate Democratic majority leader and one of his key early supporters, to be confirmed as secretary of Health and Human Services.

"The president has confidence that Senator Daschle is the right person to lead the fight for health care reform," Obama's press secretary, Robert Gibbs, said when the news broke.

The White House reiterated that position on Saturday. A Senate Finance Committee meeting has been called for Monday to discuss pending nominations, an aide said.

CNBC.com Tom Daschle

Daschle recently filed amended tax returns to pay back taxes, interest and penalties involving unreported consulting income, charitable contributions and use of a car service provided by a prominent businessman and Democratic donor.

Republicans grudgingly acknowledged that any serious damage to Daschle's chances for confirmation in the Democratic-controlled Senate are unlikely given that Timothy Geithner's nomination for treasury secretary, held up after it was revealed that he had failed to pay more than $34,000 in taxes, eventually was confirmed by a 60-34 vote.

The White House insisted Daschle would move forward in his new role. Jim Manley, a spokesman for Senate Majority Leader Harry Reid, D-Nev., also predicted Daschle would be confirmed.

Obama has made accountability a key thrust of his administration's approach since his election on a platform vowing sweeping change in the way Washington operates.

Economic Stimulus

With fighting the country's economic and financial crisis the top priority of his young administration, Obama called on the Senate to approve an economic stimulus bill that the House of Representatives passed this week.

But as economic conditions get worse the president said new strategies were coming to address the country's ills. "Soon my Treasury secretary, Tim Geithner, will announce a new strategy for reviving our financial system that gets credit flowing to businesses and families," Obama said. "We'll help lower mortgage costs and extend loans to small businesses so they can create jobs."

Obama did not offer specifics about the plan but said he would work with both parties to ensure a strong stimulus bill made it to his desk.

He has set a mid-February target for passing the more than $800 billion in tax cuts and spending. Republicans say they oppose the president's stimulus package largely because of its spending priorities.

Senate Republican leader Mitch McConnell said in his party's weekly radio address that the bill the Democratic-led House passed last week along party lines "looks more like a $1 trillion Christmas list." Obama also said his plan would ensure corporate executives do not siphon away tax dollars to fund big bonuses, as he again expressed outrage at big Wall Street pay-outs in 2008.

• 'Bad Bank' Run By FDIC Possible By Next Week: Source

A Senate Finance Committee report obtained by Reuters showed Daschle recently paid $128,203 in back taxes and $11,964 in interest for 2005 to 2007.

A congressional aide said Daschle did not originally report the money because he did not think it was taxable income.

Gibbs said Daschle brought the tax issues to the Senate committee's attention when he submitted his nomination forms.

Obama had picked Daschle not only as HHS secretary but to lead a high-profile overhaul of the nation's health care system. The idea was to put an experienced and well-liked congressional operator in charge of a political issue Obama had identified as one of his top legislative priorities.

Meanwhile, an Obama administration official says that Republican Sen. Judd Gregg of New Hampshire is the leading candidate to become commerce secretary.

The official says that an announcement of Gregg's nomination could come as soon as Monday. The official spoke Saturday on condition of anonymity because the official wasn't authorized to discuss administration deliberations.

Copyright 2009 Reuters. Click for restrictions.