March 20 (Bloomberg) -- Congress’s Blue Dog Democrats yesterday released a set of principles they say will allow them to support both President Barack Obama’s proposed budget and the cause of limiting government spending.

Their task may only get tougher with time.

The Blue Dog Coalition -- a group of Democrats who mostly come from Republican-leaning or swing districts -- called for pay-as-you-go budgeting, deficit reduction and restrictions on health-care spending.

“I want the president to succeed but at the same time I don’t want our country to continue down the same road it has been going for the last eight years,” said Representative Charles Melancon, 61, a Louisiana Democrat and Blue Dog spokesman.

With 51 votes in the 435-member House of Representatives, the Blue Dogs are essential to Obama’s economic agenda. They already provided the critical votes to pass the president’s $787 billion stimulus plan after Republicans rebuffed his efforts to forge a bipartisan majority. Their numbers may be even more vital to pass Obama’s budget.

Sticking with Obama on his $3.6 trillion budget may be harder for them, particularly for those Blue Dogs elected in Republican-leaning districts where the Democratic Party isn’t particularly popular.

“It’s a big way to signal that there is a difference between them and the national Democratic Party,” said John Fortier, a scholar at the American Enterprise Institute in Washington.

Budget Hawk

For Melancon, Obama’s economic agenda represents a tough choice. A budget hawk, he said he didn’t come to Washington to vote for trillion-dollar deficits. So he must balance his political values with his support for the president.

The Obama administration already has recognized the clout of the Blue Dogs: The president invited them to the White House during his first days in office.

“The Blue Dogs have been strong defenders of fiscal discipline and one of the key constituencies in Congress,” said Peter Orszag, the White House director of Office of Management and Budget.

Their impact was felt during budget negotiations when they persuaded Orszag to include a provision requiring Congress by law to cut discretionary spending every time there is a spending increase. “Pay-go” is credited in part for bringing discipline to Congress in the mid-1990s and helping to create the budget surpluses of President Bill Clinton’s administration.

Additional Spending

To address the financial crisis, though, the Blue Dogs support additional federal spending to jump-start the economy. They are trying to determine where productive economic stimulus ends and wasteful spending begins.

“We are trying to figure out where to draw the line,” said Jim Costa, a California Democrat and Blue Dog.

Formed after Democrats lost their majority in the House in 1994, for the first time in 50 years, the Blue Dog Coalition organized around the idea that the Democratic Party had become too liberal.

Adapted from the South’s nickname for loyalists who would vote for a yellow dog if it were on the ballot as a Democrat, the Blue Dog moniker reflects members who said their views had been “choked blue” by the Democrats’ liberal wing. And they have often succeeded in bringing the party closer to the middle.

“They help us make sure that what we get is what the country wants,” said Representative Barney Frank, the chairman of the Financial Services Committee, a Massachusetts Democrat and self-proclaimed liberal.

Budget Watchdogs

Even though Blue Dogs have supported Obama’s stimulus spending, they won’t give up their role as budget watchdogs, said Al From, founder of the Democratic Leadership Council, a Washington-based group of centrist Democrats.

“Someone has to make sure that sanity is maintained even when you are doing what you have to do in the short term,” From said.

In the weeks leading up to Congress’s Feb. 13 vote on the stimulus package, the Blue Dogs were in constant contact with the White House economic team including Orszag, Melancon said.

As the House prepared to vote on the stimulus plan, the Blue Dogs faced off with White House Chief of Staff Rahm Emanuel, demanding that the White House honor “pay-go,” and Emanuel assured them that Obama would back the proposal, Melancon said.

Only six Blue Dogs voted against the stimulus package. The final tally was 246 to 183 with the 40 Blue Dog votes providing the winning difference; not a single Republican voted for it.

Electoral Success

Representative Sanford Bishop, a Georgia Democrat, another Blue Dog, said the group plays an important role in Democrats’ electoral success. “The Democrat majority has been built by electing fiscally conservative Democrats from across the country,” Bishop said.

The group has grown from 23 members in 2004 to 51 in 2009. It has now capped membership at 25 percent of the total number of House Democrats. “There is a waiting list,” said Jim Cooper, a member from Tennessee.

Michael Franc, vice president for government relations at the Heritage Foundation, a Washington-based research group that promotes markets and limited government, said Obama’s budget avoids making hard decisions by putting big-ticket items such as health-care cost increases in the baseline rather than listing them as discretionary budget increases. Franc said that putting the items in the baseline also allows Blue Dogs to support big budget increases without demanding the offsetting cost cuts dictated by the pay-go rules they support.

“Blue Dogs don’t want to be the skunk at the Democrats’ garden party,” said Franc.

To contact the reporters on this story: Christopher Stern in Washington cstern3@bloomberg.net

Last Updated: March 20, 2009 00:01 EDT