By John Shaw

WASHINGTON (MNI) - With their agenda still packed with daunting items such as health care reform, financial regulation and climate change legislation, congressional Democratic leaders also face two challenges that may determine how much longer they remain in the majority in the House and Senate: rising unemployment and a soaring budget deficit.

While Democratic leaders argue that the Bush administration played a leading role in creating the current economic mess, that argument is not likely to hold much sway with voters during the 2010 midterm elections who want solutions rather than recriminations.

Many Democrats have acknowledged that the rise in the nation's unemployment rate to 10.2% is a real and growing threat to their agenda -- and to their longevity in the majority.

In an announcement Thursday prior to his nine-day trip to Asia, President Obama said he will convene a jobs summit in Washington next month in which his administration will seek ideas from leaders in business, labor and the academic world.

"We all know that there are limits to what to what government can and should do, even during such difficult times," Obama said.

"But we have an obligation to consider every additional, responsible step that we can to encourage and accelerate job creation in this country," he said.

The president said he's eager to explore ideas that might work to stimulate job creation.

"It's important that we don't make any ill-considered decisions -- even with the best intentions -- particularly at a time when our resources are so limited. But it's just as important that we are open to any demonstrably good idea to supplement the steps we've already taken to put America back to work," he said.

Former President Bill Clinton met Tuesday with Senate Democrats and said that congressional Democrats should complete work on health care reform this year, so they can focus most of their efforts in 2010 on job creation initiatives.

Senate Majority Leader Harry Reid has told Senate Democrats that they will develop a job creation agenda for next year.

Congress passed a $787 billion fiscal stimulus bill in February that was intended to stop the free-fall in the economy and boost employment. Democrats say the plan provided stability and a positive boost to the collapsing economy; Republicans say it did little other than create nearly a trillion dollars (when interest is included) in debt.

Last week, Congress approved a $24 billion package that extended unemployment benefits, continues and expands a tax credit for homebuyers and provides tax relief for money-losing firms.

It is unclear what additional economic stimulus measures might be embraced by Democratic leaders. House Speaker Nancy Pelosi and Majority Leader Steny Hoyer have said they are willing to consider a tax credit for firms that create new jobs.

Pelosi has also said that passage of a $500 billion six year transportation reauthorization bill should be viewed as a jobs bill since it funds highway and transit construction projects.

While pressure grows in Congress for lawmakers to do all they can to jump-start employment, pressure is also mounting for at least creating a process to start bringing the U.S.'s massive budget deficits under control.

At a hearing this week in the Senate Budget Committee, the chairman of the panel, Sen. Kent Conrad, and the ranking member of the committee, Sen. Judd Gregg, both said that Congress needs to create a "special bipartisan process" to address the U.S.'s steadily worsening long-term fiscal outlook.

Conrad said the regular congressional budget process is not equipped to deal with the scope and political sensitivity of the nation's budget problems. "The simple reality is that will never happen," Conrad said.

"Some kind of bipartisan process is needed," he said, referring to proposals to create a special entitlement and tax reform panel that would develop a comprehensive package which would be considered by Congress on an expedited basis.

Conrad said there is a "growing consensus" in Congress that a special process is needed to address both entitlements and a tax system that is "outdated and inefficient."

Gregg said creating a special panel is "absolutely critical." He added: "We have proven the regular legislative order doesn't work." .

The Senate panel heard from a half dozen lawmakers who have offered various proposals to create a bipartisan fiscal reform panel, with different ideas offered on whether it should be comprised of lawmakers and administration officials or outside experts.

Democratic Senator Evan Bayh said it is "highly unlikely" that he will vote to increase the debt ceiling later this year unless it is coupled with "credible action to address the problem of increasing our national debt."

"There are only so many leverage points in the congressional calendar and this is one of them," Bayh said.

Ten Democratic senators and independent senator, Joe Lieberman, have said they will not vote for a debt-ceiling increase unless they get a vote on creating a commission to examine long-term fiscal issues.

The Senate is expected to consider debt ceiling legislation next month.

Reid has not said when debt ceiling legislation will be taken up by the Senate.

** Market News International Washington Bureau: 202-371-2121 **