* Narrow issues can cause big divisions
* Union bill may be next big test for Democrats
By Thomas Ferraro
WASHINGTON, March 15 (Reuters) - Republicans are not the only ones in the U.S. Congress squawking about President Barack Obama's record $3.55 trillion budget plan.
Some of the president's fellow top Democrats also are upset with certain provisions -- including ones dealing with farm subsidies, tax deductions and industrial emissions -- setting up hurdles within his own party that Obama must overcome.
"Everyone is starting to wake up to the fact that the all-Democratic controlled Washington doesn't mean pure liberalism. It means more centrist, more moderate," said Ethan Siegal of The Washington Exchange, a private firm that tracks the federal government for institutional investors.
Republicans see Obama's proposed record spending, much of it aimed at helping to lift the U.S. economy out of a deepening recession, as too costly.
Opposition from Democrats and Republicans is likely to grab headlines again in the weeks ahead as committees get down to complete their work in drafting details.
Democrats, who expanded their hold on Congress in the November election that brought Obama to power, are proving to be a contentious bunch.
"Democrats also have more moderate and more conservatives in their ranks and more issues that will divide them," said Andrew Taylor, a political science professor at North Carolina State University. "It's the cost of doing business."
The budget proposal Obama put forward last month outlines a bold governing agenda, which includes expanding healthcare, upgrading education, moving the U.S. toward energy independence and combating global warming.
It projects a deficit for this fiscal year of $1.75 trillion, falling to $1.17 trillion next year, prompting Republican complaints about Obama's proposed spending and worrying members from both parties who say there should be more deficit reduction.
TROUBLE ON THE FARM
Democrats in agricultural states object to Obama's call to end direct-payment subsidies to large farmers, which he said could save $1 billion per year.
"It's more than dead on arrival," said House Agriculture Committee chairman Collin Peterson, a Minnesota Democrat.
"I would be opposed to any effort to cut support of the farm safety net," said Senate Budget Committee Chairman Kent Conrad, a Democrat from North Dakota.
Democrats and Republicans from industrial or coal-producing states also oppose Obama's proposal to curb industrial emissions blamed for climate change.
Obama proposes a cap-and-trade system that would put a price on carbon emissions. He would require companies to buy emission permits to help fund clean energy technology.
Senate Energy Committee Chairman Jeff Bingaman, a New Mexico Democrat, sees the proposal as too costly for industry. He suggests changes that include a mix of carbon allowances to be given to polluters along with the sale of permits.
Even Obama's call to slash tax deductions for the very rich to help pay for healthcare reforms faces resistance from some Democrats who fear it could reduce tax-deductible charitable contributions.
The Senate Finance Committee's Democratic chairman, Max Baucus, has suggested instead paying for expanded healthcare by taxing the health benefits workers receive from employers -- an idea rejected by Obama on the campaign trail.
"The inevitable is happening," said James Thurber of American University's Center for Congressional and Presidential Studies. "We face crises but narrow issues are coming forward to cause divisions."
Lawmakers want to represent their states, offer their expertise and get reelected, he said.
"That's more important to them than going along with what the president wants and what their leadership wants," Thurber said. "It's politics."
To be sure, Obama -- with public approval ratings of more than 60 percent -- has scored major legislative victories since taking office two months ago.
The biggest was passage of a $787 billion economic stimulus package, along with bills to expand a federal health insurance program for children and combat workplace discrimination.
But Obama and Democratic leaders were forced to compromise and cajole members of their own party to pass the stimulus plan and other legislation, including a $410 billion federal spending bill in the Senate last week.
Most analysts say the White House will have to make compromises on a number of bills, including one supported by Obama to make it easier for workers to unionize.
The Employee Free Choice Act is backed by Obama but its support among Senate Democrats seems to be shaky, if not shrinking. Mark Pryor is among several Democratic senators who say they are reconsidering their earlier support.
"I anticipate there will be proposed amendments to it," Pryor said. "I will just have to wait to see what it looks like when it hits the Senate floor." (Editing by John O'Callaghan)