By Matt Spetalnick
WASHINGTON (Reuters) - President Barack Obama urged lawmakers on Wednesday to agree quickly on core elements of healthcare reform, signalling he might support a scaled-back overhaul after his Democrats lost a key Senate seat.
Obama acknowledged that voter anger helped carry Republican Scott Brown to a stunning victory in Tuesday's Massachusetts election which has imperilled the president's healthcare effort and the rest of his legislative agenda.
"People are angry, they are frustrated. Not just because of what's happened in the last year or two years, but what's happened over the last eight years," Obama told ABC News on the anniversary of his first year in office.
Pushed on the defensive, the White House said it may retool its strategy for selling Obama's agenda while pressing ahead with his priorities of job creation, climate change and financial regulatory reform as well as healthcare.
Obama and his aides scrambled to limit the fallout after Brown's victory which was widely seen as reflecting public anxiety over the president's policies in the face of double-digit unemployment and a sluggish recovery.
The election upset sent shudders through Democrats facing tough races in November's midterm elections, when Republicans hope weaknesses exposed in the liberal stronghold of Massachusetts will threaten Democratic control of Congress.
Brown's win deprived Obama's Democrats of a crucial 60th Senate vote they need to pass the healthcare bill, Obama's top legislative priority, and push through other big measures.
Obama's aides said they bore some of the blame for the loss of the Senate seat. The long, bitter healthcare debate had not played well with the public, they said.
Obama had faced criticism for emphasizing healthcare too much instead of focussing firmly on jobs and the economy.
Weighing in a day after the Massachusetts ballot, Obama made clear he is sticking with his healthcare push but hinted he might give ground. The White House stressed, however, Obama was still dedicated to broad reform.
"I would advise that we try to move quickly to coalesce around those elements in the package that people agree on," Obama told ABC.
"We know that we need insurance reform ... We know that we have to have some form of cost containment," he said. "And we know that small businesses are going to need help so that they can provide health insurance for their families. Those are the core, some of the core elements of this bill."
The election upset also compounded problems confronting Obama on the one-year anniversary of the day he took office with soaring rhetoric and hopes for change.
Obama's approval rating has fallen from 70 percent-plus at his inauguration to around 50 percent now, among the lowest of recent presidents at this stage.
OBAMA'S Defence
In the interview, he reminded Americans of the deep economic problems he inherited and the public animosity towards the previous administration. "The same thing that swept Scott Brown into office swept me into office," Obama told ABC.
Aides rejected the notion that the Massachusetts vote was a mini-referendum on Obama's first year.
White House senior adviser David Axelrod told MSNBC that while the administration would "take into account" the message from voters on healthcare, "it's not an option simply to walk away from a problem that's only going to get worse."
He said the healthcare debate didn't relate to large numbers of the American people. "And so it left in people a sense that maybe we weren't focussing on the main issues of concern in their lives," he said.
After his victory over state Attorney General Martha Coakley, Brown, a Massachusetts state senator, said he would be the pivotal 41st Republican vote against the healthcare overhaul in the 100-member Senate.
AGENDA AT RISK
U.S. House of Representatives Speaker Nancy Pelosi vowed Democrats would "move forward" with healthcare reform. But some Democrats urged a more cautious approach.
Republicans, who have called Obama's healthcare effort a government takeover of the system, said the election result proved the issue should be killed and that Americans opposed the president's "big government" policies.
The debate over financial regulation, another Obama priority, looked set to get even more divisive, with Democrats and Republicans both trying to tap voter anger.
Ahead of November's elections, Democrats are likely to boost attacks on banks and Wall Street bonuses, with Republicans working to delay any bill.
Getting climate change legislation passed this year, especially in a down economy, was already going to be tough. Brown's election raises new obstacles. The House passed a bill last year. Similar legislation has stalled in the Senate.
But analysts said the loss of the Massachusetts Senate seat would likely strengthen Obama's resolve to press ahead with popular job creation measures that Republicans would be reluctant to block.
(Additional reporting by Jeff Mason, Caren Bohan and Susan Heavey in Washington, Ros Krasny and Scott Malone in Boston, Dan Trotta in New York; editing by Alan Elsner)
