Republicans Mull If Trade Deals Worth Obama's Price

* White House ties retraining program to trade deals

* Critics say TAA a duplicative, ineffective program

* Supporters says TAA fills need other programs don't

* Business groups say TAA remains 'vitally important'

By Doug Palmer

WASHINGTON (Reuters) - Does the United States, faced with a huge budget deficit, really need a roughly $1 billion annual program to help retrain workers who have lost their jobs because of foreign competition?

And if not, should Congress kill or pare back the nearly 50-year-old Trade Adjustment Assistance program even if that means proposed free trade deals with South Korea, Panama and Colombia could also die?

Those are two questions confronting Republicans as they consider President Barack Obama's threat not to send the trade pacts to Congress for approval until there is a deal to renew the so-called TAA at or near levels approved in 2009.

For some on the right who support the trade agreements, the answer to at least the first question is clear.

"We oppose the TAA program ... It's just a giant government boondoggle," said Barney Keller, a spokesman for the pro-tax cut group Club for Growth, whose opposition to the program has helped create the current Republican quandary.

The three trade deals were originally negotiated during the Republican administration of former President George W. Bush and approval of the pacts has been a party priority.

Now, with that finally in sight, some Republicans are balking at demands the deals be tied to TAA, especially after last year's elections made cutting government spending the party's No. 1 goal.

Congress created trade adjustment assistance in 1962. It was traditionally aimed at helping factory workers who lost their jobs as a result of free trade agreements, and bipartisan deals in 2002 and 2009 expanded the program to cover the service industry and government workers.

The revamped TAA program also covers workers whose jobs have moved to countries such as India and China that do not have a free trade pact with the United States.

'GOLD-PLATED BENEFITS'

When the expanded program expired at the end of 2010, lawmakers approved a six-week extension to give themselves more time to resolve issues blocking longer-terms renewals of two trade programs for developing countries.

Since then, Republicans have taken control of the House , and the Club for Growth has issued a "key vote alert" calling on Congress to reject renewal of the expanded TAA program.

"TAA is duplicative (and overly generous) because the unemployed already have access to 99 weeks of unemployment benefits thanks to the many extensions already passed by Congress," the fiscally conservative lobby group said.

After the Club for Growth statement, House Republicans pulled the TAA bill from the floor.

Senator Orrin Hatch, the top Republican on the Finance Committee, also questions if the United States can afford the program while calling for quick action on the three trade deals.

"Why should we put up $7.2 billion over ten years (for TAA) in a country that's currently broke?" said Hatch, who is up for re-election next year.

The Heritage Foundation, a conservative think tank, has fueled anti-TAA feeling with questions such as why a worker who loses his job because of foreign competition should receive more government help than a former Blockbuster employee whose movie rental company could not compete with domestic rival Netflix.

"Why should we single out one category of workers for these gold-plated benefits," said James Sherk, a senior policy analyst in labor economics at the Heritage.

Also, workers who receive retraining under TAA do not earn any more than workers who did not, which shows the program is "broadly ineffective," Sherk said.

'POLICY DECISION' TO BLAME FOR JOB LOSSES

Supporters say that finding was based on an evaluation performed about a decade before Congress started reforming TAA in 2002 and is therefore irrelevant.

Major business groups such as the U.S. Chamber of Commerce and the National Association of Manufacturers that usually back Republicans on most issues support TAA and have called on lawmakers to work with the White House to renew the program as part of broader deal to pass the trade pacts.

"TAA is as vitally important today as it has been over the years," the groups said in a letter to congressional leaders.

Greg Mastel, a former Democratic congressional staffer who is now managing director of Dutko Worldwide, a lobbying and public affairs firm, argues the government does have an extra responsibility to help workers displaced by trade.

"In large part, workers who lose jobs because of trade do so because of a policy decision by government. The government decided to allow imports, the government decided to allow a liberal investment policy," Mastel said.

"I happen to agree with those policies, but you can't deny they sometimes disadvantage groups of workers," he said.

Howard Rosen, a visiting fellow at the Peterson Institute for International Economics and executive director of the TAA Coalition, argued the roughly $1 billion annual cost for the program is tiny compared to large benefits the U.S. economy gets each year from trade liberalization.

Workers displaced by foreign competition have a harder time adjusting than other laid-off workers because they tend to be older and less educated and have higher earnings, Rosen said.

Many of the reforms passed in 2002 and 2009 were specifically intended to address shortcomings that hampered the program's effectiveness, he said. (Editing by Mohammad Zargham)