WASHINGTON - The leader of the biggest U.S. labor federation warned President Barack Obama on Monday that failure to act quickly on unemployment would be suicidal and would put the Democrats' control of Congress at risk.

The warning from AFL-CIO President Richard Trumka came just hours before Obama held talks with union leaders to soothe their concerns about how his ambitious proposals to overhaul the $2.5 trillion healthcare system will affect their members, including a proposed tax on so-called Cadillac health insurance plans that unions oppose..

In a strongly worded speech at the National Press Club, Trumka urged Democrats to deliver genuine healthcare reform and job growth or risk a repeat of the Republican takeover of Congress in 1994.

Obama won strong backing from trade unions in his 2008 presidential campaign and it is crucial for him to retain the support of working class voters before mid-term congressional elections in November.

Republicans view Obama's Democratic party as vulnerable over unemployment, which is at 10 percent, and are seeking opportunities to weaken the party's majority in Congress.

Both sides papered over their differences in statements after the meeting.

It was a frank and productive meeting between friends about moving forward with healthcare reform, Trumka said.

A White House spokesman said the president and labor leaders had an exchange of views and had a productive discussion about their shared commitment to health reform.

Neither statement mentioned the contentious issue of the tax on high-cost plans, which some economists say could help rein in long-term healthcare costs.

Unions argue that many members pay more for healthcare, not because their plans are generous, but because they cover those more costly to insure, like older workers.

Unions have also campaigned for a government-run health plan, the so-called public option, which is bitterly opposed by Republicans and the insurance industry.

SUICIDAL POLITICS

Trumka condemned the Senate's healthcare bill, which includes the Cadillac tax proposal but not a public option. He also warned that failure to move swiftly to bring down the unemployment rate would amount to suicidal politics.

This is a moment that cries out for political courage. But we're not seeing enough of it, he said.

Union officials feel betrayed by Obama's support for the Cadillac tax and the possible loss of the public option, both of which weigh heavily on union members who have given up pay increases and job security to retain health benefits.

This is a policy designed to benefit elites -- in this case, insurers, hospitals, pharmaceutical companies and irresponsible employers, at the expense of the broader public, Trumka said.

He warned that Democratic politicians could see support slump among working people just as it did in 1990s after the North American Free Trade Act (NAFTA) was enacted over labor's protests.

Obama faces pressure from labor to follow through on promises to restructure U.S. trade policy to put a greater emphasis on creating and keeping jobs in the United States.

He could alienate labor groups this year if he decides to push for approval of free-trade deals with Panama, South Korea and Colombia left over from the Bush administration.

(Additional reporting by Ross Colvin, Caren Bohan and Doug Palmer; Editing by Chris Wilson and Cynthia Osterman)

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