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WASHINGTON (Reuters) – Lawmakers in the U.S. Senate might vote on an unusually ambitious budget proposal that could include sweeping tax-and-spending reforms if other efforts to get the nation's finances under control falter, the head of the Budget Committee said on Thursday.

One day after budget forecasters projected a record $1.5 trillion deficit for this fiscal year, Democratic Senator Kent Conrad said he might use his post as Budget Committee chairman to force his colleagues to confront the country's grim fiscal picture.

"Who else is going to do it? That's the frustration," Conrad told reporters after a budget hearing.

Conrad's comments came as Senate lawmakers were considering a variety of methods to reduce budget deficits that are at a higher level when measured against the economy than any time since World War Two.

Unlike some European countries, President Barack Obama and lawmakers have not taken steps to close a budget gap the Congressional Budget Office predicts will hit 9.8 percent of GDP this year.

While Republicans in the House of Representatives eye sharp cuts to domestic spending, their counterparts in the Senate are crafting several more comprehensive measures that could tackle tax reform and restructure retirement programs, along with spending caps.

Conrad is part of a bipartisan group that plans to resurrect the recommendations of a presidential panel that last year proposed spending cuts and a revamped tax code to trim the deficit by $4 trillion over a decade.

The so-called Bowles-Simpson plan, named after the panel's chairmen, called for raising the retirement age and cutting corporate tax breaks.

OBAMA NEUTRAL

Obama himself has stayed neutral. In his State of the Union address earlier this week, he applauded the effort but has not endorsed any of the proposals, frustrating some deficit hawks.

The plan will face an uphill climb in the Senate as key lawmakers, such as Finance Committee Chairman Max Baucus, are not participating in the effort. The group is several weeks from finishing work on the legislation, several aides said.

Conrad said he would prefer that Obama and congressional leaders of both parties hold a summit meeting to hammer out an agreement.

But if that is not going to happen, he said he might try to use the annual budget plan that Congress is supposed to pass each year as a deficit reduction vehicle.

That resolution, which does not require a presidential signature, would have to be expanded beyond its usual five-year time frame to enact real reforms, he said.

On its own, the budget resolution is an imperfect instrument for the kind of far-reaching reforms envisioned by Bowles-Simpson, Conrad said.

A budget resolution cannot ensure that tax writers on the Finance Committee simplify the tax code and eliminate breaks carved out over the years, nor can it ensure that members of the Appropriations Committee eliminate funding for unwanted weapons systems or ineffective programs.

Conrad also suggested an approach that would impose automatic limits if certain budget goals were not met, but he declined to provide details. "I'm partly shopping ideas here," he said.

The budget resolution that emerges from the Republican-controlled House this spring could also contain far-reaching changes.

The House Budget Committee might back a proposal that would effectively privatize the government's Medicare health insurance program for the elderly by converting the benefit into a voucher to buy private insurance, Representative Jeb Hensarling, a member of that chamber's Republican leadership who also sits on the Budget Committee, told the National Journal.

Separately, two senators introduced a bill that would stretch out the budget process over two years, which would give lawmakers more time to pass spending bills that are routinely months late. Republican Senator Johnny Isakson and Democratic Senator Jeanne Shaheen said their approach would also give lawmakers more time to ensure the government is operating effectively.

(Editing by Peter Cooney)