* Top Senate Democrat mulls "nuclear option"

* Republicans could lose power to block Obama's nominees

By Thomas Ferraro

WASHINGTON, July 9 (Reuters) - U.S. Senate Majority Leader Harry Reid, frustrated by a dysfunctional and unpopular Congress that has been unable to perform basic tasks such as agreeing on a federal budget, may soon seek an unprecedented rules change in the Senate.

The Nevada Democrat's aim would be to strip Republicans of their ability to stop President Barack Obama's judicial and executive branch nominees with procedural roadblocks known as filibusters, which also have been used to halt much of the president's legislative agenda.

Republicans charge that such a move would effectively turn the 100-member Senate into the House of Representatives where the rules already allow the chamber's majority to virtually ignore the minority.

"I'm worried, very worried," said veteran Republican Senator John McCain of Arizona. "There has been wrong on both sides, but this could destroy the Senate."

Filibusters were designed to permit the minority to demand unlimited debate and force the majority to compromise. They initially required senators to stand and speak, ending when the speaking stopped.

But the rules were changed years ago to simply permit these procedural roadblocks to continue until the opposing side could muster a super-majority of votes, now 60.

"This place can't continue to operate and function with the filibuster being used the way it is now," said Democratic Senator Tom Harkin of Iowa.

Republicans deny being obstructionist, citing scores of Obama nominees who have been confirmed. They accuse Reid of trying to pick a fight to fire up his party's liberal base.

Senate Republican Minority Leader Mitch McConnell said on Tuesday that Democrats apparently wanted to change the rules because they weren't getting everything they wanted when they wanted it.

"Let's get real here. That's not how a democracy functions," McConnell declared in a speech in the Senate.

Sixty-seven votes are needed to change Senate rules, including those for the filibuster. But Democrats, who control the chamber, 54-46, could do it with 51 by using for the first time a procedural power play dubbed the "nuclear option."

Here's how:

In open session, the Senate parliamentarian would formally advise the chamber's presiding chair, Vice President Joe Biden or his designated stand-in, that 67 votes are needed for a rule change.

The presiding chair would echo the parliamentarian's finding, prompting Reid to move to overrule the chair and propose that all rules changes could be done with just 51 votes. Senate procedure permits most matters, including overruling the chair, to be decided by a simple majority.

Democrats would then change the rules again, this time to reduce to 51 from 60 the number of votes needed to end filibusters against judicial and executive branch nominees.

Democratic aides say Reid is considering only changing the rule on filibusters for nominations, not legislation. But once a precedent is set, both sides note, it could be extended.

'VERY FRUSTRATED'

Reid is expected to decide whether to ask Democrats to pull the trigger in the coming weeks, but first wants to see if Republicans block a number of embattled nominees, aides say.

The nominations include: Gina McCarthy to head the Environmental Protection Agency, Thomas Perez to become the secretary of the Labor Department and Richard Cordray to be director of the Consumer Financial Protection Bureau.

There are also at least three spots on the National Labor Relations Board that require Senate approval.

None of these nominees have been filibustered this year, but Republicans say they might be.

Senate Republicans have vowed to block any director for the Consumer Financial Protection Bureau until there are structural changes in the agency created to combat fiscal fraud.

Republicans also have opposed nominees at the NLRB, hobbling the federal agency that investigates charges of unfair labor practices.

Democratic Senator Jack Reed of Rhode Island declined to predict what Reid will do.

"But I can tell you that Harry (Reid) is very frustrated and rightfully so about the failure of the Senate to confirm a number of executive appointees, not because they are not qualified, but because Republicans don't like their agencies," Reed said.

An earlier threat to invoke "the nuclear option" was averted in January when a deal was reached that was supposed to make the Senate confirmation process more efficient and less hostile.

But Democrats now accuse Republicans of violating the deal. Republicans deny it and argue that Reid made an unconditional promise not to use the "nuclear option," a charge denied by Democrats.

The move has been repeatedly threatened over the years by both parties but has never been invoked, primarily because the party in the majority knows that it eventually will be back in the minority and likely want the filibuster in its arsenal.

Republicans warn that if Democrats invoke "the nuclear option," they will retaliate when they return to the majority, likely with Obama's 2010 healthcare restructuring law.

While Reid expects at least a couple of fellow Senate Democrats to oppose "the nuclear option," he doesn't expect much, if any, backlash from the public, which gives Congress a record low approval rating of close to single digits, aides say.

"The public doesn't like Congress. Reid wants to change how it works. Republicans will be defending the status quo. We expect to win that argument," a Democratic aide said. (Reporting by Thomas Ferraro; Editing by Paul Simao)

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