*Obama will sign stimulus legislation Tuesday
*Congressional approval gives Obama much-needed boost
*Republicans say much of bill's spending "wasteful"
CHICAGO, Feb 14 (Reuters) - U.S. President Barack Obama on Saturday hailed congressional approval of a $787 billion economic stimulus bill as a "major milestone on our road to recovery" and the White House said he would sign the legislation on Tuesday in Denver.
"I will sign this legislation into law shortly, and we'll begin making the immediate investments necessary to put people back to work," Obama said, savoring his biggest legislative victory since taking office on Jan. 20.
The Senate cast the final vote, 60-38, late on Friday, hours after the House of Representatives passed an identical bill, 246-183, capping weeks of arguing over how to best jolt the economy out of deep recession.
Obama and his fellow Democrats who control Congress failed to win over many Republicans, falling short of the broad bipartisan support he sought for the massive package of increased spending and tax cuts.
But Obama brushed off partisan bickering over the stimulus bill as "healthy differences of opinion."
"Congress has passed my economic recovery plan -- an ambitious plan at a time we badly need it," he said in his weekly radio address delivered during his first trip home to Chicago since assuming the presidency. "This is a major milestone on our road to recovery."
Obama, who had warned that economic crisis could turn to catastrophe without rapid government intervention, said the stimulus would "lay a new foundation" for lasting growth.
The White House has said it will take about a month for the money to start flowing. But a primary concern for economists is that the stimulus will come too late to do much good in 2009, when many forecasters think full-year output will contract.
Despite that, final passage of the stimulus bill gives a much-needed boost to the new president, whose "No-drama Obama" image has come under strain of late.
He has had an uneven start, dealing with an uproar over the tax problems of several top Cabinet choices and the abrupt withdrawal last week of his nominee for commerce secretary, Republican Sen. Judd Gregg, citing policy differences.
But Obama has kept his approval ratings high by tackling the economy as his top domestic priority. His recipe includes middle-class tax cuts, infrastructure spending, help for the poor and unemployed and investment in alternative energy.
He predicts that the stimulus plan will save or create more than 3.5 million jobs over the next two years.
But the stimulus debate in Congress has also laid bare bitter divisions over how to boost an economy suffering a rising jobless rate of 7.6 percent and a banking crisis that has nearly frozen lending.
Only three Republicans voted for the measure in the 100-seat Senate, and no Republicans broke ranks to support it the House, arguing it had too much spending and not enough tax breaks. The final plan was split into 36 percent for tax cuts and 64 percent in spending and other provisions.
Sen. Lisa Murkowski, delivering the Republicans' radio address, said Democrats should be mindful that funding spent on stimulus "isn't Monopoly money" and it adds to the federal deficit. "Much of the spending is wasteful," she said.
But Obama, pointing out that he had inherited a $1 trillion federal deficit after eight years of Republican rule, defended the increase in deficit spending from the stimulus as necessary in the short-term "in order to jump-start our sick economy."
He pledged to submit a proposed federal budget in coming weeks that will "begin to restore the discipline these challenging times demand."
He insisted in addition to the stimulus plan, there was a critical need to "stabilize, repair, and reform our banking system" and stem the spread of housing foreclosures.
"We must write and enforce new rules of the road, to stop unscrupulous speculators from undermining our economy ever again," Obama said. But he offered no specifics.
Treasury Secretary Timothy Geithner faced heavy criticism last week when he announced the administration's plan to rescue the banking industry but gave few details. (Editing by Philip Barbara)