SCRANTON: US President Barack Obama warned Wednesday of a "massive blow" to the struggling economy if Republicans refuse to back an extension of a payroll tax cut due to expire next month.
Obama, on a trip to a gritty corner of Pennsylvania in which he reached out to white working class voters with whom he has traditionally struggled, told Republicans not to act the "grinch" before Christmas holidays.
"Don't vote to raise taxes on working Americans during the holidays," Obama roared in a campaign-style speech at a high school in Scranton, birthplace of Vice President Joe Biden, long a champion of blue collar workers.
"Stop saying 'no' to stuff that would make our economy stronger. Put our country before party. Put money back into the pockets of working Americans," Obama said, lashing Republicans.
Failing to extend the payroll tax cut would "be a massive blow for the economy, because we're not fully out of the recession yet," the president said.
There was an element of politicking about Obama's appearance however, because Republicans say that they will accept his plans to extend the payroll tax cut, but simply object to his plans for paying for it.
Democrats plan to hold a Senate vote this week to raise the funds by levying a 3.25 percent surtax on people earning $1 million -- a proposal Republicans reject, saying it would slow the economy and hurt small businesses.
But Republicans unveiled their own plan, which calls for extending the payroll tax cut, but not expanding it, and offsetting that with a three-year pay freeze on civilian government workers.
The proposal also calls for means testing some government health benefits and food aid to exclude millionaires and billionaires -- an implicit acknowledgement of the Democratic approach's political appeal -- and invites the wealthiest Americans to make voluntary contributions to the federal treasury.
"We've made clear ... we're interested in working with the president to find common ground on his jobs plan," said Republican House Speaker John Boehner.
Republicans argue that any stimulatory impact of the payroll tax cut would be superseded by the blow to growth dealt by the Democratic plan to up taxes on millionaires.
"The president and Democrats in Congress are saying we ought to recoup the revenue we won't get from one group of taxpayers by socking it to another group," said Senate Republican leader Mitch McConnell on Friday.
"What this really means is that one way or another they want the money coming back to Washington -- so that the president and his allies in Congress can divvy it up how they want."
The issue, the latest bitter row between Obama's Democrats and Republicans over taxing the rich, is evolving into a pre-Christmas showdown on Capitol Hill along with White House demands for an extension of unemployment insurance (UI).
Democrats want to use the row to brand Republicans as protectors of the super rich while everyday Americans are suffering. Republicans meanwhile are keen to brand Obama as anti-business and a prophet of high taxation.
As part of his $447-billion jobs plan, Obama proposed further cutting the payroll tax for employees to 3.1 percent of earnings and to halve the employer contribution from 6.2 percent to 3.1 percent in a bid to spur hiring.
The administration says the move would give Americans earning $50,000 a year a $1,500 tax cut next year as compared to a $1,000 tax hike if Congress does not extend the benefit by its expiry date at the end of this year.
The tax, which is separate from federal and state income taxes, goes to finance retirement and medical insurance for the elderly.
Obama comfortably won Pennsylvania in his 2008 presidential race. But recent polls have suggested the state, often seen as a microcosm of the wider US political map, appears to be a closer race this time around.
His campaign however believes it has an advantage in voter registration and legions of big city voters who should provide the president with a Pennsylvania cushion as he seeks a second term in office in November 2012.
Many analysts believe however that an Obama loss in Pennsylvania would augur a Republican tide that would see the president turfed out of office after four years.
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