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Obama: 'Massive blow' if GOP blocks payroll tax

President Barack Obama gestures while speaking at Scranton High School in Scranton, Pa., Wednesday, Nov. 30, 2011. President Barack Obama gestures while speaking at Scranton High School in Scranton, Pa., Wednesday, Nov. 30, 2011. (AP Photo/Carolyn Kaster)
By Jim Kuhnhenn
Associated Press / November 30, 2011
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NEW YORK—Blending governing with re-election politics, President Barack Obama roused a cheering northeast Pennsylvania crowd Wednesday as he warned of a "massive blow to the economy" if Republicans block a payroll tax extension.

But hours later, addressing donors in New York, he toned his rhetoric down and declared progress was possible.

Obama took to the road with a dual pitch for money, campaigning for more cash in the pockets of U.S. workers -- and for his campaign treasury as well.

He pressed his case at a campaign-style rally in working-class Scranton, Pa., where he said Republicans had to choose between lower taxes for the wealthy, or a payroll tax cut that would help working Americans. Republicans say they would support extending the payroll tax cut, but reject new taxes to offset the costs.

"Are you going to cut taxes for the middle class and those who are trying to get into the middle class, or are you going to protect massive tax breaks for millionaires and billionaires?" he said. "Are you going to ask a few hundred thousand people who have done very, very well to do their fair share or are you going to raise taxes for hundreds of millions of people across the country?"

Later, in donor-rich New York City where he was raising money for his already flush re-election bid, he took a more conciliatory tone, acknowledging that Republicans such as House Speaker John Boehner of Ohio and Senate Minority Leader Mitch McConnell of Kentucky were also willing to extend the payroll tax, though not with a tax increase on millionaires.

"For the last couple of days Mr. Boehner and Mr. McConnell have both indicated that it probably does make sense not to have taxes go up for middle class families, particularly since they've all taken an oath not to raise taxes," Obama told about 50 donors at a Greenwich Village restaurant. "And so it's possible we'll see some additional progress in the next couple of weeks that can continue to help strengthen the economy."

The populist pitch in Scranton and the fundraisers in New York served as political bookends for the president and illustrated the dual policy and political demands on him as the 2012 campaign season nears.

He first rallied the type of working-class crowd that would benefit from the tax cuts and then appealed for campaign contributions from donors, many of whom would be the ones to shoulder the tax increases Obama supports.

Obama told one group of donors that he still needs to make sure that key aspects of the health care law get implemented in 2014, that banking regulations are enacted and that energy policies are updated.

"I'm going to need another term to finish the job," he said.

Meanwhile on Capitol Hill, Republicans said they were prepared to extend the temporary payroll tax cut, but they opposed Democrats' plan to pay for it by taxing incomes over $1 million, setting up a showdown over how to find mutually acceptable savings of over $100 billion before any extension could become law. The GOP released a plan of their own that would raise money by freezing federal workforce salaries and providing government benefits according to income.

The full payroll tax of 6.2 percent would be restored if Congress does not act by year's end, increasing taxes on 160 million Americans. Obama and the Democrats want to expand this year's 2 percentage point reduction in the payroll tax as well as extend, it while Republicans favor a straight extension.

"If Congress doesn't act to extend this tax cut then most of you ... the typical middle-class family is going to see your taxes go up by $1,000 at the worst possible time," Obama said.

Obama was welcomed warmly by a crowd of nearly 2,000 in the Scranton High School gym. At one point the president said that Republicans have sworn an oath not to raise taxes, prompting one man in the crowd to yell loudly: "Give us some names!"

In making a case for the consequences of letting the tax cut lapse, Obama offered a bleak assessment, telling his audience: "It would be tough for you. It would also be a massive blow for the economy because we're not fully out of the recession yet."

Technically, though, the recession ended in June 2009, according to the National Bureau of Economic Research, the nonprofit group that determines the beginning and end of recessions. The downturn began in December 2007 and was the longest and deepest since World War II, costing the country about 7.5 million jobs.

The recovery has been unusually weak, but the economy is growing again. It expanded 2 percent in the July-September quarter.

In selecting Scranton to make his appeal, Obama ventured to the birthplace of Vice President Joe Biden and Sen. Bob Casey, the Pennsylvania Democrat who is the author of the payroll tax cut plan expected to come up for a vote in the Senate later this week.

Before making remarks, Obama sought to put a face on the beneficiaries of the payroll tax cut by stopping at the home of third-grade teacher Patrick Festa and his wife Donna, a graphic designer, in working-class South Scranton. The three chatted in the family's Christmas-decorated dining room, Obama inquiring about their work and their two high school-aged children.

Obama won Pennsylvania with 54 percent of the vote in 2008, but the fragile economy could put the state in play in 2012. Its proximity to Washington and its political importance have made it a favorite stopping place for Obama and Biden. The trip comes as Obama steps up his re-election campaign, rolling out two ads that call on supporters to begin to mobilize.

In New York, Obama attended three fundraisers: one at the home of businessman Jack Rosen, chairman of the American Jewish Congress, where tickets went for at least $10,000; one at the Greenwich Village restaurant Gotham Bar and Grill at $35,800 per ticket; and a reception at the Sheraton Hotel, where tickets began at $1,000. The money will be split between the Democratic National Committee and the Obama re-election campaign.

At Rosen's Upper East Side residence, Obama expressed support for Israel, after Rosen noted "concern" about U.S.-Israeli relations among some Jewish voters, and he spoke of progress that has been made on restoring the economy.

"Bottom line is this: Over the past three years we've made progress. People aren't feeling all that progress so far because we had fallen so far. But the trajectory of the country at this point is sound," Obama said.

Obama had private time and posed for pictures with groups of Latino supporters and gay and lesbian backers before he addressed the Sheraton fundraiser, the last of the night.

"Every single thing that we care about is at stake in the next election," he told that crowd. "The very core of what this country stands for is on the line."

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