Senate Republicans blocked a $30-billion plan to help community banks boost lending to small businesses, dealing a blow to President Barack Obama's election-year battle to reduce unemployment.

Tempers ran high as Democratic leaders failed to muster the 60 votes needed to advance the measure over Republican objections. Republicans were upset that Democrats shut them out from amending the package that also includes about $12 billion in tax breaks for small businesses.

Enough is enough. This has been anything but a jobs agenda, said Republican Senator Olympia Snowe. The Maine moderate has voted with Democrats on a number of issues, most recently to extend jobless benefits to the long-term unemployed, but voted against this time.

Senate Republican Leader Mitch McConnell accused Democrats of playing election-year politics and complained about billions of dollars in spending added to the package.

This thing now has more than a billion dollars of agriculture spending in it, McConnell argued.

Obama twice this week called for the Senate to pass the bill. He wants to show Americans he is focused on job creation, mindful that voter anxiety over the lackluster economy and the 9.5 percent unemployment rate could translate into big losses for his Democratic Party in November congressional election.

An earlier Democratic effort to pass a jobs package that included money for cash-strapped states and extended some expired individual and tax breaks was also blocked in the Senate by Republicans who argued that the extra spending should be covered by cuts elsewhere in the budget.

BILL NOT DEAD?

Despite Thursday's heated debate in the Senate Chamber, McConnell and Democratic Leader Harry Reid held out hope that they eventually would agree to amendments and approve the measure.

Democrats are worried the Republican amendments would force election-year debates on politically sensitive issues involving immigration and border security as well as expiring tax cuts.

Obama has been pushing for passage of the lending measure arguing that getting more capital into the hands of independent community bankers would lead to more small business loans.

Since the 2008 financial crisis, small businesses have found it difficult to obtain loans that would help them expand as the economy recovers from the recession.

Many business owners are also worried about costs associated with Obama's healthcare overhaul and fear they will face higher taxes if Obama keeps a pledge to let President George W. Bush's tax cuts for wealthier income groups expire as scheduled at the end of 2010.

Obama discussed the legislation with a group of small-business owners at a sandwich shop in New Jersey on Wednesday to encourage the Senate to pass the bill before it adjourns in early August for a one-month break.

Some Republicans have cast the small-business proposal as part of what they consider government overreach by the Obama administration. But McConnell said on Thursday Republicans would be willing to support it if they were free to offer amendments.

(Reporting by Donna Smith; Editing by David Storey)

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