Obama warns of "Scrooge" Christmas without tax-cut extension

HATFIELD, Pennsylvania (CNN) -- Stumping for a deal to avoid automatic tax increases and spending cuts that will otherwise hit at year's end, President Barack Obama on Friday toured a Pennsylvania toy factory that's churning out would-be holiday gifts, warning of a "Scrooge" Christmas if Congress does not pass legislation extending tax cuts for 98% of Americans.

"Let's get that done. Let's go ahead and take the fear out for the vast majority of American families so they don't have to worry about $2,000 coming out of their pockets next year," Obama said after touring the Rodon Manufacturing Group plant in Hatfield, Pennsylvania.

The plant makes K'Nex toys, which Obama jokingly offered to congressional members who make his "nice list."

Addressing the tax-cut extension for lower- and middle-class famllies is the most urgent "ticking clock" among the provisions in the "fiscal cliff" package of automatic tax increases and spending cuts that will take effect January 1 if lawmakers and the administration can't reach a compromise, Obama said.

Without the cut, the administration has argued many Americans could pull back on purchasing during the crucial holiday shopping season. On Friday, Obama warned it could lead to a "Scrooge" holiday.

The Democrat-controlled Senate has already passed legislation calling for the extension. House Republicans who oppose any tax increase have balked at separating consideration of the broader tax-cut extension and Obama's proposal to raise income tax rates on the top 2% of Americans.

Obama accused House Republicans of holding a policy Democrats and Republicans agree on -- keeping tax rates lower for most Americans -- "hostage" to their insistence that taxes not go up for anyone.

"That doesn't make sense," he said.

The president urged Americans to flood Congress with calls, letters and social networking messages urging them to dispense with one the issue.

On Thursday, the administration unveiled details of a comprehensive package to avert the looming "fiscal cliff."

Obama's proposal calls for $1.6 trillion in new taxes, including higher tax rates on families making more than $250,000.

Obama also wants to close loopholes, limit deductions, raise the estate tax rate to 2009 levels and increase taxes on capital gains and dividend taxes.

The proposal also calls for additional spending, including a new $50 billion stimulus package, a home mortgage refinancing plan, and an extension of unemployment insurance benefits. It would also extend the payroll tax cut passed early in Obama's administration to give taxpayers more money to spend.

In return, multiple sources told CNN that Obama is offering $400 billion in new cuts to Medicare and other entitlement programs. Specifics would be decided next year, the sources said.

Republican aides said the $1.6 trillion was higher than previously discussed. Democrats said the number should not be a surprise, adding Obama discussed it on the campaign trail.

"It's time for Republicans in Washington to join the chorus of other voices -- from the business community to middle class Americans across the country -- who support a balanced approach that asks more from the wealthiest Americans," the White House said in a statement.

Longer term, analysts and the Congressional Budget Office have said that going over the cliff would threaten millions of jobs, especially those dependent on government contracting, and risk a return to recession.

Wall Street and other big business are lobbying the administration and lawmakers to reach a deal. Investors have been grappling with the uncertainty over the prospect of higher taxes and damaged consumer confidence caused by political gridlock over deficits and the debt.

House Speaker John Boehner declared himself disappointed that "no substantive progress" has occurred in two weeks of talks, saying Republicans were waiting for the White House to propose significant spending cuts.

For their part, Senate Democrats say Obama has made his positions clear -- especially his call to extend middle-class tax cuts while allowing rates on the wealthiest 2% of Americans to return to higher rates of the 1990s.

On Thursday, Senate Democratic leader Harry Reid responded to Boehner by telling reporters: "I don't understand his brain."