* Republicans accuse Democrats of election-year politics

* Obama had urged the Senate to approve bill

* Senate leaders hold out hope of a deal for passage

(Adds details, new materials throughout)

By Donna Smith

WASHINGTON (Reuters) - U.S. 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)