* Obama calls for up-or-down vote on small business bill

* Reid hopeful that Senate can act on bill next week

By Ross Colvin

WASHINGTON (Reuters) - U.S. President Barack Obama
Saturday accused Republicans of holding American small
businesses "hostage to politics" after Republican senators
refused to back a $30 billion small-business lending package.

Senate Republicans blocked the package Thursday, dealing
a fresh blow to Obama's efforts to show Americans, in the midst
of a tough election year, that his administration is focused on
tackling stubbornly high unemployment.

With opinion polls showing eroding support for Obama's
handling of the economy, Democrats fear voters will punish them
for the 9.5 percent unemployment rate come November, when 435
seats in the House of Representatives and 37 of the 100 seats
in the Senate will be in play in mid-term elections.

"I'm calling on the Republican leaders in the Senate to
stop holding America's small businesses hostage to politics,
and allow an up-or-down vote on this small business jobs bill,"
Obama said in his weekly radio and Internet address.

"Understand, a majority of senators support the plan. It's
just that the Republican leaders in the Senate won't even allow
it to come up for a vote," he said.

Democratic leaders failed on Thursday to muster the 60
votes needed to advance the measure over Republican
objections.

Republicans are upset that Democrats shut them out during
discussions to amend the package, which they say is another
example of Obama's overreach in government spending.

Senate majority leader Harry Reid is hopeful that a deal
can still be reached that would allow the Senate to act on the
bill next week.

But even if the Senate passes the bill, it would be too
late to get it to Obama's desk before mid-September.

The House, which passed its version of the bill in June, is
set to begin a six-week break on Friday. It will be unable to
vote on the version passed by the Senate until then.

It was at least the third time in a week that Obama had
called on Republicans to back the bill.

The bill provides for a $30 billion fund to invest in
community banks to bolster lending. It also would provide tax
credits and a limited capital gains exemption.

Small businesses, which account for two-thirds of jobs
created in the United States, have been hit hard by the credit
crunch, making it difficult for them to expand.
(Editing by Jackie Frank)