Obama rules out extending Bush-era cuts while pledging tax relief for middle class

President Barack Obama Wednesday warned the United States could not afford the 700-billion-dollar bill to extend Bush-era tax cuts for the rich, picking a populist fight with Republicans.

Obama staked out a political position which will reverberate through the campaign ahead of mid-term elections in November in which his Democrats fear heavy losses.

"We are ready for this week, to give tax cuts to every American making 250,000 dollars or less," Obama said in a major economic speech in Cleveland, Ohio.

"For any income over this amount, the tax rates would go up to what they were under President (Bill) Clinton.

"This is not to punish folks who are better off -- it's because we can't afford the 700-billion-dollar price tag."

Republicans want all the tax cuts passed by ex-president George W. Bush to be renewed before the expire at the end of his year.

They argue that Obama will slow growth by hiking taxes on the rich, and deter some small business owners from creating jobs.

"Americans want jobs, not more government, more debt and more taxes," said Senate Republican minority leader Mitch McConnell.

"Let’s start today with a declarative statement against tax hikes on the small businesses that are critical to expand and create jobs."