WRAPUP 5-US 'fiscal cliff' talks turn sour, Obama threatens veto

* Obama says Republicans have a personal grudge

* President would veto Republican's "Plan B"

* Senate Republican says deal still possible this week

WASHINGTON, Dec 19 (Reuters) - The conflict over the stalled

"fiscal cliff" talks grew more heated Wednesday and threatened

to become even more so Thursday when the action is expected to

shift for the first time to the floor of the U.S. House of

Representatives.

In the absence of a bipartisan agreement, the Republican

leadership of the House plans to move a bill of its own to the

floor Thursday to avert the steep tax hikes and budget cuts set

for January.

But instead of serving as a show of unity for Republicans in

their wrangling with Democratic President Barack Obama, the

so-called Republican "Plan B," which was still evolving late

Wednesday, was exposing internal fractures because it includes a

tax hike on those earning $1 million or more, dividing anti-tax

conservatives.

The planned action by Republicans angered President Barack

Obama Wednesday, who accused opponents of holding a personal

grudge against him.

As a year-end deadline nears, Obama and House of

Representatives Speaker John Boehner are locked in intense

bargaining over a possible deal to avoid the so-called fiscal

cliff of harsh tax hikes and spending cuts that could badly

damage an already weak economy.

Obama said he was puzzled over what was holding up the talks

and told Boehner's Republicans to stop worrying about scoring "a

point against the president" or forcing him into concessions

"just for the heck of it."

"It is very hard for them to say yes to me," he told a news

conference in the White House. "At some point, you know, they've

got to take me out of it."

The rise in tensions threatens to unravel significant

progress made over the last week.

Boehner and Obama have each offered substantial concessions

that have made a deal look within reach. Obama has agreed to

cuts in benefits for seniors, while Boehner has conceded to

Obama's demand that taxes rise for the richest Americans.

However, the climate of goodwill has evaporated since

Republicans announced plans on Tuesday to put an alternative tax

plan to a vote in the House this week that would largely

disregard the progress made so far in negotiations.

On Wednesday, Obama threatened to veto the Republican

measure, known as "Plan B," if Congress approved it.

Boehner's office slammed Obama for opposing their plan. "The

White House's opposition to a backup plan ... is growing more

bizarre and irrational by the day," Boehner said through his

spokesman, Brendan Buck.

Boehner expressed confidence the House would pass the

legislation on Thursday, but Wednesday night it was still

unclear exactly what it would contain. That was reflected in a

late meeting of the Rules Committee of the House, which was

supposed to prepare the legislation for the floor but had little

actual wording in front of it as it struggled to complete its

task.

In an eleventh hour effort to avoid a potential defeat at

the hands of some of his own party members over the tax hike,

Boehner added spending cuts to Plan B that would convince

conservatives it was worth a risky vote.

Any fiscal cliff agreement by Obama and the Republican

leadership would need the support of their parties' rank and

file in Congress, and Thursday's vote on Plan B will be a test

of Boehner's ability to deliver votes on any eventual deal.

In an effort to help Boehner out, anti-tax activist Grover

Norquist gave his blessing to the bill.

But other conservative groups, including the influential

Club for Growth, were urging Republicans to vote against Plan B.

Wall Street is on edge over the fiscal cliff talks although

investors still expect a deal. The S&P 500 stock index slipped

0.76 percent on Wednesday.

Business leaders have descended on Washington to lobby for a

deal to avoid going over the cliff while putting public finances

on a more sustainable path. Without an agreement to narrow

deficits over the long run, the United States could eventually

lose investors' trust, triggering a debt crisis.

An acrimonious presidential campaign that culminated in

Obama's re-election on Nov. 6 has added to the bad blood in

Washington between Obama and congressional Republicans.

The two sides also clashed bitterly last year over the

government's limit on borrowing - known as the debt ceiling - an

episode that nearly led the nation to default on its debt.

On Wednesday, Obama said the fiscal cliff must not get

bogged down with negotiations over the debt ceiling, an issue

that must be dealt with again early next year.

But Boehner's offer to raise the debt ceiling enough for

another year of borrowing is facing opposition from a large

group of Republicans, a House Republican aide said.

LITMUS TEST

Obama and Boehner appeared to have bridged their biggest

ideological differences but remain hung up on the mix of tax

hikes and spending cuts meant to narrow the budget gap.

"What separates us is probably a few hundred billion

dollars," Obama said.

The White House wants taxes to rise on household incomes

above $400,000 a year, a concession from Obama's opening

proposal for a $250,000 income threshold.

Senior administration officials described negotiations as at

a standstill and Obama warned he would ask everyone involved in

the talks, "what it is that's holding it up?"

Still, the top Republican in the Senate said a resolution to

the stalemate could come by the end of the week.

"There's still enough time for us to finish all of our work

before this weekend, if we're all willing to stay late and work

hard," said Senate Republican leader Mitch McConnell.

Obama had his own problems with Democrats, many of whom

dislike the president's offer to reduce benefits to seniors,

although some political allies of Obama have given signs they

feel they could swallow this concession.

"I don't like these particular changes," said Democratic

Representative Chris Van Hollen, a member of the House

leadership from Maryland. But he added: "What people are seeing

is the president willing to compromise in order to get things

done."

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