President Obama today said there is no reason for the government to shut down over the fight to extend the payroll tax cut and warned lawmakers again not to leave town for the holidays until this issue is resolved.

"There's no reason why we shouldn't be able to extend these items - the payroll tax cut, [unemployment insurance] - before the holidays. There's no reason the government should shut down over this," Obama said during remarks at a "We Can't Wait" event at the White House. "I expect all of us to do what's necessary in order to do the people's business and make sure that it's done before the end of the year."

The president pressed lawmakers to extend the payroll tax cut before it expires at the end of the year and warned that if they don't, 160 million middle class Americans would see their taxes go up on Jan. 1.

Democrats had sought to prevent passage of the spending bill out of fear that if the federal government was funded, Republicans would recess before acting on the tax cut bill. If a spending deal, or a temporary stop-gap measure, is not reached by Friday, much of the federal government will shut down.

"Let me repeat that: Congress should not and cannot go on vacation before they have made sure that working families aren't seeing their taxes go up by a thousand dollars and those who are out there looking for work don't see their unemployment insurance expire," Obama said.

The president's comments came as congressional leaders expressed optimism that a deal could be reached to resolve differences on a bill to keep the government running and extend the payroll tax holiday.