With time running out, an ideological battle over abortion and environmental issues threatened on Thursday to scuttle a congressional deal to avert a looming government shutdown.
The mood shifted from optimism to pessimism as Democratic and Republican leaders in the U.S. Congress blamed each other for a failure to agree on billions of dollars in spending cuts that would keep the government operating beyond the midnight Friday deadline.
Republicans in the House of Representatives planned an afternoon vote on a stop-gap measure to push the deadline back a week, but Senate Democratic leader Harry Reid called it a "non-starter" and President Barack Obama promised to veto it.
Congressional negotiators worked through the night toward a compromise that would keep more than 800,000 government workers in their jobs, but Republican House Speaker John Boehner said "we were closer to a number last night than we are this morning."
Democrats said there was general agreement on the numbers in the deal, and Reid blamed the impasse on a dispute over Republican policy provisions involving Planned Parenthood and the Environmental Protection Agency.
He said fiscal conservatives aligned with the Tea Party movement were driving the process by pushing an "extreme" agenda and cheering for a shutdown.
"I am not nearly as optimistic, and that's an understatement, as I was 11 hours ago," Reid said.
"If this government shuts down, and it looks like it's headed in that direction, it's going to be based on our friends in the House of Representatives, the leadership over there, focusing on ideological matters," he said.
WHITE HOUSE MEETING
Reid and Boehner began a White House meeting with President Barack Obama and Vice President Joe Biden to renew talks on a budget deal.
With the U.S. economy in the early stages of a recovery from the worst recession since the 1930s, Obama told reporters after a late-night Wednesday meeting at the White House that a government shutdown would have "ramifications all across this economy."
He said a shutdown could hit small business owners, applicants for home loans and workers who would be left without paychecks as the result of federal layoffs.
Administration officials have warned a government shutdown could halt the processing of income tax refunds right in the heart of the refund season. Various government agencies were notifying their workers of the possibility of layoffs if negotiations failed.
A final deal would clear the way for the House and Senate to vote at some point on funding the federal government through September 30 and put an end to a months-long fight over spending for the fiscal year that is now half over.
The House will vote on Thursday on a one-week funding bill that would include $12 billion in additional spending cuts and assure Pentagon funding through September 30.
Republicans hope House passage would put further pressure on the Senate to act, but Democrats oppose the legislation. "That's just not bad policy, it's a fantasy," Reid said. He said Senate Democrats would pass a stop-gap extension that did not include spending cuts or policy restrictions.
A Democratic congressional aide said a final deal on total spending cuts for the remainder of this fiscal year would probably end up closer to $33 billion than the Republicans' $40 billion target, although a Republican aide said their side was still pushing for closer to $40 billion.
(Additional reporting by Donna Smith, David Alexander, Richard Cowan, Thomas Ferraro and David Morgan; Writing by John Whitesides; Editing by Vicki Allen)