US budget: Talks go on as government shutdown looms

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Republicans and Democrats are continuing urgent efforts to reach a deal on spending cuts, as they seek to avert an imminent government shutdown.

Republicans in the House have been summoned to a late-night meeting but leaders say no deal has been agreed.

Top Democrat Harry Reid earlier said both sides had agreed to $38bn (£23bn) in cuts but were unable to agree on federal funding for abortion.

Without a new budget, the US government will shut down at midnight on Friday.

If that occurs, some 800,000 government employees will be barred from working and will not be paid, government lending will cease and national parks and other government-run sites will close.

In the event of a shutdown, the US military would continue to operate but troops would not be paid until the deadlock was broken.

'Roll over'

Rumours of a possible deal circulated on Friday night as the clocked ticked down towards the deadline, but congressional leaders on both sides sought to play down expectations.

Members of the House of Representatives have been called into a closed-door update on the budget negotiations.

But Republican Representative Jeb Hensarling said beforehand an agreement on spending cuts had not yet been hammered out.

News of the meeting came after House Speaker John Boehner and Mr Obama spoke by phone on Friday evening, their second call of the day, but details of the conversation were not disclosed.

In a news conference earlier, Mr Boehner said most of the "policy issues have been dealt with and the biggest fight is over the spending".

He said he was hopeful an agreement could be reached, but that Republicans were not going to "roll over".

"Our goal is not to shut down the government; our goal is to cut spending," he said.

The Democrats say talks are deadlocked because their opponents insist on having new rules about abortion included in the bill, which will only in practice affect cancer screening.

BBC North America editor Mark Mardell notes that while President Obama has made it clear a shutdown would damage the fragile US economic recovery, it would also do huge damage to the already battered image of Washington politicians.

It is hard to say which party would be hurt the most and for that reason alone, a last-minute deal is likely, even if the rhetoric suggests otherwise, our correspondent adds.

White House spokesman Jay Carney said Mr Obama spoke separately to Mr Boehner and Democratic Senate Majority Leader Harry Reid on Friday morning.

"Discussions between the leaders and the White House aimed at reaching a budget agreement are continuing," Mr Carney said in a statement.

Government closure

The last US government shutdown came in 1995, amid a dispute between the Republican Congress and Democratic President Bill Clinton's White House.

That shutdown lasted for 20 days and was estimated to have shaved a full percentage point off US economic growth for one quarter of the year.

This time around, talks have been stalled for days as Republicans - urged on by the fiscally conservative Tea Party movement - push for larger budget cuts than Democrats are willing to concede.

Mr Obama held two sessions of talks on Thursday with Mr Boehner and Mr Reid and said then that he was "not yet prepared to express wild optimism" that a deal would be reached.

Republicans in the US House have pushed for $61bn (£37.4bn) in cuts between now and the end of the fiscal year on 30 September, and have sought to use the budget bill to dismantle Democratic policy priorities.

The Democrats have accepted cuts of more than $33bn (£20bn) from last year's levels but say the size of the cuts Republicans demand would hinder the nascent US economic recovery.

A leading House Democrat, Steny Hoyer, said on Friday that lawmakers had come "70% of the way on the numbers" but were still fighting over social policies - such as on abortions and the environment - attached to the legislation.

"I think we're very close. We have come 70% of the way in terms of dollars. That's a long way to go in terms of trying to reach compromise," he said.

The US government has subsisted without a long-term budget since 1 October, funded by a series of temporary measures.

The most recent of those is set to expire at midnight on Friday, forcing all government services deemed non-essential to shut down and keeping hundreds of thousands of government workers at home.

Republicans in the House approved the temporary stop-gap measure on Thursday, which would cut $12bn from spending in a single week.

Mr Obama said in a statement that the US government could not continue to operate on a week-to-week basis and that he would veto the Republican bill if it arrived on his desk.