House unexpectedly defeats spending bill

U.S. President Barack Obama receives a standing ovation as he addresses a Joint Session of Congress inside the chamber of the House of Representatives on Capitol Hill in Washington September 8, 2011.

WASHINGTON (Reuters) - The U.S. House of Representatives unexpectedly defeated a bill that would fund the federal government past September 30 on Wednesday as dozens of Republicans broke with their party to push for deeper spending cuts.

The measure failed by a vote of 195 to 230, with 48 of the chamber's most conservative Republicans joining Democrats in opposition.

It was an embarrassment for House Republican leaders who have at times struggled to rein in rank-and-file conservatives.

"This is a democracy. This is the sausage factory," said Appropriations Committee Chairman Hal Rogers, who sponsored the bill.

The surprise outcome could further rattle consumers and investors who have been unnerved by the high-stakes budget battle that has played out in Washington this year. Congress pushed the government to the brink of a shutdown in April and the edge of default in August.

Republican leaders said they would figure out a way to pass the spending bill and avoid a government shutdown that would affect everything from national parks to scientific research.

"There is not going to be a shutdown. Everybody needs to relax," said Representative Eric Cantor, the No. 2 House Republican, as he emerged from a meeting with other top Republicans after the vote.

The bill would have funded the government at an annual rate of $1.043 trillion, in line with a bipartisan agreement reached in August. Many conservatives want to stick with the lower figure of $1.019 trillion that the House approved in April.

Republican leaders got little help from Democrats, who objected to a $1.5 billion cut to an electric vehicle loan program. Republicans included the cut to offset the cost of increased disaster aid.

Republicans might remove that cut to pick up Democratic support, an aide said -- an action that could further alienate conservatives.

That would be a big victory for Democrats, who want to double the amount of disaster aid in the bill and ensure that it is not paired with further spending cuts.

"At the bottom line, the disaster victims have to be treated far more fairly than they did today," said Democratic Senator Charles Schumer.

Facing rock-bottom approval ratings, lawmakers from both parties are eager to show voters that they can act quickly to approve aid for victims of floods, tornadoes and other disasters in one of the most extreme years for weather in U.S. history.

The Federal Emergency Management Agency has requested $5.1 billion to replenish its disaster fund, which could dry up entirely next week. FEMA has has already suspended rebuilding efforts across the country.

(Additional reporting by Richard Cowan, Donna Smith and Thomas Ferraro; Editing by Eric Walsh)