UPDATE 5-Obama urges feuding U.S. Congress to avoid shutdown
* Weekend sessions of Congress set
* Senate bill would operate government for six weeks
* Defiant House Republicans seek one-year Obamacare delay
WASHINGTON, Sept 27 (Reuters) - President Barack Obama sternly warned the U.S. Congress on Friday against a government shutdown on Oct. 1 as lawmakers struggled to pass an emergency spending bill that Republicans want to use to defund Obama's healthcare reform law.
While there was still a chance of averting a shutdown, time was running out as House of Representatives Republicans fought with each other over the next steps.
"Over the next three days, House Republicans will have to decide whether to join the Senate and keep the government open or shut it down because they can't get their way on an issue that has nothing to do with the deficit," Obama said in a statement to reporters at the White House.
Earlier on Friday, the Senate, as expected, passed a straight-forward emergency-funding measure to keep the government running through Nov. 15. But first, it stripped out Republican language to end funding for the healthcare law known as Obamacare.
The House could vote on that measure in an unusual Saturday or Sunday session. But all indications were that Republicans would tack on a new measure to that bill, which likely would be rejected by the Senate and make a shutdown all the more likely.
Hours after Obama spoke, Representative Tom Graves of Georgia, a conservative Republican, said he and 61 of his colleagues would seek passage of a one-year delay of Obamacare as part of an emergency funding bill.
Michael Steel, a spokesman for House Speaker John Boehner, had no comment on whether Graves' amendment would be the path Republicans would take this weekend. "We're reviewing our options and will discuss them with members tomorrow," he said.
Although some government functions like national security would continue, a shutdown could hit activities ranging from school lunch programs for poor children and paying U.S. troops to foreign embassy operations.
Before the Senate passed its bill to keep the lights on in government buildings, Senate Majority Leader Harry Reid, a Democrat, said the measure would "send a message to radical Republicans" that they should climb on board with a simple extension of federal funding at current levels.
Taunting Boehner, Reid told reporters the Senate bill would overwhelmingly pass the House "if the speaker had the courage" to bring it up for a vote.
But Boehner had some political realities to consider. Representative Richard Hudson, a North Carolina Republican, said: "I think it would be devastating for the speaker's support" among Republicans if he went ahead with a bill that needed a lot of Democratic support to pass because of Republican opposition.
Meanwhile, business groups, including the U.S. Chamber of Commerce, urged Congress to promptly pass the spending bill and raise the limit on government borrowing.
Concern over fiscal negotiations in Washington sent the dollar to a 7-1/2-month low and pressured world equities on Friday.
The impasse has sent the cost of insuring against a U.S. debt default to its highest since May.
A PARTIAL SHUTDOWN
A shutdown would likely result in up to 800,000 federal employees being furloughed. The most visible sign to the public, if past shutdowns are a guide, are museum closings in Washington that outrage tourists and attract television cameras, and possible delays in processing tax filings, for example.
But the government does not grind to a halt.
Large swaths of "essential" activity continue, including benefit checks and national security-related operations. Government agencies were in the process of determining which employees would be considered essential and which not.
Obamacare would continue to be implemented, beginning a period of open enrollment on Tuesday for individuals to purchase insurance.
Various agencies on Friday began announcing plans for next week in the event of a shutdown. For example, the Labor Department said its flow of employment statistics, which are closely watched by financial markets, would be disrupted.
The key 79-19 vote to end debate on the Senate bill was a defeat for Tea Party-backed Republican Senator Ted Cruz, who tried to tie up the Senate all week with demands that government funds be denied until Obama's healthcare law was put on ice. Fewer than half of his fellow Republicans supported him.
Cruz, speaking to reporters after the vote, urged the House to continue fighting to scuttle Obamacare, which he argues will hurt the U.S. economy.
Indicative of lawmakers' desperation, many mulled the possibility of passing a bill to keep the government running for a very short period of time to avert a shutdown and provide more time to work out a longer-term deal.
Representative Shelley Moore Capito of West Virginia, a senior House Republican, told Reuters: "People are talking about a 10-day CR," a so-called continuing resolution to fund the government through Oct. 10.
That could put the subsequent temporary funding bill on a similar timetable to a debt limit increase that Congress must pass or risk a government default on its loans.
As lawmakers stared down the midnight Monday deadline when the current fiscal year ends - and government funding along with it - Senate officials worked feverishly to transmit the newly passed spending bill to the House.
Earlier, Republican Senator John McCain blamed members of his own party for the difficulties in passing legislation to fund the government beyond Monday. Congress also faces the hard task of raising the limit on federal borrowing authority, which Republicans are targeting for controversial add-ons.
Without a debt limit increase by Oct. 17, Treasury Secretary Jack Lew has warned, the United States would have a difficult time paying creditors and operating the government.
"We are dividing the Republican Party rather than attacking Democrats. We are now launching attacks against Republicans ... so it's very dysfunctional," McCain said on the CBS program "This Morning."
Other lawmakers also expressed frustration with their fellow Republicans' demands to win on Obamacare, even though the Supreme Court has upheld most of the law.
"There's a lot of exasperation by those of us who want to move the ball forward and in a rational way," Capito said. "By rational, I mean trying to achieve the achievable."
Tea Party conservatives' insistence on using these two important fiscal bills to advance their small-government agenda comes as a new Gallup Poll shows the country's patience with them could be wearing thin, even though there still are a significant number of backers.
According to the poll, 22 percent of U.S. adults think of themselves as supporters of the movement, down 10 points from the apex of Tea Party popularity in 2010, when they influenced enough elections to return House control to Republicans.
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