* Federal government funding expires on midnight Friday
* Lawmakers less optimistic they can avoid shutdown
* Two sides locked in game of brinkmanship
(New details throughout)
By Andy Sullivan and Alister Bull
WASHINGTON, April 5 With time running short,
President Barack Obama failed on Tuesday to break a deadlock in
budget talks between his Democrats and Republicans that
threatens a partial shutdown of the U.S. government.
Some lawmakers said they were losing hope they could
finalize a long-delayed budget deal to avoid a government
shutdown before funding expires at midnight on Friday.
"I am not optimistic, no I'm not," Senate Democratic Leader
Harry Reid told a news conference.
House of Representatives Republican leader Eric Cantor was
also pessimistic. A deal was "not a likelihood," he said.
Republicans and Democrats are locked in a game of
brinkmanship over how to fund the federal government for the
final six months of the 2011 fiscal year.
Full budget coverage [ID:nUSBUDGET]
Multimedia PDF format link.reuters.com/xym97r
Obama's belated intervention on Tuesday netted no gain and
both sides emerged from a meeting at the White House sticking
to their positions.
Obama said Americans wanted him and Congress to "act like
grownups" and there was no excuse for not hammering out a deal
in the next few days.
Republicans are eager to fulfill a campaign promise to cut
spending and scale back government, while Democrats oppose the
type and depth of the cuts proposed.
The dispute will set the stage for even larger budget
battles likely to last into the 2012 election campaign.
Republicans on Tuesday proposed an overhaul of
government-run health programs, dramatic tax cuts and sharp
spending caps in a budget plan for the next fiscal year, which
starts on Oct. 1. [ID:nN04296272]
Republican leaders hope the proposal by House Budget
Committee Chairman Paul Ryan will help ease pressure from
conservative Tea Party members who are forcing the party to
adopt a hardline stance in the current budget negotiations.
The deadlock in the budget talks threatens to throw
hundreds of thousands of employees out of work and ripple
through an economy still recovering from the worst recession
since the 1930s. [ID:nN05100992]
Despite negotiators earlier tentatively agreeing to slash a
record $33 billion from the budget, talks have stalled over the
details. The two sides have been unable to agree on which
government programs should be targeted.
Complicating matters, House Speaker John Boehner is now
pushing for another $12 billion in cuts in exchange for a
weeklong extension of the negotiations.
"We want the largest spending cuts that are possible,"
Boehner told reporters.
Democrats say Republicans are being unreasonable.
Boehner later held what he called a "productive" meeting
with Reid to discuss the impasse.
While the talks continued, the White House warned federal
agencies to make contingency plans in the event of a shutdown.
While the military would continue to operate and retirees
would continue to get their Social Security benefits, passport
offices, bankruptcy courts and national parks would likely
close. The Internal Revenue Service would continue to collect
taxes but would probably not issue refunds.
SHUTDOWN ODDS CLIMB TO 60 PERCENT
Financial markets would likely not be affected by a
shutdown as the Treasury Department would continue to make debt
payments, analysts said, but state and local governments could
see their own budget woes worsen.
Investors are more concerned the government might be forced
to default on its debt if Congress does not raise the country's
$14.3 debt ceiling within the next few weeks. Failure to do so
would be "catastrophic," Treasury Secretary Timothy Geithner
Prediction market Intrade, which allows people to bet on
the outcome of events, showed investors are gambling there's a
60 percent chance the government will shut down by June 30, up
from 40 percent earlier in the day.
Obama has been criticized by both parties for remaining
aloof from a budget battle that has consumed Capitol Hill since
the beginning of the year.
His late entry into the budget battle marks an attempt both
to play the dealmaker and to avoid blame if Republicans and
Democrats fail to forge agreement in time.
"The strategy follows the political logic of President
Obama's whole career, which is to avoid messy battles which
make you appear to be a partisan," said Ross Baker, a political
science professor at Rutgers University.
Boehner, meanwhile, must contend with a different kind of
political pressure. In his first big test since Republicans won
control of the House last year, Boehner faces a brewing mutiny
on his right flank.
Many members of his party, heeding the Tea Party movement,
have shown little appetite for compromise and may not back a
deal that Democrats find acceptable.
(Additional reporting by Jeff Mason, Caren Bohan, David
Lawder, Rachelle Younglai, Donna Smith and Thomas Ferraro;
Editing by Doina Chiacu, Ross Colvin and Todd Eastham)