* Time to avoid shutdown dwindles as Republicans, Democrats dig in
* Obama appears resigned to a shutdown in remarks to reporters
* House and Senate toss rival bills back and forth
* One million federal workers face furlough after midnight
By David Lawder and Susan Heavey
WASHINGTON, Sept 30 The U.S. Congress, still in partisan deadlock on Monday over Republican efforts to halt President Barack Obama's healthcare reforms, was on the verge of shutting down most of the U.S. government starting on Tuesday morning.
With the law funding thousands of routine government activities set to expire at midnight, Republicans in the U.S. House of Representatives were still insisting that any temporary measure to fund the government include a delay of Obamacare, knowing that it would be rejected by the Democratic-controlled Senate, as it was Monday afternoon for second time in a week.
There was little doubt how it would end without a last-minute compromise - in a shutdown that would leave some essential functions like national security intact but cut many regulatory agencies back to a skeleton staff.
Neither body wants to get stuck holding the funding measure at midnight, for fear of being identified as the one that ultimately didn't pass it, leading to the game of hot potato with rival funding bills that is in its second week.
Asked late in the day if Republicans would send an anti-Obamacare version of the funding measure back to the Senate for a third time, Representative Marsha Blackburn of Tennessee said, "Oh my goodness gracious, we're going to keep going. We're keeping the government open."
At 5 p.m. (2100 GMT) Obama appeared resigned to a shutdown, stepping into the White House press room to reiterate that the shutdown would be the fault of the "extreme right wing" of the Republican Party, referring to the conservative Tea Party.
He also reassured the public that while poor people and seniors, among others, would continue to receive benefit checks in the event of a shutdown, many other functions of government would grind to a halt, throwing "a wrench into the gears of our economy."
And he taunted Republicans about the health reforms known as Obamacare. It "takes effect tomorrow no matter no matter what Congress decides to do today ... you can't shut it down."
Americans are split over whether funding for Obama's signature healthcare law should be linked to measures that pay for U.S. government operations, but more will blame Republicans if the government has to shut down on Tuesday, according to a new Reuters/Ipsos poll.
The duration of the "funding gap," the bureaucratic term for a partial government shutdown, would depend on when lawmakers finally approve a funding bill.
Some functions deemed essential, such as U.S. Department of Agriculture meat inspections, would continue. Other agencies, like the Environmental Protection Agency, will furlough most of their workers.
A shutdown would continue until Congress resolves its differences. That could be a matter of days, or weeks.
The standoff did not bode well for the next political battle, a far-more consequential bill to raise the federal government's borrowing authority. Failure to raise the $16.7 trillion debt ceiling by mid-October would force the United States to default on some payment obligations - an event that could cripple its economy and send shockwaves around the globe.
Global stock markets fell on Monday as investors worried about the prospects of a partial U.S. government shutdown. The Dow Jones industrial average ended 0.8 percent lower. The dollar, which had been down 0.4 percent against a basket of six major currencies, was down just .07 percent in late Monday trade as some traders saw hope for a last-minute deal.
"The government is such an important part of the entire economy, between the people it employs and the impact it has on consumer confidence," said Nicholas Colas, chief market strategist at the ConvergEx Group in New York. "The size of the selloff is logical given the stakes."