WASHINGTON (AP) — The federal government lurched toward a partial shutdown at midnight on Monday after Republicans stubbornly demanded changes in the nation's health care law as the price for essential federal funding and President Barack Obama and Democrats adamantly refused.
Before the midnight deadline, the White House's budget office said it was notifying federal agencies that the government will shut down Tuesday.
Sylvia Mathews Burwell, the director of the White House Office of Management and Budget, said late Monday in a memorandum to agency heads that there was no indication Congress would approve a short-term funding measure before the midnight deadline. She said federal agencies should execute their plans for an orderly shutdown.
Burwell said the Obama administration urged Congress to move quickly so critical government services could be restored.
With Congress hopelessly gridlocked, Obama said hundreds of thousands of federal workers would be furloughed and government operations ranging from veterans' centers to national parks and most of the nation's space agency would be shuttered.
He laid the blame at the feet of House Republicans, whom he accused of seeking to tie government funding to ideological demands, "all to save face after making some impossible promises to the extreme right wing of their party."
House Speaker John Boehner responded a short while later on the House floor. "The American people don't want a shutdown and neither do I," he said. Yet, he added, the new health care law "is having a devastating impact. ... Something has to be done."
The stock market dropped on fears that political gridlock between the White House and Republican Party influenced by hardcore conservative tea party lawmakers would prevail, though analysts suggested significant damage to the national economy was unlikely unless a shutdown lasted more than a few days.
While an estimated 800,000 federal workers faced furloughs, some critical parts of the government — from the military to air traffic controllers — would remain open.
Still, a shutdown would and inconvenience millions of people who rely on federal services or are drawn to the nation's parks and other attractions.
The State Department would continue processing foreign applications for visas, and embassies and consulates overseas would continue to provide services to American citizens.
Any interruption in federal funding would send divided government into territory unexplored in nearly two decades. Then, Republicans suffered grievous political damage and President Bill Clinton benefited from twin shutdowns.
Now, some Republicans said they feared a similar outcome. "We can't win," said Republican Sen. John McCain, the party's 2008 presidential candidate.
"We're on the brink," Democratic Sen. Barbara Mikulski said shortly after midday as the two houses maneuvered for political advantage and the Obama administration's budget office prepared for a partial shutdown.
On a long day and night in the Capitol, the Senate torpedoed one Republican attempt to tie government financing to changes in the health care law, referred to as "Obamacare." House Republicans countered with a second despite unmistakable signs their unity was fraying — and Senate Democrats promptly rejected it, as well.
That left the next move up to Boehner and his House Republican rank and file, with just two hours remaining before the shutdown deadline of midnight EDT (0400 GMT).
They decided to re-pass their earlier measure and simultaneously request negotiations with the Senate on a compromise, a move that some Republican aides said was largely designed to make sure that the formal paperwork was on the Senate's doorstep at the moment of a shutdown.
Whatever its intent, Senate Majority Leader Harry Reid rejected it. "That closes government. They want to close government," he said.
As lawmakers squabbled, Obama spoke bluntly about House Republicans. "You don't get to extract a ransom for doing your job, for doing what you're supposed to be doing anyway, or just because there's a law there that you don't like," he said. Speaking of the health care law that undergoes a major expansion on Tuesday, he said emphatically, "That funding is already in place. You can't shut it down."
Hours before a midnight deadline, the Senate voted 54-46 to reject a proposal by House Republicans for a temporary funding bill that would have kept the government open but would have delayed implementation of the health care law for a year and permanently repeal a tax on medical devices that helps finance it.
House Republicans countered by scaling back their demands and seeking different concessions in exchange for allowing the government to remain open. They called for a one-year delay in a requirement in the health care law for individuals to purchase coverage.
The same measure also would require members of Congress and their aides as well as the president, vice president and the administration's political appointees to bear the full cost of their own health care coverage by barring the government from making the customary employer contribution.
The vote was 228-201, with a dozen Republicans opposed and nine Democrats in favor.
Unimpressed, the White House issued a veto threat against the bill and Senate Democrats swatted it on a 54-46 party line vote about an hour later.
Obama followed up his public remarks with phone calls to Boehner and the three other top leaders of Congress, telling Republicans he would continue to oppose attempts to delay or cut federal financing of the health care law.
Obama did embrace one Republican measure Monday, signing legislation that would ensure that members of the armed forces would continue to get paid during any shutdown. The House had passed the legislation over the weekend and the Senate approved it Monday.
For all the Republican defiance, it appeared that Senate Majority Leader Harry Reid and fellow Democrats had the upper hand in the fast-approaching end game.
For the first time since the showdown began more than a week ago, there were some signs of open dissent from some Republican lawmakers from the strategy that has been carried out at the insistence of hardcore tea party-aligned conservatives working in tandem with Republican Sen. Ted Cruz of Texas.
Several Republican senators and House members said they would be willing to vote for straightforward legislation that would keep the government functioning, with no health care-related provisions.
Other Republicans sought to blame Democrats for any shutdown, but Dent conceded that Republicans would bear the blame, whether or not they deserved it.
The prospect of a shutdown contributed to a decline in stock markets around the world. U.S. stocks sank as Wall Street worried the budget fight could lead to something much worse for the economy — a failure to raise the nation's borrowing limit.
Whether or not Congress averts a shutdown, Republicans are sure to move the health care fight to a must-do measure to increase the borrowing cap, which is expected to hit its $16.7 trillion ceiling in mid-October.
Obama has vowed not to negotiate over the debt ceiling, noting that a default would be worse for the economy than a partial government shutdown.
The U.S. risks a market-rattling, first-ever default on its obligations if Congress fails to raise that limit.
Both a shutdown and a default would be politically risky ahead of next year's congressional elections.
The last time the government shut down, in 1995-1996, Republicans suffered significant political damage, and then-President Bill Clinton's political fortunes were revived in the process.
Some Republican leaders fear the public will blame their party for a shutdown if they insist on crippling health care reform. But individual House members may face a greater risk by embracing a compromise. Many represent heavily partisan congressional districts, and voters in primaries have ousted lawmakers, particularly Republicans, they see as too moderate.
Since the last government shutdown, temporary funding bills have been noncontroversial, with neither party willing to chance a shutdown to achieve legislative goals it couldn't otherwise win.
But with the 3-year-old health care law nearing implementation, tea party conservatives are determined to block it.
There are few issues Republicans feel as passionately about as the health care reform, which they have dubbed "Obamacare" They see the plan, intended to provide coverage for the millions of Americans now uninsured, as wasteful and restricting freedom by requiring most Americans to have insurance.
A crucial part of the plan will begin Tuesday, whether or not the government partially closes: enrollment in new health care exchanges for millions of uninsured Americans. That's because most of the program is paid from monies not subject to congressional appropriations.
For all the controversy about other matters, the legislation in question is a spending bill — and there was little if any disagreement about the spending-related issues.
The House and Senate have agreed to fix spending for a wide swath of federal programs at an annual level of $986 billion for the budget year that begins Oct. 1, the same as for the 12 months just ending.
Associated Press writers Andrew Taylor, Alan Fram and David Espo contributed to this report.