The Congress on Thursday neared a budget deal to avert a looming government shutdown but disputes over abortion and environmental issues posed late hurdles to a final agreement.

With time running short, Republicans in the House of Representatives planned an afternoon vote on a stop-gap measure to push Friday's midnight deadline back a week, although Senate Democratic leader Harry Reid called the plan a non-starter.

Congressional negotiators worked deep into the night to find a compromise that can keep more than 800,000 government workers in their jobs, but Reid said he was less optimistic now than he was last night after a White House meeting with Republican House Speaker John Boehner.

The numbers are basically there, Reid said of budget talks as the Senate opened on Thursday. But he said Republican policy provisions on hot-button issues such as abortion and the Clean Air act could scuttle the talks.

I am not nearly as optimistic, and that's an understatement, as I was 11 hours ago, Reid said.

If this government shuts down, and it looks like it's headed in that direction, it's going to be based on our friends in the House of Representatives, the leadership over there, focusing on ideological matters, he said.

President Barack Obama and Vice President Joe Biden scheduled another meeting with Reid and Boehner to work toward a budget deal for 1 p.m. EDT.

With the U.S. economy in the early stages of a recovery from the worst recession since the 1930s, Obama told reporters after a late-night Wednesday meeting at the White House that a government shutdown would have ramifications all across this economy.

He said a shutdown could hit small business owners, applicants for home loans and workers who would be left without paychecks as the result of federal layoffs.


Administration officials have warned a government shutdown could halt the processing of income tax refunds right in the heart of the refund season. Various government agencies were notifying their workers of the possibility of layoffs if negotiations failed.

A final deal would clear the way for the House and Senate to vote at some point on funding the federal government through September 30 and put an end to a months-long fight over spending for the fiscal year that is now half over.

A Democratic congressional aide said total spending cuts for the remainder of this fiscal year would probably end up closer to $33 billion than the Republicans' $40 billion target, although a Republican aide said their side was still pushing for closer to $40 billion.

The Republican aide said the two parties have agreed on the composition of a large portion of the spending cuts.

The Republican said a temporary stop-gap measure will probably be needed beyond Friday because staffers will not have time to turn a permanent agreement into a bill. Democrats have repeatedly said they will not support another stop-gap bill.

Boehner plans a Thursday House vote on a one-week, stop-gap funding bill that would include $12 billion in additional spending cuts and assure Pentagon funding through September 30.

Republicans hope House passage would put further pressure on the Senate to act, but Democrats oppose the legislation.

That's just not bad policy, it's a fantasy, Reid said.

Late on Wednesday, a House committee passed a Republican budget blueprint for 2012 that was unveiled on Tuesday. It would slice about $6 trillion more in spending over the next decade, largely through Medicare and Medicaid healthcare benefit cuts to the elderly and poor. Senate Democrats are expected to block it.

(Additional reporting by Donna Smith and David Morgan; Writing by John Whitesides; Editing by Vicki Allen)