President Obama: “There are a few issues that are outstanding… so I’m not prepared to express wild optimism”
Crisis talks over bitterly disputed US spending cuts are still taking place as the deadline looms to strike a deal and avoid a government shutdown.
President Barack Obama said progress had been made after night-time talks with congressional leaders.
He said he was not prepared to express “wild optimism” but hoped to be able to announce a deal on Friday morning.
Without a deal, the law funding most of the US government will expire at midnight, forcing services to cease.
Some 800,000 government employees would be barred from working and would not be paid, government lending would cease and national parks and other government-run sites would close.
The US military would continue to operate but troops would not be paid until the deadlock was broken.
BBC North America editor Mark Mardell, in Washington, says both Republicans and Democrats might be damaged by a shutdown and may pull back from the brink.
But this is only a dress rehearsal for bigger rows about next year’s budget, the deficit as a whole and the debt ceiling, and each time doing a deal will become that bit more difficult, our correspondent adds.
“Even if a breakdown is averted today, there are many more moments yet to come over budget, debt and deficit – late night crisis meetings at the White House may become a fixture”
Mark Mardell BBC North America editorRead Mark’s thoughts in full
The last US government shutdown came in 1995, amid a dispute between the Republican Congress and Bill Clinton’s White House.
That shutdown lasted for 20 days and was estimated to have shaved a full percentage point off US economic growth for one quarter of the year.
This time around, talks have been stalled for days as Republicans – urged on by the fiscally conservative Tea Party movement – push for larger budget cuts than Democrats are willing to concede.
Mr Obama held two sessions of talks on Thursday with the Republican Speaker of the House of Representatives, John Boehner, and the Democratic Senate majority leader, Harry Reid.
The president spoke after the second session ended without an agreement.
“I’m not yet prepared to express wild optimism but I think we are further along today than yesterday,” he said.
The White House then announced that his planned trip to the state of Indiana on Friday had been postponed.
Republicans in the US House have pushed for $61bn (£37.4bn) in cuts between now and the end of the fiscal year on 30 September, and have sought to use the budget bill to dismantle Democratic policy priorities.
The Democrats have accepted cuts of more than $33bn (£20bn) from last year’s levels but say the size of the cuts Republicans demand would hinder the nascent US economic recovery.
Our correspondent Adam Brookes says there is an ideological dimension to the dispute, with the Republicans calling for budget cuts in areas, such as abortion and environmental protection, that Democrats want to see protected.
A leading House Democrat, Steny Hoyer, said on Friday that lawmakers had come “70% of the way on the numbers” but were still fighting over social policies – such as on abortions and the environment – attached to the legislation.
“I think we’re very close. We have come 70% of the way in terms of dollars. That’s a long way to go in terms of trying to reach compromise,” he said.
Looking tired, Mr Obama spoke late on Thursday after leaving the cross-party meeting, which also included Vice-President Joe Biden.
“My hope is that I’ll be able to announce to the American people some time relatively early in the day that a shutdown has been averted, that a deal has been completed,” he said.
“There’s no certainty yet.”
He said his administration had spent the past two years trying to right the ailing US economy and that he feared a government shutdown would derail signs of recovery seen recently.
“For us to go backwards because Washington couldn’t get its act together is unacceptable,” he said.
Meanwhile, Mr Boehner and Mr Reid said in a joint statement they would work through the night “to attempt to resolve our remaining differences”.
Throughout the day on Thursday, congressional leaders from both parties insisted no deal had been reached but also said they were optimistic one could be struck before a temporary measure funding the US government expired.
The US government has subsisted without a long-term budget since 1 October, funded by a series of temporary measures.
The most recent of those is set to expire at midnight on Friday, forcing all government services deemed non-essential to shut down and keeping hundreds of thousands of government workers at home.
Republicans in the House approved another temporary measure on Thursday – but one that would cut $12bn from spending in a single week.
Mr Obama said in a statement that the US government could not continue to operate on a week-to-week basis and that he would veto the Republican bill if it arrived on his desk.
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