Last-minute deal avoids US government shutdown

A dramatic eleventh-hour deal staved off a damaging US government shutdown, busting a rancorous budget stalemate between President Barack Obama's and his newly empowered Republican foes.

Party leaders clinched the agreement, including some $38.5 billion dollars of extra spending cuts, after a intense political bargaining, barely an hour before the federal government effectively ran out of money at midnight (0400 GMT).

"Some of the cuts we agreed to will be painful ... and I would not have made these cuts in better circumstances," Obama said at the White House after a long day of suspensful negotiating averted a potential political crisis.

"But beginning to live within our means is the only way to protect those investments that will help America to compete for new jobs," said the president.

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House of Representatives Speaker John Boehner told his restive Republican caucus behind closed doors he had sealed an agreement with the White House to fund the government for the rest of the fiscal year that ends October 1.

"His has been a lot of discussion and a long fight. But we fought to keep government spending down because it really will, in fact, help create a better environment for job creators in our country," he told reporters afterwards.

Lawmakers in both chambers raced to approve a stopgap funding measure before midnight to give negotiators until Thursday to finalize the overall deal and make some $2 billion in spending cuts.

"We have agreed to an historic amount of cuts," Boehner and Democratic Senate Majority Leader Harry Reid said in a joint statement that capped months of bitter feuding over reining in Washington in the face of a galloping deficit.

The overall accord also removed what Democrats had characterized as the biggest stumbling block -- a Republican-crafted measure stripping federal funding from the Planned Parenthood clinics that provide abortions.

The accord marked the end of the first major showdown between Obama and his fired-up Republican foes, energized by an archconservative "Tea Party" movement fiercely opposed to compromise and sure to at least grumble about the deal.

It was also sure to fuel a bruising battle over the role and scale of government in the run up to Obama's 2012 reelection bid as Republicans traing their sights on the ultimate US political prize: The White House.

Anticipating a possible insurrection, Boehner told Republicans behind closed doors that "this is the best deal we could get out of them," according to two officials who attended the emotional gathering.

One Republican, Representative Marsha Blackburn, wept about the possible impact of spending cuts on a military base dear to her district, a witness said. Another came from a formal event still in black tie. Another wore a ball gown.

The agreement came after a long day in which Republican leaders parried every question with a "no deal" up to three hours before the deadline, despite telephone discussions between Obama and Boehner.

Participants nervously alluded to 1995, when the US government last plunged into a shutdown caused by a funding row, and Bill Clinton outmaneuvered his Republican foes and rescued a sagging presidency.

But Obama faces higher unemployment denting his popularity as the world's richest country struggles to its feet following the worst recession since the Great Depression of the 1930s.

Boehner was in the tough position of keeping a restive coalition -- whipped up by the Tea Party, and a political imperative of not alienating crucial independent and moderate voters thought to make the difference in US elections.

A shutdown would have seen around 800,000 federal employees temporarily laid off, paychecks for frontline combat soldiers delayed and national parks and monuments closed.

But operations vital to national security like the war in Afghanistan and border services would have gone on as normal.

"Tomorrow, I am pleased to announce, that the Washington monument, as well as the entire federal government, will be open for business," Obama said in his address.

"This agreement between Democrats and Republicans on behalf of all Americans is on a budget that invests in our future while making the largest annual spending cut in our history," he said.

Boehner earlier charged that a deal was foundering because Democrats were balking at cuts in government programs demanded by House Republicans elected in a mid-term election rout in November.

"We're not going to roll over and sell out the American people like it's been done time and time again here in Washington," Boehner said.

"When we say we're serious about cutting spending, we're damn serious about it."

Reid had shot back that the two sides had agreed on $38 billion in cuts and accused Republicans of trying to curtail women's health programs to appease social conservatives opposed to abortion.

"As a legislator, I'm frustrated. And as an American, I'm appalled," he said, as Democrats, like Republicans played to their core political supporters in a possible sign of covering themselves for a future compromise.

Obama canceled a planned trip to Indiana on Friday to stay in Washington and see the final push to the end. He also called off a weekend away with his family in the historic Virginia city of Williamsburg.