White House rejects latest Republican offer to end shutdown

By Richard Cowan and Mark Felsenthal

WASHINGTON (Reuters) - The White House rejected a Republican plan to reopen portions of the U.S. government on Tuesday as the first shutdown in 17 years closed landmarks like the Statue of Liberty and threw hundreds of thousands of federal employees out of work.

The back and forth offered no sign that President Barack Obama and Republicans can soon end a standoff over health care that has sidelined everything from trade negotiations to medical research and raised new concerns about Congress's ability to perform its most basic duties.

The Republican plan would restore funding for national parks, veterans services, and the District of Columbia. Other government services would remain unfunded.

While the selective funding approach appeared to unite conservative and moderate Republicans for now, the White House said Obama would veto it. Democrats who control the Senate said they would reject it before it reached Obama's desk.

Republicans who control the House of Representatives said Obama could not complain about the impact of the shutdown while refusing to negotiate. "The White House position is unsustainably hypocritical," said Michael Steel, a spokesman for House Speaker John Boehner.

An even bigger battle looms in coming weeks, when Congress must raise the debt limit or risk a U.S. default that could roil global markets.

"This is a mess. A royal screwup," said Democratic Representative Louise Slaughter of New York.

Obama accused Republicans of taking the government hostage in order to sabotage his signature health care law, the most ambitious U.S. social program in five decades.

"They've shut down the government over an ideological crusade to deny affordable health insurance to millions of Americans," Obama said in the White House Rose Garden.

Republicans in the House view the Affordable Care Act as a dangerous extension of government power and have coupled their efforts to undermine it with continued government funding. The Democratic-controlled Senate has repeatedly rejected those efforts.

Spending authority for much of the government expired at midnight on Monday (0400 GMT), but that did not prevent the Obama administration from opening on Tuesday the health-insurance exchanges that form the centerpiece of the law.

VETERANS PASS BARRICADES

Republicans said their latest proposal would help elderly veterans who earlier in the day pushed past barricades at the National World War II Memorial to get into the shuttered site.

"They're coming here because they want to visit their memorial, the World War II memorial. But no, the Obama administration has put barricades around it," said Republican Representative Mike Simpson of Idaho.

Democrats said Republicans were resorting to gimmicks to avoid a vote that would restore funding to the entire government because they were afraid it would pass.

"That's important - a park? How about the kids who need daycare?" said Democratic Representative Sander Levin of Michigan. "You have to let all the hostages go. Every single one of them."

The veterans in question had gotten in to the memorial with help from several Republican lawmakers. But they didn't seem particularly interested in taking sides.

"It's just like a bunch of little kids fighting over candy," said George, Atkinson, an 82-year-old Coast Guard veteran of the Korean War. "The whole group ought to be replaced, top man down."

The plan appeared to temporarily unite Republicans, heading off a split between Tea Party conservatives who pushed for the government funding confrontation and moderates who appear to be losing stomach for the fight.

Before a meeting of House Republicans, Representative Peter King, a New York moderate, estimated that more than 100 of the chamber's 232 Republicans would back Obama's demand to restore all government funding without conditions. That would be enough to easily pass the House with the support of the chamber's 200 Democrats.

The shutdown closed landmarks like the Grand Canyon and pared the government's spy agencies by 70 percent. In Washington, the National Zoo shut off a popular "panda cam" that allowed visitors to view its newborn panda cub online. In Pennsylvania, white supremacists had to cancel a planned rally at Gettysburg National Military Park.

MARKET REACTION

Whether the shutdown represents another bump in the road for a Congress increasingly plagued by dysfunction or is a sign of a more alarming breakdown in the political process could be determined by the reaction among voters and on Wall Street.

Stock investors appeared to be taking the news in stride with investors confident a deal could be reached quickly. The S&P 500 <.SPX> closed up 0.8 percent and the Nasdaq Composite <.IXIC> gained 1.2 percent.

But the U.S. Treasury was forced to pay the highest interest rate in about 10 months on its short-term debt as many investors avoided bonds that would be due later this month, when the government is due to exhaust its borrowing capacity.

If Congress can agree to a new funding bill soon, the shutdown would have little impact on the world's largest economy.

A week-long shutdown would slow U.S. economic growth by about 0.3 percentage points, according to Goldman Sachs, but a longer disruption could weigh on the economy more heavily as furloughed workers scale back personal spending.

The last shutdown in 1995 and 1996 cost taxpayers $1.4 billion, according to congressional researchers.

The political crisis raised fresh concern about whether Congress can meet a crucial mid-October deadline to raise the government's $16.7 trillion debt ceiling. Some Republicans see that vote as another opportunity to undercut Obama's healthcare law.

Failure to raise the debt limit would force the country to default on its obligations, dealing a blow to the economy and sending shockwaves around global markets.

A 2011 standoff over the debt ceiling hammered consumer confidence and prompted a first-ever downgrade of the United States' credit rating.

Analysts say this time it could be worse. Lawmakers back then were fighting over how best to reduce trillion-dollar budget deficits, but this time they are at loggerheads over an issue that does not lend itself to compromise as easily: an expansion of government-supported health benefits to millions of uninsured Americans.

Republicans have voted more than 40 times to repeal or delay "Obamacare," but they failed to block the launch of its online insurance marketplaces on Tuesday. The program had a rocky start as government websites struggled to cope with heavy online traffic.

"What I'm hearing from my constituents at home is if this is the only way to stop the runaway train called the federal government, then we're willing to try it," said Texas Senator John Cornyn, the second-ranking Republican in the Senate.

A Reuters/Ipsos poll showed 24 percent of Americans would blame Republicans, while 19 percent would blame Obama or Democrats. Another 46 percent said everyone would be to blame.

The shutdown battles of the 1990s didn't substantially affect public's opinion of then-Democratic President Bill Clinton or his Republican adversaries, the Gallup polling organization said.

Republicans and Democrats traded blame for the shutdown, but many seemed deeply embarrassed for the institution as a whole.

Several said they planned to donate their salaries to charity or forego pay altogether.

"This is a black eye on our government at all levels," said Republican Representative Michael Grimm of New York. "I think it's a low point for us."

(Additional reporting by Ian Simpson, Richard Cowan, Caren Bohan, David Lawder, Roberta Rampton and Steve Holland; Writing by Andy Sullivan; Editing by Karey Van Hall, David Storey and Tim Dobbyn)

Matches

MORE TOP STORIES TODAY

Punjab pull off another big chase

Punjab pull off another big chase

GAME 7, SHARJAH—Maxwell, Miller, Pujara chase down Rajasthan's 192. More »

Royal test for Kings

Royal test for Kings

Preview — Clash of philosophies between Australia-centric teams More »

Have nothing to prove to anybody — Sehwag

Have nothing to prove to anybody — Sehwag

The Nawab of Najafgarh says a good run in IPL could help his chances of a comeback on India's tour to England in June. More »

Shastri in proposed IPL probe panel

Shastri in proposed IPL probe panel

Some members stressed on the need for proposing names with an "impeccable record and clean image". More »

Duminy steals first win for Delhi

Duminy steals first win for Delhi

Furious fifties by Duminy and Dinesh Karthik end a long losing streak for the Daredevils. More »

Five things England must do to bounce back

Five things England must do to bounce back

England have appointed a new head coach in Peter Moores. More »

AB, Parthiv seal Bangalore's second win

AB, Parthiv seal Bangalore's second win

Royal Challengers overcame a stutter to cruise to the small target they were set by Mumbai Indians. More »

‘Felt like helpless minority’

‘Felt like helpless minority’

Former BCCI treasurer Ajay Shirke says emotions got the better of Srinivasan and he tried to oversimplify things by calling Meiyappan an “enthusiast.” More »

Srinivasan can attend BCCI meeting

Srinivasan can attend BCCI meeting

His status as president of TNCA makes him eligible to attend the Working Committee meeting on Sunday. More »

No way back for Pietersen: ECB

No way back for Pietersen: ECB

Kevin Pietersen's hopes of reviving his international career appeared to end Saturday when ECB managing director Paul Downton said there was 'no way back'… More »

The world record that nearly wasn't

The world record that nearly wasn't

Twenty years ago this week, Brian Lara became Test cricket's highest scorer, but he almost didn't make it. More »

Maxwell carves his parallel universe

Maxwell carves his parallel universe

Glenn Maxwell seems to project an icy disdain when at the crease. Match situations rarely faze him and the bubble in which he plays excludes everyone … More »

Moores gets second stint as coach

Moores gets second stint as coach

In a two-year spell from 2007 to 2009, the 51-year-old Moores led England in seven Test series. More »

Bangladesh senior players to see shrink

Bangladesh senior players to see shrink

Bangladesh's senior players will have three sessions with a psychological skill development coach later this month More »

BCCI is not anybody’s property — Dalmiya

BCCI is not anybody’s property — Dalmiya

Dalmiya feels that Srinivasan’s ‘power hungry’ attitude isn’t helping matters. More »

Tough for bowlers: Saeed Ajmal

Tough for bowlers: Saeed Ajmal

The 36-year-old believes the T20 format and rule changes in 50-over matches have made a real difference. More »

KP ridicules idea of day-night Tests

KP ridicules idea of day-night Tests

Kevin Pietersen has ridiculed the idea of day-night Test cricket, saying the game would be so different to proper Test cricket that we will need a whole… More »

Rajasthan edge low-scoring thriller

Rajasthan edge low-scoring thriller

The bowlers restricted Hyderabad to 133 for 6 before Rahane and Binny took Rajasthan over the line. More »

Maxwell blitz takes Punjab home

Maxwell blitz takes Punjab home

The Kings XI batsman blasted a 43-ball 95 to help his team pull off a massive chase against Chennai Super Kings. More »

BCCI members want independent probe

BCCI members want independent probe

The board members are realising after the Supreme Court's observations that something has to be done — IS Bindra More »

'BCCI lacks leaders to take on Srini'

'BCCI lacks leaders to take on Srini'

Two former BCCI presidents, Shashank Manohar and Jagmohan Dalmiya, have reacted strongly to the news of the BCCI calling an emergent meeting on Sunday… More »

Delhi look for first points against confident Kolkata

Delhi look for first points against confident Kolkata

Preview — The threat of Sunil Narine looms large again. More »

Bangalore vs Mumbai: A battle of the big-hitters

Bangalore vs Mumbai: A battle of the big-hitters

Preview — Given the firepower in both line-ups, Dubai crowd may see another high-scorer More »

Yuvraj tees off to Sharjah's delight

Yuvraj tees off to Sharjah's delight

Yuvraj Singh was hardly convincing to begin with against Delhi, but a big dose of crowd support and a helping of poor bowling meant he had the opportunity… More »