* Meeting ends with both sides blaming the other
* Concerns grow over looming debt limit deadline
* Obama cancels overseas visits to Malaysia, Philippines
By Jeff Mason and Thomas Ferraro
WASHINGTON, Oct 2 (Reuters) - President Barack Obama metwith Republican and Democratic leaders in Congress on Wednesdayto try to break a deadlock that has shut down wide swaths of thefederal government, but there was no breakthrough.
After more than an hour of talks, House of RepresentativesSpeaker John Boehner said Obama refused to negotiate, whileHouse Democratic Leader Nancy Pelosi and Senate DemocraticLeader Harry Reid accused Republicans of trying to hold thepresident hostage over Obamacare.
Reid said Obama told Republicans "he will not stand" fortheir tactics.
As hundreds of thousands of federal employees faced a secondday without pay, leaders of the Republican-controlled House ofRepresentatives and the Democratic-led Senate offered tokenconcessions that were quickly dismissed by the other side.Obama, meanwhile, scaled back a long-planned trip to Asia.
Republicans have tried to tie continued government fundingto measures that would undercut Obama's signature healthcarelaw. Obama and his Democrats say that is a non-starter.
"The president reiterated one more time that he will notnegotiate," Boehner told reporters after the White Housemeeting. "All we're asking for here is a discussion and fairnessfor the American people under Obamacare."
Reid said Democrats were willing to discuss any ways totackle the budget after a temporary funding bill is passed."We're through playing these little games," he said.
The shutdown, which took effect Monday at midnight (0400 GMTTuesday), has raised questions about Washington's ability tocarry out its most essential duties.
Though it would do relatively little damage to the world'slargest economy in the short term, global markets could beroiled if Congress also fails to raise the debt limit beforeborrowing authority runs out in coming weeks.
The shutdown has closed landmarks like the Grand Canyon andprevented some cancer patients from receiving cutting-edgetreatment.
United Technologies Corp, which makes Sikorskyhelicopters and other items for the military, said it would beforced to furlough as many as 4,000 employees, if the U.S.government shutdown continues through next week, due to theabsence of government quality inspectors.
"Am I exasperated? Absolutely I'm exasperated. Because thisis entirely unnecessary," Obama told CNBC television in aninterview before meeting the congressional leaders. "I amexasperated with the idea that unless I say to 20 millionpeople, 'You can't have health insurance,' these folks will notreopen the government. That is irresponsible."
The U.S. Army's top general said the shutdown wassignificantly harming day-to-day operations, and intelligenceleaders say it is undermining their ability to monitor threats.A Federal Reserve official said it could delay the centralbank's ability to assess whether its monetary stimulus effortsare still needed.
The uncertainty in Washington has forced the White House toscale back an Asia trip that was designed to reinforce U.S.commitment to the region.
Obama scuttled two stops on a planned four-country tour andleft visits to two other countries up in the air. He was due toleave on Saturday and return a week later.
Secretary of State John Kerry will visit Malaysia and thePhilippines in his place. Obama is weighing whether to attenddiplomatic summits in Indonesia and Brunei, a White Houseofficial said.
Despite the disruption, Boehner's Republicans have failed toderail Obama's controversial healthcare law, which passed amilestone on Tuesday when it began signing up uninsuredAmericans for subsidized health coverage.
Though some moderate Republicans have begun to questiontheir party's strategy, Boehner so far has kept them unitedbehind a plan to offer a series of small bills that wouldre-open select parts of the government most visibly affected bythe shutdown.
The Republican-controlled House passed and sent to theSenate a funding bill that would re-open the National Institutesof Health, which conducts medical research, and another bill toreopen shuttered federal parks and museums, such as theSmithsonian museums, the National Gallery of Art and theHolocaust Memorial Museum in Washington.
Both bills passed with the support of about two-dozenDemocrats, who joined Republicans. The House was expected tovote Thursday on measures to fund veterans' care, the Districtof Colombia and the Army Reserve.
The measures are likely to be defeated in theDemocratic-controlled Senate, and Obama said he would veto themif they reached his desk.
Still, they allowed Republicans to charge that theiradversaries are standing in the way of help for elderly veteransand young cancer patients. "Will they now say 'no' to fundingfor veterans, our National Parks and the National Institutesof Health?" asked Boehner spokesman Michael Steel.
Reid told Republicans he would engage in talks about taxreform, farm policy and other pressing issues that Congress hasfailed to address once Republicans agreed to re-open thegovernment without conditions. Republicans dismissed that idea.
A Reuters/Ipsos poll indicated that 24 percent of Americansblamed Republicans for the shutdown, while 19 percent blamedObama or Democrats. Another 46 percent said everyone was toblame.
BIGGER FIGHT LOOMS
The shutdown fight is rapidly merging with a higher-stakesbattle over the government's borrowing power that is expected tocome to a head soon.
Treasury Secretary Jack Lew has said the United States willexhaust its borrowing authority no later than Oct. 17.
The government could have difficulty paying pension checks,interest charges and other bills after that point.
Many Republicans see the debt limit vote as anotheropportunity to undercut Obama's healthcare law or extract otherconcessions - an approach that business groups say could lead todisaster.
"You can re-litigate these policy issues in a politicalforum, but they shouldn't use the threat of causing the U.S. tofail on its ... obligations to repay on its debt as a cudgel,"Goldman Sachs chief executive Lloyd Blankfein toldreporters after he and other financial-industry executives metwith Obama.
Some Democrats have begun to consider asking Obama tounilaterally raise the debt ceiling on his own - a move thatcould lead to years of court battles. The White House has saidthat approach is not feasible.
Asked whether there is a push underway among Democrats toconvince Obama that he should use this power, a senior HouseDemocrat who asked not to be identified said: "No, not at thispoint."
Stock investors on Wednesday appeared to show growinganxiety over the standoff after taking the news in their strideon Tuesday. The S&P 500 and the Nasdaq both closed down 0.1percent.
Obama said Wall Street should be worried about the debtceiling. "I think this time's different. I think they should beconcerned," Obama told CNBC. "When you have a situation inwhich a faction is willing potentially to default on U.S.government obligations, then we are in trouble."
A short-term shutdown would slow U.S. economic growth byabout 0.2 percentage points, Goldman Sachs said on Wednesday,but a weeks-long disruption could weigh more heavily - 0.4percentage points - as furloughed workers scale back personalspending.
The last shutdown in 1995 and 1996 cost taxpayers $1.4billion, according to congressional researchers.
- Politics & Government
- government shutdown