The federal budget stalemate that stands to trigger a government shutdown shifted Thursday from a debate over spending cuts to a fight over the thorny policy issues of abortion and environmental regulation that have divided Democrats and Republicans for years.
Facing a deadline of midnight Friday, negotiators worked day and night in an effort to strike a compromise as the policy demands loomed as a major new obstacle.
For a third straight day, President Obama called House Speaker John A. Boehner (R-Ohio) and Senate Majority Leader Harry Reid (D-Nev.) to meetings at the White House. Afterward, Obama set a hard deadline for reaching an agreement, saying he wanted a deal from the congressional leadership overnight.
"I expect an answer in the morning," Obama said, emerging from a late session at the White House. "My hope is that I'll be able to announce to the American people, sometime relatively early in the day, that a shutdown has been averted."
Underscoring the stakes involved, Obama canceled plans to visit Indiana on Friday so he could remain in Washington and oversee the talks.
If the two sides near an agreement, another short-term measure could be instituted to allow the deal to be adopted.
Meanwhile, the government continued preparations to halt government operations. In Baghdad, Defense Secretary Robert M. Gates told troops that they may not receive their next paychecks because of the shutdown.
For weeks, Republicans have insisted on reductions in federal spending. Conservative House members also have pushed for Republican policy priorities only indirectly related to the spending debate.
"This debate used to be about saving money," Reid said earlier in the day. "That is no longer the case. The 'tea party' is trying to push through its extreme social agenda -- issues that have nothing to do with funding the government."
The two sides appeared to be near agreement on a package that would cut spending by $34.5 billion from domestic programs for the remainder of the 2011 fiscal year, which ends Sept. 30.
The new package would cut slightly deeper than a previous proposal, in part because it would include $3 billion in reductions to the Defense Department that would appeal to Democrats as well as fiscally conservative Republicans. It represents about half of the $61 billion in cuts the GOP has sought.
But Boehner insisted that no new agreement on spending levels had been reached as he continued to pursue the largest package of cuts possible.
Polls show that most in Boehner's party are behind him. In a new Gallup poll, most respondents wanted the two sides to compromise, and a slight majority of Republicans wanted lawmakers to stick to their principles, even if it means shutting down the government.
Conservative activists have urged the GOP to hold out for more cuts, staging rallies and calling for a government shutdown.
"We're continuing to work toward an agreement," Boehner said after a midday meeting at the White House with Reid and Vice President Joe Biden. "But we are not there yet."
Yet the dispute over the size of the spending cuts receded as Republicans made a play to include their top policy priorities, which have been a strong undercurrent throughout the debate, in the budget package.
Boehner is fighting to retain provisions that were included in House-passed bill in February. Those provisions would restrict abortion services and limit the ability of the Environmental Protection Agency to regulate pollutants.
To many rank-and-file Republicans, those hot-button issues are just as important as spending cuts. But they are also nonstarters for many Senate Democrats, including Reid.
Five separate provisions related to family planning and abortion were being pursued by the Republicans, including one that would prevent federal funding for Planned Parenthood, a long-sought goal for many socially conservative lawmakers.
The GOP proposed a new abortion-related provision to give states greater control over federal family planning funds under the Title X program.
Longstanding federal law already prohibits federal funds from being used for abortion, except in rare cases. The proposed change would allow governors or local officials to steer funds away from Planned Parenthood or other healthcare providers that also offer abortion services.
The Title X program was launched during the Nixon administration to give women access to reproductive healthcare. House members want to eliminate $317 million in the program for the 2011 fiscal year.
Other family-planning-related provisions pursued by the GOP would halt foreign aid funding to health organizations that promote or provide abortion services, a measure known as the Mexico City rule, as well as to the U.N. Population Fund, which provides reproductive, AIDS prevention and women's health services.
Another provision would ban the District of Columbia from sending local tax revenue to groups that provide access to abortions.
Abortion rights activists protested Thursday outside the Capitol.
The House GOP is also pressing for several provisions related to the EPA's ability to regulate greenhouse gases.
Attaching policy priorities to must-pass spending bills is a routine legislative strategy in Washington. But Democrats argued that not all of the Republican provisions would pass if separated from the spending bill.
In his brief address Thursday night, Obama reiterated the stakes for the country, saying a shutdown would "severely hamper" the economic recovery and inconvenience millions who rely on government services.
"For us to go backwards because Washington couldn't get its act together is unacceptable," he said. "That's why I'm expecting that as a consequence of the good work done by our staffs tonight that we can reach agreement tomorrow."
Many conservatives accuse Democrats of overstating the effects of a government shutdown.
The House adopted a temporary funding bill on a party-line vote Thursday, drawing a veto threat from Obama because the seven-day extension included excessive budget cuts. The measure was considered unlikely to pass the Senate.
The House measure would cut $12 billion from domestic accounts, while increasing Pentagon funding and ensuring that paychecks for the troops were not disrupted during a government shutdown.
Kathleen Hennessey and Peter Nicholas in the Washington bureau contributed to this report.