UPDATE 3-Healthcare, global warming impede U.S. budget deal

* Deal needs to be in place by middle of next week

* Progress on spending cuts, but policy issues remain

* White House says current plan risks Obama veto
(Adds OMB comments, paragraphs 6-7)

By Andy Sullivan

WASHINGTON, March 25 (Reuters) – Healthcare, global
warming, birth control and other hot-button political issues
are threatening to derail a compromise over U.S. spending cuts,
lawmakers and aides said on Friday.

The dispute again raises the possibility of a government
shutdown that would force thousands of layoffs and rattle
financial markets, even as Republican and Democratic
negotiators began to bridge a $50 billion gap between their
rival spending plans.

Aides said the closed-door talks were initially productive.
But leaders from both parties later issued sharply worded
statements that any shutdown would be the fault of the other.

“The status quo is unacceptable, and right now that is all
Washington Democrats are offering,” said House Speaker John
Boehner.

“The House Republican leadership is back to agonizing over
whether to give in to right-wing demands that they abandon any
compromise on their extreme cuts,” Democratic Senator Charles
Schumer said.

The White House budget office said the House plan raised
“extreme social policy issues that have nothing at all to do
with reducing spending or reducing the deficit” while cutting
research and education spending needed for economic growth.

“The President said he would veto the bill if it got to him
in this form, and we need to work together to find a reasonable
compromise,” said Meg Reilly, a spokeswoman for the Office of
Management and Budget.

TIME RUNNING OUT

The U.S. government has been operating on a temporary
extension of last year’s budget since Oct. 1 because lawmakers
have been unable to resolve a partisan debate over spending.

Time is running short. Lawmakers have only a few days to
resolve the impasse when they return to Washington next week.

Pressured by Tea Party fiscal conservatives, Republicans
want to keep a campaign promise to scale back government, while
Democrats worry cuts could imperil the economic recovery.

But Republicans also hope to use their power of the purse
to prevent Democratic President Barack Obama from pursuing
policies they do not like. Those range from the healthcare
overhaul passed last year to restrictions on greenhouse gas
emissions and denying funding to Planned Parenthood, a
birth-control group that also provides abortions.

A spending bill passed by the Republican-controlled House
includes roughly 30 such restrictions, which are unlikely to
pass a Democratic-led Senate or make it past Obama’s veto pen.

A bill free of policy restrictions would be a tough sell
for Boehner, who owes his job to the dozens of conservative
lawmakers aligned with the Tea Party movement.

“There is no way a bill without policy restrictions can
pass the House,” a Republican leadership aide said.

Adding further pressure from the right, Tea Party activists
plan a rally at the Capitol building next Thursday.

A stopgap measure keeps the government running through
April 8. But any deal will have to be in place well before then
to allow enough time for it to pass through both the House of
Representatives and the Senate.

If there is no deal by the middle of next week, lawmakers
will have to decide whether to pass another stopgap measure or
dig in their heels and prepare for a shutdown, aides said.

Passing another stopgap measure could be difficult after
lawmakers already approved two extensions this year. Senior
legislators from both parties have said they will not vote for
another extension, and 54 conservative House Republicans
refused to back the most recent one.

“The sense is we’re kind of cruising towards a shutdown,”
one Democratic aide said.
(Additional reporting by Roberta Rampton; Editing by Peter
Cooney)

UPDATE 3-Healthcare, global warming impede U.S. budget deal