7 April 2011 Last updated at 22:28 ET

US budget deadlock: Obama sees 'narrowed differences'

US President Barack Obama has said he is hopeful a government shutdown can be averted, as negotiators worked into the night to forge a budget deal.

Republicans and Democrats failed to reach an agreement on Thursday but Mr Obama said "differences had narrowed".

He said he was not prepared to express "wild optimism" but hoped to be able to announce a deal on Friday morning.

Without a deal, the law funding most of the US government will expire at midnight on Friday, forcing a shutdown.

Talks have been stalled for days as Republicans - urged on by the fiscally conservative Tea Party movement - push for larger budget cuts than Democrats are willing to concede.

After Mr Obama spoke, the White House announced that his planned trip to the state of Indiana on Friday had been postponed.

'No certainty'

Republicans in the US House have pushed for $61bn (£37.4bn) in cuts between now and the end of the fiscal year on 30 September, and have sought to use the budget bill to dismantle Democratic policy priorities.

The Democrats have accepted cuts of more than $33bn (£20bn) from last year's levels, but say the size of the cuts Republicans demand would hinder the nascent US economic recovery.

Looking tired, Mr Obama spoke late on Thursday after leaving a meeting with Vice-President Joe Biden, Republican House Speaker John Boehner and Democratic Senator Harry Reid.

"My hope is that I'll be able to announce to the American people some time relatively early in the day that a shutdown has been averted, that a deal has been completed," he said.

"There's no certainty yet."

He said his administration had spent the past two years trying to right the ailing US economy, and that he feared a government shutdown would derail signs of recovery seen recently.

"For us to go backwards because Washington couldn't get its act together is unacceptable," he said.

He added that 800,000 federal government workers would be barred from working and would not collect pay cheques, while millions more who rely on government services would be affected.

Meanwhile, Mr Boehner and Mr Reid said in a joint statement they would work through the night "to attempt to resolve our remaining differences".

'Non-essential services'

Throughout the day on Thursday, congressional leaders from both parties insisted no deal had been reached but also said they were optimistic one could be struck before a temporary measure funding the US government was to expire.

The US government has subsisted without a long-term budget since 1 October, funded by a series of temporary measures.

The most recent of those is set to expire at midnight on Friday, forcing all government services deemed non-essential to shut down and keeping hundreds of thousands of government workers at home.

Republicans in the House approved another temporary measure on Thursday - but one that would cut $12bn from spending in a single week.

Mr Obama said in a statement that the US government could not continue to operate on a week-to-week basis and that he would veto the Republican bill if it arrived on his desk.