Senate Majority Leader Harry Reid and House Speaker John Boehner released the following joint statement after a White House meeting that lasted an hour and a half:
"We have narrowed the issues, however, we have not yet reached an agreement. We will continue to work through the night to attempt to resolve our remaining differences."
Obama emerged from the talks less than enthusiastic.
"I'm not prepared yet to express wild optimism," he told reporters. "I think we were further along today than we were yesterday."
Behind the scenes, aides on Capitol Hill said a deal is within reach but the two sides remained divided on abortion policy riders and the overall spending cuts. The White House and Senate Democrats are resisting attempts to up the spending cuts to $40 billion from the previously agreed to $33 bilion. Republicans have long-wanted to find ways to slash money to Planned Parenthood and are using the contentious issue as a wedge to extract more spending cuts.
Republicans are insisting on a policy rider that would take all federal funds slated for Planned Parenthood and other family planning organizations and give it to state health departments to use as they see fit. That way, states controlled by Republican legislatures would choose not to give that money to Planned Parenthood while state capitals controlled by Democrats would keep things status quo.
Republicans also want to prohibit payments to any foreign organizations that use non-U.S. funds to provide abortions overseas -- a policy that was overturned by an executive order from Obama. Another rider would end the United States' contribution to the United Nations Population Fund, which focuses on reproductive health, according to a report in the New York Times.
But a GOP aide said the abortion talks were just a sidebar to distract from the real matter at hand: Boehner is stubbornly demanding more spending cuts.
"Spending is still the big issue," the GOP aide told TPM. "Democrats are trying to pretend otherwise because they're pushing the status quo on spending -- and they can't sell that."
Congressional GOP and Democratic staffs planned on working through the night to find common ground, and Obama instructed Boehner and Reid to get back to him in the morning with a progress report.
"I expect an answer in the morning," Obama said. "My hope is that I would be able to announce to the American people very early in the day that a government shutdown has been avoided. That's what I hope to be able to announce tomorrow, but there's no certainty yet."
Obama also issued a last-ditch warning about the impact a shutdown would have on the economy's fragile recovery.
"Our nation's top economists have said the economic damage from a government shutdown would mount very quickly," he said. "We've been working very hard to get this economy back on its feet...for us to go backwards because Washington couldn't get its act together is unacceptable."
Correction: This story originally described one anti-abortion rider as banning U.S. funding of abortions overseas. That ban already exists. The rider in question would prohibit funding to foreign NGOs that use non-U.S. funds to provide abortions. We regret the error.