* Obama cancels overseas visits to Malaysia, Philippines
* Obama and Senate reject House plan; want full funding
* Concerns grow over looming debt limit deadline
By Mark Felsenthal
WASHINGTON, Oct 2 (Reuters) - President Barack Obama on Wednesday scrapped part of a long-planned trip to Asia and left the remainder of the trip in doubt as a U.S. government shutdown went into a second day with no end in sight to the funding battle in Congress that triggered it.
Obama scuttled two stops on a planned four-country tour and left visits to two other countries up in the air, according to White House statements.
The president told his counterparts in Malaysia and the Philippines he would not be able to meet them as planned and a White House official said the president is weighing whether to attend diplomatic summits in Indonesia and Brunei.
"We will continue to evaluate those trips based on how events develop throughout the course of the week," National Security Council spokeswoman Caitlin Hayden said.
Obama was originally due to leave the United States on Saturday and return a week later.
Not only must the president deal with the budget impasse and its effects, but he faces an even bigger crunch in Congress, which will put the United States at risk of defaulting on its debts if it does not raise the limit on U.S. public debt. Treasury Secretary Jack Lew has said the United States will exhaust its borrowing authority no later than Oct. 17.
The fight between Obama's Democrats and the Republicans over the government's borrowing power is rapidly merging with the standoff over everyday funding, which has forced the first government shutdown in 17 years and sent hundreds of thousands of federal employees on unpaid leave.
The White House announcements about the Asia trip followed a fruitless day on Capitol Hill, with congressional Democrats and Republicans coming no closer to resolving their differences.
Obama accused Republicans of taking the government hostage to sabotage his signature healthcare law, the most ambitious U.S. social program in five decades, passed three years ago.
Republicans in the House of Representatives view the Affordable Care Act as a dangerous extension of government power, and have coupled their efforts to undermine it with continued efforts to block government funding. The Democratic-controlled Senate has repeatedly rejected those efforts.
The standoff has raised new concerns about lawmakers' ability to perform their most basic duties and threatens to hamper a still fragile economic recovery.
"This is a mess. A royal screw-up," said Democratic Representative Louise Slaughter of New York.
LANDMARKS CORDONED OFF
As police cordoned off landmarks such as the Lincoln Memorial, and government agencies stopped activities ranging from cancer treatments to trade negotiations, Republicans in the House sought to restore funding to national parks, veterans' care and the District of Columbia, the capital.
An effort to pass the three bills fell short on Tuesday evening, but Republicans plan to try again on Wednesday. They are likely to be defeated by the Democratic-controlled Senate.
"That's important - a park? How about the kids who need daycare?" said Democratic Representative Sander Levin of Michigan. "You have to let all the hostages go. Every single one of them."
The setback to the Asia trip, designed to reinforce U.S. commitment to the region, is the first obvious international consequence of the troubles in Washington.
"They've shut down the government over an ideological crusade to deny affordable health insurance to millions of Americans," Obama said on Tuesday.
Republicans said Obama could not complain about the impact of the shutdown while refusing to negotiate. "The White House position is unsustainably hypocritical," said Michael Steel, a spokesman for House Speaker John Boehner.
A Reuters/Ipsos poll indicated that 24 percent of Americans blamed Republicans, while 19 percent blamed Obama or Democrats. Another 46 percent said everyone was to blame.
COOLING OFF PERIOD?
All three bills won support from a majority of the House, but fell short of the two-thirds vote needed to pass under special rules that allow quick action. Republican leaders plan to bring up the bills for a regular vote on Wednesday. Obama said he would veto the bills if they reached his desk.
The selective spending plan appeared to temporarily unite Republicans, heading off a split between Tea Party conservatives who pushed for the government funding confrontation and moderates who appear to be losing stomach for the fight.
Representative Peter King, a New York moderate, estimated that more than 100 of the chamber's 232 Republicans would back Obama's demand to restore all government funding without conditions. That would be enough to easily pass the House with the support of the chamber's 200 Democrats.
"They're afraid to go forward because they're afraid of a primary," he said on MSNBC's "Morning Joe" program, citing the fear of retribution at the polls ahead of the 2014 midterm election from possible challengers from the Tea Party, the conservative Republican movement advocating limited government.
King urged Obama to do more, saying there could be room to negotiate and combine the current spending bill with a deal on the debt ceiling if the president offers Republicans something, such as lifting the healthcare law's tax on medical devices.
"It's time for the president to come in right now," he said.
House Democratic Whip Steny Hoyer also saw potential for a plan that could buy a "a cooling off period" of about six weeks.
"We may be getting to a place where there's going to be enough rational Republicans to join with the Democrats and pass ... a continuing resolution which will fund government, get us open," he told CNN's "New Day" program.
The shutdown closed landmarks including access to the Grand Canyon and pared the government's spy agencies by 70 percent. In Washington, the National Zoo shut off a popular "panda cam" that allowed visitors to view its newborn panda cub online. In Pennsylvania, white supremacists had to cancel a planned rally at Gettysburg National Military Park.
Stock investors on Wednesday appeared to show growing anxiety on over the standoff after taking the news in stride on Tuesday, with Wall Street expected to open 0.6 percent lower and the U.S. dollar continuing to fall.
The U.S. Treasury has also been forced to pay the highest interest rate in about 10 months on its short-term debt as many investors avoided bonds that would be due later this month, when the government is due to exhaust its borrowing capacity.
A short-term shutdown would slow U.S. economic growth by about 0.2 percentage points, Goldman Sachs said on Wednesday, but a weeks-long disruption could weigh more heavily - 0.4 percentage points - as furloughed workers scale back personal spending.
The last shutdown in 1995 and 1996 cost taxpayers $1.4 billion, according to congressional researchers.
The political crisis has raised fresh concern about whether Congress can meet a mid-October deadline to raise the government's $16.7 trillion debt ceiling. Some Republicans see that vote as another opportunity to undercut Obama's healthcare law.
Failure to raise the debt limit would force the United States to default on its obligations, dealing a blow to the economy and sending shockwaves around global markets.
A 2011 standoff over the debt ceiling hammered consumer confidence and prompted a first-ever downgrade of the United States' credit rating.
Analysts say this time it could be worse. Lawmakers back then were fighting over how best to reduce trillion-dollar budget deficits, but this time they are at loggerheads over an issue that does not lend itself to compromise as easily: an expansion of government-supported health benefits to millions of uninsured Americans.
Republicans have voted more than 40 times to repeal or delay "Obamacare," but they failed to block the launch of its online insurance marketplaces on Tuesday. The program had a rocky start as government websites struggled to cope with heavy online traffic.