WRAPUP 7-White House rejects latest Republican offer to end shutdown
* Republicans proposed restoring funding for certain programs
* No clear path to break congressional deadlock
* Raises concerns over looming debt ceiling deadline
* Financial markets relaxed so far
WASHINGTON, Oct 1 (Reuters) - The White House rejected a Republican plan to reopen portions of the U.S. government on Tuesday as the first shutdown in 17 years closed landmarks like the Statue of Liberty and threw hundreds of thousands of federal employees out of work.
The quick dismissal offered no sign that President Barack Obama and Republicans can soon end a standoff over health care that has sidelined everything from trade negotiations to medical research and raised new concerns about Congress's ability to perform its most basic duties. An even bigger battle looms in coming weeks, when Congress must raise the debt limit or risk a U.S. default that could roil global markets.
As Republicans in the House of Representatives huddled to consider their next move, Obama accused them of taking the government hostage in order to sabotage his signature health care law, the most ambitious U.S. social program in five decades.
"They've shut down the government over an ideological crusade to deny affordable health insurance to millions of Americans," Obama said in the White House Rose Garden.
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 government funding. The Democratic-controlled Senate has repeatedly rejected those efforts.
Spending authority for much of the government expired at midnight on Monday (0400 GMT), but that did not prevent the Obama administration from unveiling the health-insurance exchanges that form the centerpiece of the law.
The latest Republican plan, floated by party leaders on Tuesday, would restore funding for federal parks, veterans programs and the District of Columbia.
That, Republicans said, also would encourage talks to fully end the shutdown and craft a broader deal that would also raise the debt limit.
"We are asking Democrats to come to the table," Republican Representative Thomas Massie of Kentucky said.
The White House did not take long to reject the offer.
The proposal "shows the utter lack of seriousness that we're seeing from Republicans," White House spokesman Jay Carney said.
The plan appeared to temporarily head off a split between Tea Party conservatives who pushed for the government funding confrontation and more moderate Republicans who appear to be losing stomach for the fight.
Before the huddle, Republican 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.
Asked why the moderates don't demand a vote, King said: "I guess that they are waiting for the right time."
In Washington, museums were closed to tourists and police erected barriers around landmarks like the Lincoln Memorial. The National Zoo shut off a popular "panda cam" that allowed visitors to view its newborn panda cub online.
Whether the shutdown represents another bump in the road for a Congress increasingly plagued by dysfunction or is a sign of a more alarming breakdown in the political process could be determined by the reaction among voters and on Wall Street.
The market appeared to be taking the news in stride with investors confident a deal could be reached quickly. U.S. stocks were higher in afternoon trading with the S&P 500 up 0.5 percent and the Nasdaq Composite gaining 0.8 percent.
But the U.S. Treasury was 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.
If Congress can agree to a new funding bill soon, the shutdown would have little impact on the world's largest economy.
A week-long shutdown would slow U.S. economic growth by about 0.3 percentage points, according to Goldman Sachs, but a longer disruption could weigh on the economy more heavily 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 raised fresh concern about whether Congress can meet a crucial 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 country 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.
"What I'm hearing from my constituents at home is if this is the only way to stop the runaway train called the federal government, then we're willing to try it," said Texas Senator John Cornyn, the second-ranking Republican in the Senate.
A Reuters/Ipsos poll showed 24 percent of Americans would blame Republicans, while 19 percent would blame Obama or Democrats. Another 46 percent said everyone would be to blame.
But the shutdown battles of 1995 and 1996 didn't substantially affect public's opinion of then-Democratic President Bill Clinton or his main adversary, Republican House Speaker Newt Gingrich, the Gallup polling organization said.
This latest shutdown, the culmination of three years of divided government and growing political polarization, was spearheaded by Republicans associated with the conservative Tea Party movement united in their opposition to Obama, their distaste for the president's healthcare law and their campaign pledges to rein in government spending.
"Americans are going to become more and more concerned about Obamacare, which is the law, than they are going to be about any short-term shutdown," said Republican Representative Greg Walden of Oregon, a member of the House leadership.
While some government offices and national parks were shuttered, spending for essential functions related to national security and public safety continued, including pay for U.S. military troops.
Though the impact was likely to be most apparent in the Washington region, it will be felt across the country as the federal government maintains offices in every major city and parks and other facilities are spread across all 50 states.
Defense Secretary Chuck Hagel, visiting U.S. ally South Korea early Tuesday, warned that the shutdown would undermine American credibility abroad and lead allies to question the nation's commitment to treaty obligations.
Republicans and Democrats traded blame for the shutdown, but many seemed deeply embarrassed for the institution as a whole.
Several said they planned to donate their salaries to charity or forego pay altogether.
"This is a black eye on our government at all levels," said Republican Representative Michael Grimm of New York. "I think it's a low point for us."