Trump demands wall funding as threat of U.S. government shutdown looms

WASHINGTON, Dec 20 (Reuters) - U.S. President Donald Trump on Thursday said border security must be part of legislation to fund the U.S. government, a position that raises the threat of a partial federal shutdown on Saturday.

Republicans in the House of Representatives scrambled to amend a Senate-passed bill to appease Trump after he said he would not sign the legislation, clearing the measure for debate. A subsequent vote was possible later on Thursday but it was unclear whether Republicans would be able to pass what Trump wants.

"I've made my position very clear. Any measure that funds the government must include border security," Trump said at a White House event.

Trump has demanded $5 billion to put toward building a wall on the U.S. border with Mexico that he argues is needed to keep out illegal immigrants and drugs, a down payment on a massive project which Democrats have rejected as ineffective and wasteful.

The funding impasse, though dramatic and consequential, was dwarfed by another bombshell announcement: the resignation late on Thursday of Defense Secretary Jim Mattis.

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Trump's administration has been rocked by a series of resignations of cabinet members and top officials. The uncertainty over a government shutdown weighed on U.S. stocks, which were already sharply lower on the session, with the S&P 500 closing 1.6 percent lower.

The partial shutdown would affect agencies including those responsible for federal law enforcement activities, airport security screenings, space exploration and farm programs.

Trump, who accused Democrats of playing politics on the issue, has said he sees the border wall as a winning issue for his 2020 re-election campaign. Last week in a White House meeting with Democratic congressional leaders, he said he would be "proud to shut down the government for border security."

The Senate bill approved on Wednesday had provided a seven-week extension of existing funds for agencies, punting the funding issue into the next Congress.

“We’re just waiting to see what the House is going to do,” said an administration official. “Then we’ll figure out what the next steps are.”

PUSH FROM THE RIGHT

Hard-right conservative pundits and lawmakers have urged Trump to push for border wall funding now, even if it leads to a shutdown, arguing that it would be impossible to get once Democrats take control of the House on Jan. 3.

"He (Trump) campaigned on the wall," Republican Representative Mark Meadows said. "It was the center of his campaign ... The American people's patience is running out."

House Republicans lost 40 seats in Nov. 6 congressional elections. Some members who lost their re-election bids are not in Washington, making it unclear whether the party could pass the funding hike. If it fails, the House may end up voting on the original bill passed by the Senate but panned by Trump.

In that scenario, it is unclear how Trump would respond, House Rules Chairman Pete Sessions said. "We’re all putting that in the calculator," he said.

The amended bill also includes $7.8 billion in aid for states hit by recent natural disasters.

House Democratic Leader Nancy Pelosi has said including border wall money in the bill would be a "non-starter" for her members. They were, however, open to the disaster aid, she said.

If the government goes into partial shutdown starting on Saturday, it could last until the new Democratic majority takes over in the House. Then it will have enough votes to pass a funding bill to send to the Republican-controlled Senate, leaving it up to Trump to decide whether to veto it.

Trump administration officials were looking for ways to build the wall by reassigning money already doled out to U.S. agencies for other projects.

The White House has not provided details of that effort but leading Democrats have warned that shifting funds around in such a way would have to be approved by Congress.

During his 2016 campaign Trump repeatedly said Mexico would pay for the border wall but never specified how. Last week he said that a new trade deal his administration had negotiated with Mexico and Canada would generate enough savings to be equivalent to Mexico financing the wall.

The issue of money for the wall also led to a partial government shutdown during a weekend in January and a second funding gap in February lasted only a few hours. Impact on government services was negligible in both cases.

In a 2013 shutdown, conservative Republicans made an unsuccessful effort to use funding bills to repeal President Barack Obama's healthcare law. (Reporting by Richard Cowan, Steve Holland and Ginger Gibson; additional reporting by Lisa Lambert, Susan Heavey, Makini Brice, Mohammad Zargham and Chuck Mikolajczak; Writing by Roberta Rampton; editing by Bill Trott, Howard Goller and Cynthia Osterman)