Analysts and lawmakers said a government shutdown remains unlikely at this point as Congress now routinely resolves budget disputes at the last possible minute. But the wrangling adds further uncertainty to markets that are already on edge.
"Something like this is just a reminder of a lack of policy response by government, not only here in the U.S. but across the globe, in coming up with solutions to the financial and economic problems that we face," said Gary Pollack, managing director at Deutsche Bank Private Wealth Management.
Democrats and Republicans remained at odds over a $1.5 billion cut to an electric vehicle program championed by President Barack Obama.
Republicans proposed the cut to partially offset the added disaster costs to avoid adding to the nation's fiscal woes.
Democrats point out that Congress usually exempts disaster money from normal budget rules. They say the cut would threaten thousands of manufacturing jobs at a time when the country is struggling with 9.1 percent unemployment.
The Senate is scheduled to vote on Monday on a version of the bill that would restore the car loan program. The chamber's top Republican, Mitch McConnell, predicted it would fail.
The dispute throws into question lawmakers' ability to find common ground on the more painful choices they will have to confront in the coming months as a special bipartisan committee searches for trillions of dollars in budget savings.