(Updates with Senate approval of temporary funds)

By Richard Cowan

WASHINGTON, Dec 13 (Reuters) - The U.S. Congress on Thursday approved another stopgap funding bill to avert a looming government shutdown, underscoring the difficulty of passing substantive legislation in a Congress where Democrats are battling Republicans and themselves.

By a vote of 385-27, the House sent the Senate a temporary funding bill that will extend until Dec. 21 one that is set to expire on Friday.

The Senate promptly approved the one-week extension, sending it to President George W. Bush for his expected signature. The measure was needed as Congress has so far failed to pass 11 of 12 individual spending bills to fund the government in the fiscal year that started Oct. 1.

By Dec. 21, lawmakers hope to end a year-long squabble with Bush and combine into one massive bill funds for government activities for the rest of the fiscal year.

The budget bill, to pay for Washington's contributions to health care, education, border security, foreign aid, airport screeners and thousands of other U.S. government programs, was still being crafted. Votes are expected next week.

"We were encouraged by what we've heard from Capitol Hill about the budget," said White House spokeswoman Dana Perino, who noted many details still needed to be worked out. It was a rare moment of comity between the White House and Democrats.

On Wednesday, Democratic ranks showed signs of strain and House Speaker Nancy Pelosi, a California Democrat, announced her party would meet Bush's demand that overall "discretionary" spending would not exceed the $933 billion cap he has demanded since February.

Thursday, Pelosi was fending off questions about congressional Democrats acquiescing to Republicans.

"This isn't about caving. This is...about setting a high water mark" and then having to settle for less in the face of Bush veto threats, Pelosi said.

Democrats had been hoping to spend about $22 billion more to pay for their priorities, including improved health care for the poor, more medical research and other social programs.

Pelosi said many of the Democrats' priorities would be funded within Bush's spending limit, implying the upcoming House bill would take money away from Bush priorities.

By the time the budget bill reaches Bush's desk, it could include as much as $70 billion more for the wars in Afghanistan and Iraq and without Iraq troop withdrawal timetables many Democrats insisted on all year.

Pelosi said she had miscalculated in thinking Republicans would begin abandoning the nearly five-year-old Iraq war. But party liberals have long complained that their leaders should take a stronger stand against the war, an issue they think gave them their majorities in the House and Senate in last November's elections.

On other issues, Democrats were bickering among themselves as well.

This summer, many Democrats seethed as their leaders gave in to White House demands on how to renew a domestic surveillance law.

More recently, as Congress has worked on a bill to rescue middle-class taxpayers from getting hit with a tax originally intended for the wealthiest. Moderate and conservative Democrats in the House have insisted that the $50 billion cost be paid for.

But Senate Democrats abandoned them, voting in droves for a bill that would tack the $50 billion one-year cost onto a $9 trillion debt. (Editing by Todd Eastham)

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