Defiant House Republicans today passed a temporary budget measure that would ensure the troops are paid through September and keep the government running for another week, hours after President Obama threatened to veto it.
The bill, however, won't resolve the bitter standoff between Democrats and Republicans and, in fact, it could make even tougher negotiations on funding the government beyond midnight Friday into Saturday.
House Speaker John Boehner, R-Ohio, and Senate Majority Leader Harry Reid, D-Nev., met with Obama at the White House today for the third time this week.
The leaders said the meeting was productive and expressed optimism that they could find middle ground, but no deal was struck, putting the government one step closer to a shutdown that now is looking unavoidable.
The trio will meet again later this evening.
"There is no agreement on the number. There are no agreement on the policy issues," Boehner said. "All of us sincerely believe that we can get to an agreement but we are not there yet."
Reid said that if nothing is done then they all have a "bad day tomorrow" to look forward to with a government shutdown.
A government shutdown would have wide effects, officials say -- including delaying many tax refunds and delaying pay for military personnel.
Boehner today expressed disappointment at the president's rejection of the temporary extension, saying that "neither the president nor Senate Democrats have identified a single policy provision they find objectionable in the bill."
Obama said earlier this week he would not vote for the measure, which includes $12 billion in spending cuts, unless there were hints of a progress in negotiations on a final bill.
"This bill is a distraction from the real work that would bring us closer to a reasonable compromise for funding the remainder of fiscal year 2011 and avert a disruptive federal government shutdown that would put the nation's economic recovery in jeopardy," the White House said in a statement.
Democrats charged that the bill is merely a political cover.
"This is a very cynical ploy to use our troops to try to impose the Republican agenda through the budget process," said Rep. Chris Van Hollen, D-Md.
Democrats accuse Republicans of holding up a deal because they are insisting on keeping so-called "riders" -- amendments that passed in the House -- related to government funding for abortion and limiting the Environmental Protection Agency's ability to enforce restrictions on greenhouse gas emissions.
Sources said earlier today that spending cuts in the remainder of the fiscal 2011 budget stood at $34.5 billion after Republicans agreed, late Wednesday, to $3 billion in cuts to the Pentagon's budget.
For many Tea Party-backed lawmakers, that may not be enough. They've said they want to see at least $61 billion in cuts, a number from the original House bill. About $10 billion in spending already has been cut in temporary funding measures.
If a deal to fund the government cannot be reached, at least 800,000 federal employees are expected to be furloughed, the same as during the 1995 government shutdown. But unlike then, it's unclear whether they would receive back pay for the lost time.
Troops and other agency staff that are considered "essential" and kept on duty during a shutdown will not receive paychecks until Congress makes a deal.
Members of Congress, however, will continue to be paid. Every lawmaker must decide which of their employees is considered essential and should be kept on staff while the government is shut.
On Wednesday, Obama cited the real-life story of J.T. Henderson, which was reported by ABC News as an example of Americans who would be hurt by the shutdown. Henderson is expecting to receive a large tax refund to pay bills.
"A shutdown could have real consequences for real people," Obama said. "There are ramifications all across this economy, and at a time when the economy is still coming out of an extraordinarily deep recession it would be inexcusable, given the relatively narrow differences when it comes to numbers between the two parties, that we can't get this done."
Current funding expires at midnight on Friday night and a House bill needs to be presented 48 hours before it is brought to the floor for a vote.
Democrats blame Boehner for caving in to "rambunctious" freshman Republicans and Tea Party pressure.
In an interview with ABC News' George Stephanopoulos Wednesday, Boehner said he is in full agreement with conservative Republicans affiliated with the Tea Party.
"What they want is they want us to cut spending," Boehner said. "They want us to deal with this crushing debt that's going to crush the future for our kids and grandkids. There's no daylight there" -- between Boehner's position and the Tea Party's position.
Tea Party-backed members of Congress want to stick to the $61 billion in cuts proposed in the original continuing resolution that passed on Feb. 19. The two short-term extensions that the House has passed in recent weeks cut a total of $10 billion.
The last government shutdown happened in 1996 under President Bill Clinton.
Under federal laws, essential staff still have to report to work, but all nonessential staff will be furloughed without pay. Furloughed staff are not allowed to work as unpaid volunteers to the government, enter their offices, use their work BlackBerries or computers, and access their work email.
Each agency is responsible for identifying its essential staff. Federal employees who are "necessary to protect life and property" and are needed to perform an "orderly shutdown of emergency operations" are considered "essential." That includes most national intelligence staff, military personnel, air traffic controllers, law enforcement, emergency and disaster personnel, the Transportation Security Administration, Coast Guard and similar staff.
During the last full five-day shutdown in 1995, an estimated 800,000 federal employees were furloughed, according to the Congressional Research Service. A smaller figure, 284,000, were furloughed in the partial 21-day shutdown that followed soon after.
Amid contractors, who are unlikely to receive back pay, more than 20 percent were negatively impacted by the last funding lapse.
A much larger number likely will be affected this time because of the size and scope of the federal government.
Washington, D.C. Mayor Vince Gray said Tuesday that because D.C.'s federal subsidy would be affected, trash collection and pothole repair in the city could be threatened during a shutdown.
The ripple effects of a shutdown will be felt outside of the nation's capital as well. The U.S. Postal Service will operate as normal, since it is self-funded. Social Security, veterans and Medicare checks would continue to be disbursed, although there could be a delay in services for new registrants and those who have filed a change of address form.
Many Americans may have to hold off on their travel plans. Museums and national parks will close, as will the national zoo, and passport applications will be delayed.
Some government inspection services, such as for meat, may be delayed as will some clinical trials administered by the National Institute of Health.
The uncertainty also could roil stock markets, rattle consumer confidence and hurt tourism, with the severity depending on how long a shutdown lasts.
The average federal government worker makes $1,404 weekly, according to the latest U.S. Bureau of Labor Statistics figures. If 800,000 of them are furloughed and don't get a paycheck during a government shutdown, it zaps about $1.1 billion out of the economy in direct employee compensation each week.