President Obama is threatening to veto a temporary Republican budget measure that would ensure the troops are paid through September and keep the government running for another week, but would not resolve the bitter standoff between Democrats and Republicans.
"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.
The president had said earlier this week he would not vote for the temporary extension, which includes $12 billion in spending cuts, unless there were hints of a progress in negotiations on a final bill.
Democrats charge 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.
House Speaker John Boehner, R-Ohio, shot back at the president and Democrats.
"Neither the president nor Senate Democrats have identified a single policy provision they find objectionable in the bill," he said in a statement. "The president and Democratic leaders have all committed to working with Republicans to cut spending. A bill that falls short of that commitment cannot pass the House."
One of the key negotiators in budget talks predicted today that the government is headed for a shutdown and expressed little optimism that a deal would be reached in time to avoid a paralyzing stalemate.
"The numbers are basically there," Senate Majority Leader Harry Reid, D-Nev., said today. "But I am not as nearly as optimistic -- and that's an understatement -- as I was 11 hours ago. The numbers are extremely close."
Reid took to the Senate floor this morning to say the two sides have come to an agreement on spending cuts, but are still at odds over extraneous "ideological matters."
"If this government shuts down -- and it looks like it's headed in that direction -- it's going to be based on my friends in the House of Representatives," he said.
Reid is accusing 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. He additionally blamed the situation on "rambunctious" freshman Republicans in the House.
Boehner's aides insist they are still negotiating on numbers and "nothing is agreed to until everything is agreed to."
"There's no agreement yet -- No agreement on the numbers, and no agreement on the policy issues that were moved through the House," Boehner said. "There are a number of issues on the table and any attempt to narrow it down to one or two would not be accurate."
Sources say spending cuts in the remainder of the fiscal 2011 budget now stand 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 that was outlined in the original House bill. About $10 billion in spending has already been cut in temporary funding measures.
Reid and Boehner will meet with Obama again today, for the third time this week, to hash out a deal.
Today's rhetoric is markedly different than the tone of optimism that was struck after Wednesday night's meeting.
"I thought the meetings were frank, they were constructive and what they did was narrow the issues and clarify the issues that are still outstanding," Obama said Wednesday night.
Boehner also cited "progress," but suggested "some honest differences" still divided the two parties' negotiating teams.
"I want to reiterate that there is no agreement on a [dollar] number and there no agreement on the policy," Boehner said. "But there's an intent on both sides to continue to work together to try to resolve this. No one wants the government to shut down. We are going to continue to work throughout the night and tomorrow."
Obama suggested he would keep the pressure on both sides.
"We're going to keep on pounding away at this thing because I'm absolutely convinced that we can get this done," he said. "There is no reason we should not be able to complete a deal."
Obama cited the real-life story of J.T. Henderson, which was reported by ABC News. 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."
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.
The clock quickly is running out for lawmakers. Current funding expires at midnight on Friday 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 Tea Party pressure and backing away from the $33 billion in cuts they say they originally negotiated with him. Boehner has said the two sides never agreed to that number.
In an interview with ABC News' George Stephanopoulos, 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 Office of Personnel Management has started planning for a shutdown, which last 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.
ABC News' Jake Tapper, Jon Garcia, Matt Jaffe and Dan Arnall contributed to this report.