Cabinet secretaries are preparing for a government shutdown and will notify employees this afternoon on what the next steps would be should one happen.

"We do need to be prepared for any contingency," said Kenneth Baer, spokesman for the Office of Management and Budget, "and in case Congress does not act, we are taking the steps necessary to be prepared if a lapse in funding should occur. That is why agencies are sending emails to their employees this afternoon to alert them to this possibility and how it would affect them."

A government shutdown is a very real threat, ever since President Obama and Senate Majority Leader Harry Reid, D-Nev., agreed to tie the Omnibus appropriations bill to an agreement on extending the payroll tax holiday.

As the clock strikes midnight Friday night, funding for the government will run out unless there is some sort of deal.

On Sunday, it seemed as if there would be a way to avoid this. Though there were some outstanding issues, there had been a general agreement on a compromise for the Omnibus spending bill, which needs to pass for the government to continue operating.

That process is held up because Obama and Reid don't believe that a payroll tax cut holiday will be extended unless they force Congress to do so.

"There is not a deal on the Omnibus," a senior administration official said when asked about the general agreement between Democratic and Republican appropriations committee staffers. "There is only a deal when the president is ready to sign a bill."

Baer said that "there is no reason for the government to shut down. Congress can avoid a shutdown by passing an acceptable omnibus spending bill as well as an extension of the payroll tax cut and unemployment benefits - or by passing another short-term CR as Congress has done seven times already this year."

-Jake Tapper and Sunlen Miller