msnbc.com staff and news service reports
updated 4/6/2011 3:40:18 PM ET 2011-04-06T19:40:18

The Obama administration warned Wednesday that a federal government shutdown would undermine the economic recovery, delay pay to U.S. troops fighting in three wars, slow the processing of tax returns and limit small business loans and government-guaranteed mortgages during peak home buying season.

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Speaking at a townhall in Philadelphia, Obama warned that the inability to strike a compromise could hurt Americans on the local level, as well. He warned that a government shutdown might prevent small business owners from taking out a loan, stall the process of selling a house or prevent a family from taking a vacation to a national park — "all because of politics."

Obama said he had asked Congress to send him a budget that includes "serious spending cuts" but still invests in things like infrastructure, education, research and development and energy and he reiterated his admonition not to let partisan politics get in the way of compromise.

"It makes it tough to win the future when you haven't passed the budget from last year," Obama told the audience during his opening remarks, before going on to urge lawmakers to reach a deal that would avoid a shutdown. "You have to make compromises as a family. That's what we are: the American family. So Democrats and Republicans need to get together, work through their differences, keep the government running so we can focus on keeping this economy growing."

The message, delivered two days before the federal government's current spending authority expires, appeared aimed at jolting congressional Republicans into a budget compromise.

Billions of dollars apart, congressional negotiators were working to strike a deal by Friday that averts a shutdown by setting federal spending limits through the end of September. The last such shutdown took place 15 years ago and lasted 21 days.

President Barack Obama told congressional leaders he would have them back at the White House on Wednesday if they didn't make progress. Obama did call House Speaker John Boehner Wednesday morning. Boehner's office said the call lasted just three minutes and that the speaker told Obama he was hopeful a deal could be reached.

Story: Obama: Progress, but no deal to avert shutdown

Administration paints grim scenario
As the talks continued, the White House sought to put the prospect of a shutdown in terms people would care about, warning even that the beloved Cherry Blossom parade in the nation's capital would be wiped out. The Smithsonian Institution and national parks around the country would also be closed.

Some fast facts on shutdowns past

A shutdown would come at an especially busy time for the Smithsonian. The Cherry Blossom Festival, which concludes this weekend, draws many tourists to an area near the museums. The Smithsonian counts about 3 million visits each April and has already sold 23,000 IMAX movie and lunch combos to school groups for the month.

Under long-standing federal rules, agencies would not be affected that provide for U.S. national security, dispense most types of federal benefit payments, offer inpatient medical care or outpatient emergency care, ensure the safe use of food and drugs, manage air traffic, protect and monitor borders and coastlines, guard prisoners, conduct criminal investigations and law enforcement, oversee power distribution and oversee banks.

Under the shutdown scenario described by the administration, the government would have to significantly cut staffing across the executive branch, including workers at the White House and civilian employees at the Defense Department; close to 800,000 workers would be affected. Congress and the federal court system will also be subject to a shutdown.

Pentagon, government officials finalize shutdown plans
At the Pentagon, defense officials were finalizing plans that would lay out how the department would deal with a shutdown.

But they already have acknowledged that U.S. military troops — including those in war zones — would receive one-week's pay instead of two in their next paycheck if the government closes.

Military personnel at home and abroad would continue to earn pay, but they won't get paychecks until there is a budget agreement and government operations resume.

Col. Dave Lapan, a Pentagon spokesman, said that the Pentagon will be open on Monday and will be staffed. He said decisions on which Defense Department employees must report to work will depend on their jobs, rather than where they are based.

Key national security responsibilities, including operations in Afghanistan, Iraq and Libya and earthquake assistance to Japan would not be interrupted by a shutdown, the Pentagon said.

The CIA also won't be closing, though it will be drawing down some non-essential personnel, to be in compliance with federal law, according to a senior intelligence official, speaking on condition of anonymity to discuss matters of intelligence.

Officials familiar with the shutdown say essential counterterrorism functions in other parts of the intelligence community will continue, like monitoring of the terrorist watch lists, and essential intelligence collection and analysis.

At the Internal Revenue Service, the tax filing deadline remains April 18 — delayed three days because of a local holiday in Washington. Tax audits, however, will be suspended if there is a shutdown.

The IRS won't process paper returns during a shutdown. Those expecting a refund should file their returns electronically and ask that the money be deposited directly into their bank accounts. Tax payments are welcome, though it is still unclear whether help lines for taxpayers will be staffed.

Social Security payments will continue to be delivered, and applications for benefits will continue to be processed. But some services will be limited, Social Security Commissioner Michael Astrue said.

"The checks will continue to go out. The problem will be on an extended CR, it will be increasingly difficult to get changes in address, changes in status, and those types of things done," Astrue said.

Astrue said Social Security headquarters and field offices will be closed. Some limited services will still be available at field offices, but the details are still being worked out, he said.

Medicare would still pay medical claims for its 48 million recipients, who are mainly seniors but also several million younger people who are permanently disabled or have kidney failure. Payments to doctors, hospitals and other service providers could be delayed, however, should a shutdown continue for several months.

At the National Institutes of Health, groundbreaking medical research would experience a disruption. Patients already being treated at the NIH's famed hospital in Bethesda, Md., would continue to get that care, but new patients could not be admitted. Likewise, no new studies of drugs or other treatments could begin.

Effect on housing market
The Federal Housing Administration, which guarantees about 30 percent of home mortgages, would stop guaranteeing loans. The issuance of government backed loans to small businesses would be suspended, according to the White House.

The Obama administration said the impact on the housing market would be more severe than in 1995, the last time there was a government shutdown. The Federal Housing Administration accounts for 30 percent of the mortgage market, nearly three times the amount 16 years ago.

Among other consequences cited by the administration:

—The Environmental Protection Agency would cease issuing permits and stop reviewing environmental impact statements which will slow approval of projects.

— Most government websites would not be updated, unless they were deemed essential.

— The Environmental Protection Agency will stop issuing permits of industrial facilities for air, land and water pollution limits.

— Federal courts would be unable to hear cases as employees like clerks, stenographers, bailiffs, and security guards would not be at work.

NBC News' Athena Jones contributed to this story.

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Video: Shutdown looms amid budget battle

  1. Closed captioning of: Shutdown looms amid budget battle

    >> in washington with the threat of a government shutdown by week's end. savannah guthrie has the latest. good morning.

    >> reporter: good morning. this morning white house aids are telling me this could go either way. there were late night meetings on capitol hill . but the threat of a government shutdown is verile real.

    >> all right. hello, everybody.

    >> reporter: a government shut down now potentially days away the president is venting frustration over the failurer to reach a deal.

    >> we don't have time for games. we don't have time for trying to score political points or maneuvering or positioning, not on this.

    >> reporter: after a closed door meeting with congressional leaders at the white house produced no breakthroughs it was back-to-back duelling news conferences.

    >> we want the largest spending cuts that are possible. we are going to continue to fight for those.

    >> i hope the republicans do what the country needs, not what they believe the tea party wants.

    >> reporter: republicans want $61 billion in cuts. democrats have agreed to $33 billion and the two sides disagree on what to cut. both parties say they don't want to see the government shut down.

    >> we think we're right.

    >> reporter: in 1995 republicans got the blame after a battle with president clinton ended in the government closinging.

    >> shut it down.

    >> reporter: but in the current volatile political climate no one knows who the american people would fault this time around.

    >> congressional leaders in both parties are worried about fallout from a shutdown. they don't know who the winners would be, who the losers would be. politicians hate uncertainty.

    >> reporter: bracing for impact there was an e-mail sent to federal agencies to prepare contingency plans while house republicans playing for time proposed a one-week budget extension if there is no deal.

    >> this is the path to prosperity.

    >> reporter: meanwhile an even bigger battle looms as republicans unveiled their budget for next year. a blueprint to cut medicare, medicaid and lower the corporate tax rate to save more than $6 trillion over a decade.

    >> this is the most predictable economic crisis in our history. what are we doing? playing politics.

    >> reporter: the president said yesterday if there was no progress on these talks he wanted to see speaker boehner and leader reid at the white house today, tomorrow, the next day until there was a deal. the meeting is very much possible today, matt.

    >> savannah guthrie , thank you very

Interactive: Budget brinkmanship

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