WASHINGTON (Reuters) -- With a government shutdown looming, congressional negotiators were to meet again on Wednesday and could be called to the White House for a second meeting with President Barack Obama to search for a deal to keep agencies running beyond Friday.
The two sides must resolve what programs would go under the knife to satisfy Republican demands for sharp spending cuts.
The size of the package is still at issue as well. Negotiators had tentatively agreed on a figure of $33 billion, but Republican House of Representatives Speaker John Boehner is now pushing for a target of $40 billion.
Separate negotiating sessions at the White House and the Capitol on Tuesday failed to produce an agreement between Boehner and Democratic leaders, who blamed each other for an impasse that could throw hundreds of thousands of government employees out of work.
The White House said President Barack Obama could meet with lawmakers again on Wednesday. "(The president) is headed to Pennsylvania today for a town hall (meeting) on energy security. Meeting with congressional leaders on the budget is still possible," White House spokesman Dan Pfeiffer said in a message on Twitter.
The budget showdown is the biggest political test for both parties since Republicans swept to power in the House and made big Senate gains in last year's elections on promises to slash government spending and reduce the federal government.
Obama vowed to keep negotiators at work until they agree on a budget for the remainder of the fiscal year, which ends on September 30. Temporary funding expires at midnight on Friday.
"The only question is whether politics or ideology are going to get in the way of preventing a government shutdown," he told reporters after Tuesday's White House meeting failed to find common ground.
Senate Democratic Leader Harry Reid sounded a note of optimism after meeting privately with Boehner later in the day.
"We're still negotiating in good faith, we're not that far apart and hopefully we can work something out," Reid said on the Senate floor.
Boehner is under pressure from fiscal conservatives aligned with the Tea Party movement who oppose any compromise. The outcome is likely to set the stage for even bigger budget battles ahead and echo through the 2012 campaign for the White House and control of Congress.
Republicans have sought to blame the Democratic-controlled Senate for not accepting cuts. Democratic Senator Charles Schumer told ABC's "Good Morning America" on Wednesday that the problem was the influence of conservative Tea Party-backed House members.
"The bottom line is that if (Boehner) can resist them, not give them their way on everything, I think we can have an agreement," Schumer said.
Boehner's deputy, House Republican Leader Eric Cantor, on Tuesday said it was not likely a deal could be reached by midnight Friday.
A government shutdown would ripple through an economy still recovering from the worst recession since the 1930s.
The military would continue to fight wars in Iraq and Afghanistan and retirees would continue to get their Social Security benefits, but passport offices, bankruptcy courts and national parks would likely close.
Much of the 4.4 million federal workforce will go to work because their jobs are deemed essential.
The Internal Revenue Service would continue to collect taxes, but would likely not issue refunds.
Financial markets would likely not be affected by a shutdown as the Treasury Department would continue to make debt payments, analysts said, but state and local governments could see their own budget woes worsen.
(Additional reporting by Matt Spetalnick, Donna Smith and David Morgan; Writing by John Whitesides; editing by Christopher Wilson and Vicki Allen)