Obama, Senate Democrats and House Republicans reached a deal maintaining federal funding for Planned Parenthood. (Neon Tommy)

The federal government avoided a shutdown on Friday with a midnight deadline moments away, saving thousands of workers across the world from temporary furloughs and keeping open institutions as commonplace as national parks.

President Barack Obama plans early Saturday to sign into law a spending resolution to fund the government through next Thursday and cut $2 billion in federal spending. By then, lawmakers expect to pass legislation making about $36.5 billion in spending cuts through Sept. 30. While there is a temporary lapse in appropriations early Saturday, White House budget director Jack Lew has instructed the federal government to "continue normal operations."

“Leaders in both parties reached an agreement to allow our small businesses to get the loans they need, our families to get the mortgages they applied for, and hundreds of thousands of Americans to show up at work and take home their paychecks on time," President Barack Obama said in a late-night address with the Washington Monument beaming through a window behind him.

Senate Majority Leader Harry Reid said his party had to make “tough choices” in agreeing to a “historic” budget cut, which Obama twice noted was the largest single-year spending cut ever in terms of real dollars. Reid spoke on the Senate floor with 86-year-old Senate Appropriations Committee Chairman Daniel Inouye sitting behind him and clutching his cane. Reid praised both Inouye and Boehner for their leadership, but didn't mention Obama.

“We didn't do at this late hour for drama,” Reid said. “We did it because it's been very hard to reach this point.”

But it was House Speaker John Boehner who first formally announced that a deal had been reached after a week of back-and-forth debating that even brought in the possibility of ending federal subsidies of NPR and Planned Parenthood.

“We fought to keep government spending down because it really will in fact help create a better environment for job creators in our country,” Boehner said after emerging from an applause-filled meeting of the House Republican Caucus.

Since a Congress controlled by Democrats failed to a pass a budget bill last year, the government has been running on a series of continuing resolutions that afforded government agencies as much money as they received the year before. Republicans armed with a majority in the House of Representatives since January have used their leveraged to cut a total now of 2 percent from Obama's original budget request for this year.

The exact nature of the cuts remained unclear after the three leaders spoke. Obama offered some hints.

“Programs people rely on will be cut back,” he said. “Needed infrastructure projects will be delayed.”

As part of the deal, the Senate in the coming weeks will be forced to take votes on defunding Planned Parenthood and the health care reform law. The spending resolution does block the District of Columbia from funding abortions for low-income women.

Tea Party leader Rep. Michele Bachmann said she was "disappointed" with the deal, saying on Fox News that Boehner should have fought harder for greater cuts. Bachmann was one 70 lawmakers voting against the funding bill.

The government was last shut down in 1996 during the Clinton administration.

The Atlantic and CNN are both running live blogs on the shutdown trying to keep abreast of fast-changing events.

Here's the timeline of events from earlier Friday:

8:10 p.m.PDT:  President Obama and Senate Majority leader Harry Reid separately address the country and laud the deal.  Reid calls the cuts "historic" three times.  He confirms that the policy riders were taken off the table.

7:55 p.m. PDT:  Boehner publicly announces deal has been made. A "bridge" bill to be passed Friday night. Long term agreement to be approved next Thursday.  CNN confirms no defunding for Planned Parenthood.

7:37 p.m. PDT: CNN reports that there is deal in place to fund the government for the final six months of the current fiscal year. But first Congress must pass a seventh continuing resolution to fund the government until Thursday. The votes in the House and Senate must come in the next 80 minutes.  Cuts will be $39b,

7:26 p.m. PDT: CNN is reporting that Speaker John Boehner says a deal is "very close," and that deal may be for the rest of the fiscal year. There are still many outstanding issues, CNN's Dana Bash said. Harry Reid is expected to speak on the Senate floor at 8:15 p.m.

7:10 p.m. PDT: The Hill's Bob Cusack points out that they'll need to pass a deal by unanimous consent to beat the shutdown deadline, meaning one objection from one lawmaker could mean a shutdown happens. Interesting facet to note: both Bachmann and Sen. Rand Paul have said they would not vote for this deal. This raises the question: if you don't object, but you vote "no," does that mean you really supported it? (Via TheAtlantic.com)

7:02 p.m. PDT: ABC News: A high-level House GOP source emailed ABC News: "Looks like there'll be a deal, but there are several important details yet to be worked out." The source added that leadership in the Republican House was confident it could be resolved before midnight

6:45 p.m. PDT: MSNBC reports that an aide to House Speaker John Boehner says there is no deal "yet." Bohener is meeting at this hour with House GOP conference to review whatever draft agreement might exist.

6:21 p.m. PDT: MSNBC news reports that a temporary deal to continue temporary funding has been reached and will be announced shortly.  House GOP will meet within hour to review the details. Observers speculate that deal may only be for 72 hours,

5:40 p.m. PDT: From The National Journal:
The likelihood of a war-time federal government shutdown—the first in American history—diminished dramatically on Friday night as all parties began reviewing, with the goal of approving, a broad array of cuts and a short-term bill to keep the government operating while the details are put into legislative language for full congressional action next week.

House Appropriators began meeting in Speaker John Boehner’s office about 7:45 p.m. EDT, a sure sign of preparing floor action for another stop-gap spending bill, the seventh in a process that began last year when Democrats failed to pass the necessary spending bills to fund the government for this fiscal year.

5:00 p.m. PDT: MSNBC reports:

At this hour, it appears that negotiators are prepared to put the fight over federal funding of Planned Parenthood aside for the moment, increasing the chances of a deal to avert a government shutdown.

One GOP source says "the issue has been resolved," while a Democratic source describes the talks as "almost there" on the so-called 'rider' that has proven to be the biggest and last stumbling block to an agreement.

Still another source says that the issue is no longer on the table.

4:00 p.m. PDT: The New Tork Times reports:

For days, the assumption has been that Speaker John A. Boehner of Ohio was dug into his hardened position on behalf of the conservatives in his House caucus and from socially conservative voices in the Republican Party.

But now — just hours before the first government shutdown in 15 years –some of the most vocal conservatives are urging Republicans to reach a deal before a shutdown occurs. That could give Mr. Boehner the political cover he needs to cut a deal with President Obama and the Democrats.

Representative Michele Bachmann of Minnesota, the founder of the Tea Party caucus in the House and a likely 2012 presidential candidate, wrote on Friday afternoon in a Twitter message: “I am ready for a big fight that will change the arc of history. The current fight in Washington is not that fight.”

In an article on Redstate, Ms. Bachmann concluded that “the current battle has devolved to an agenda that is almost too limited to warrant the kind of fighting that we’re now seeing in Washington.”

Likewise, Mike Huckabee, the former governor of Arkansas and a possible presidential candidate, said Friday afternoon in an interview with Fox Business News that a shutdown would “hurt the Republicans, not the Democrats.”

3:45 p.m. PDT: With a midnight budget deadline looming, congressional Democrats and Republicans blaned each other for failing to reach an agreement on avoiding a shutdown of the U.S. government.  Negotiations are continuing but few observers are expressing much hope that a lights off order won't go out at the strike of twelve Friday night.

Democrats say both sides have agreed on the size of the cuts, some $38 billion, but complain that the deal has been blocked by GOP demands that one of the cuts be a virtual defunding of Planned Parenthood and other women's health services. Republicans say that the agreement has been stalled by Democrats demanding a $1.7 billion cut in the defense budget.

Reuters says a mood of frustration has engulfed Capitol Hill with neither side sure who will be blamed for an eventual shutdown:

"They've got to be laughing at us right now" in China, said Senate Foreign Relations Committee Chairman John Kerry. "How terrific that the United States of America can't make a decision."

The White House said a shutdown would idle about 800,000 federal government workers and could slow the U.S. economic recovery. Vital services such as defense, law enforcement, emergency medical care and air traffic control would continue.

Without a deal, many official websites would darken and furloughed government workers would be required to power down their BlackBerries. Trash would go uncollected in Washington, and national parks and monuments like the Statue of Liberty in New York would clos

Investment firm Goldman Sachs estimates a government shutdown lasting more than a week could cost the economy $8 billion in missed federal spending, dragging down growtth.

Senate Majority Leader Harry Reid made an emotional speech saying the final sticking point was a Republican demand to gove states more latitude over restricting federal funding for birth control and other women's health services. "Republicans want to shut down the government because they think there's nothing more important than keeping women from getting cancer screenings. This is indefensible and everyone should be outraged," Reid said on the Senate floor.

House Speaker John Boehner, meanwile, argued that the remaining stumbling block was not over social issues but over the spending cuts themselves.  "I'm hopeful that we'll be able to come to some agreement, but we're not going to roll over and sell out the American people," Boehner told reporters. "When we say we're serious about cutting spending, we're damn serious about it."

As the tense negotiations came down the wire, federal workers from Washington D.C. to Los Angeles prepared to be furloughed.

The last time the federal government was shut down in the mid-1990's, the House Republican majority led then by Newt Gingrich paid a high price and paved the way for the re-election of Bill Clinton.

It's anybody's guess how a shutdown this weekend would reverberate. Most political observers speculate that the House leadership under Boehner would privatey like to avoid a shutdowb but are afraid of alienating a zealous Tea Party wing that opposes compromise.

Some conservatives had their eyebrows raised when the right-of-center Wall Street Journal editorial page urged a compromise.