Washington ( CNN ) -- Democrats and Republicans narrowly averted a partial shutdown of the federal government Friday night , agreeing on a budget deal and a short-term funding extension little more than an hour before the clock struck midnight and time ran out . The new funding extension , which cuts spending by $ 2 billion , will last through next Thursday . `` The government will be open for business , '' President Barack Obama said . `` In the final hours before our government would have been forced to shut down , leaders in both parties reached an agreement that will 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 . '' Negotiators capped days of frantic closed-door talks and public recriminations by agreeing on a framework for a package of $ 38.5 billion in spending cuts covering the rest of the fiscal year , which expires September 30 . Republicans , bolstered by their capture of the House of Representatives in last November 's midterm elections , had initially pushed for $ 61 billion in cuts . Opinion : How did we get to brink of shutdown ? A GOP push to strip $ 317 million in federal funding from Planned Parenthood failed . Democrats also turned back Republican attempts to get federal dollars currently set aside for family planning and women 's health turned into block grants for states . Such a move would have given governors and state legislatures more ability to cut funding for services opposed by conservatives . Sources told CNN , however , that leaders of the Democratic-controlled Senate agreed to hold separate votes on both measures , as well as on an initiative to repeal President Barack Obama 's health care overhaul . Lessons learned from past shutdowns . Obama praised the agreement , calling the cuts `` painful '' but necessary to secure the country 's economic future . This `` is what the American people expect us to do , '' the president said at the White House . `` That 's why they sent us here . '' `` This has been a lot of discussion and a long fight , '' said House Speaker John Boehner , R-Ohio . Republicans fought to `` create a better environment for job creators in our country . '' Senate Majority Leader Harry Reid , D-Nevada , called the deal `` difficult but important for the country . '' Nevertheless , the furious down-to-the-wire talks portend even tougher rounds of negotiations when Congress takes up an increase in the nation 's debt ceiling and the fiscal year 2012 budget in the months ahead . If the negotiations had failed , approximately 800,000 government workers would have been furloughed . A range of government services would have come to halt . Obama noted earlier in the week that the mechanism of shutting down government operations had already started . An inability to reach a deal would have hurt federal workers , people who rely on government services and the nation 's broader economic recovery , he warned . Belief Blog -- My Take : Culture war in budget battle . `` For us to go backwards because Washington could n't get its act together is unacceptable , '' the president said . Top aides on both sides of the aisle had seemed increasingly resigned to the prospect of a shutdown . Congressional staffers began receiving their furlough notices Thursday afternoon . Friday 's agreement to slash $ 38.5 billion in spending comes on top of two previous funding extensions that included $ 10 billion in cuts . Republicans , under pressure from the conservative Tea Party movement to reduce the size of government , blame Democrats for failing to pass a fiscal year 2011 budget last year when they controlled both the Senate and the House . They also say Obama and his party are ignoring the peril of rising federal deficits and the national debt . Democrats call the $ 61 billion in cuts initially pushed by the Republicans extreme , and argue reductions of that scale would have harmed the economic recovery while damaging education and innovation programs essential for continued growth . The budget brinkmanship showed the political stakes of the situation , with both parties trying to depict the other as unwilling to do what 's right for the country . It also demonstrated the cavernous gap between the two parties on social issues . Democrats said the Republican drive to defund Planned Parenthood proves the GOP is fixated on abortion and other issues related to women 's health . Republicans repeatedly insisted that the size of spending reductions was the main cause of the dispute in recent days . CNN 's Dana Bash , Deirdre Walsh , Ted Barrett , John King , Kate Bolduan , Brianna Keilar , Terry Frieden , Ed Henry and Dan Lothian contributed to this report .
NEW : A temporary measure will keep the government funded through next Thursday . NEW : The deal calls for $ 38.5 billion in spending cuts . NEW : Obama calls the cuts `` painful '' but necessary .