About 800,000 federal workers are being forced off the job and most nonessential federal programs and services are being suspended.
The shutdown, the first since one in the winter of 1995-96 severely damaged Republican election prospects, raised fears the political gridlock between the White House and a Republican Party influenced by hardcore conservative lawmakers would prevail.
National parks and museums in Washington will be closed, and agencies like NASA and the Environmental Protection Agency will be all but shuttered. People classified as essential government employees - such as air traffic controllers, Border Patrol agents and most food inspectors - will continue to work, and the State Department will continue processing foreign applications for visas. Embassies and consulates overseas will continue to provide services to American citizens.
The health care law itself was unaffected as enrollment opened Tuesday for millions of people shopping for medical insurance.
The stand-off pits Democrats against a core of conservative activists who have mounted a campaign to seize the must-do budget measure in an effort to derail the 2010 health care reform they have dubbed "Obamacare."
Read more: What the shutdown means
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There are few issues Republicans feel as passionately about as the health care law. They see the plan, intended to provide coverage for the millions of Americans now uninsured, as wasteful and restricting freedom by requiring most Americans to have health insurance.
Until now, such temporary spending bills have been routinely passed with bipartisan support, ever since a pair of unpopular shutdowns 17 years ago engineered by then-Speaker Newt Gingrich severely damaged Republican election prospects and revived then-President Bill Clinton's political standing.
The Democratically controlled Senate twice on Monday rejected bills passed in the Republican-majority House of Representatives that conditioned keeping the government open on delaying key portions of the law. The House passed the last version again early Tuesday; Senate Majority Leader Harry Reid said the same fate awaits it when the Senate reconvenes Tuesday morning.
Obama accused Republicans of holding the budget hostage to get what they want.
"You don't get to extract a ransom for doing your job, for doing what you're supposed to be doing anyway, or just because there's a law there that you don't like," Obama said Monday, delivering a similar message in private phone calls later to Republican House Speaker John Boehner and other lawmakers.
The US Capitol building in Washington on the eve of US government shutdown. (Reuters)
Boehner said he didn't want a government shutdown, but he insisted that the health care law "is having a devastating impact. ... Something has to be done."
Republican leaders have voiced reservations about the effort and many lawmakers predicted it wouldn't work, fearing the public will blame their party for the shutdown. But individual Republican House members may face a greater risk by embracing a compromise. Many represent heavily partisan congressional districts, and voters in Republican primaries have ousted lawmakers they see as too moderate.
It wasn't clear how long the standoff would last, but it appeared that Obama and Reid had the upper hand.
"We can't win," said Republican Sen. John McCain, adding that "sooner or later" the House would have to agree to Democrats' demands for a simple, straightforward funding bill reopening the government.
The order directing federal agencies to "execute plans for an orderly shutdown due to the absence of appropriations" was issued by White House Budget Director Sylvia Burwell shortly before midnight Monday.
The military will be paid under legislation freshly signed by Obama, but paychecks for other federal workers will be withheld until the impasse is broken. Federal workers were told to report to their jobs for a half-day but to perform only shutdown tasks like changing email greetings and closing down agencies' Internet sites.
The self-funded Postal Service will continue to operate and the government will continue to pay retirement benefits and health benefits for the poor and elderly.
US senator Ted Cruz (R-TX) (C) departs the Senate floor after a late-night vote rejected budget legislation from the Republican-controlled House of Representatives at the US Capitol in Washington. (Reuters)
Obama appeared in a video message assuring members of the military they'll be paid under a law he just signed and told civilian Defense Department employees who won't be paid that "you and your families deserve better than the dysfunction we're seeing in Congress."
The underlying spending bill would fund the government through Nov. 15 if the Senate gets its way or until Dec. 15 if the House does.
The prospect of a shutdown led U.S. stocks to sink as Wall Street worried the budget fight could lead to something much worse for the economy - a failure to raise the nation's borrowing limit.
Members of the House of Representatives leave the US Capitol after passing a continuing resolution to fund the US government that would also delay enrollment in the Affordable Care Act for one year in Washington DC. (AFP Photo)
Republicans are likely to take up the health care fight again when Congress must pass a measure to increase the borrowing cap, which is expected to hit its $16.7 trillion ceiling in mid-October.
Obama has vowed not to negotiate over the debt ceiling, noting that a default would be worse for the economy than a partial government shutdown. The U.S. risks a market-rattling, first-ever default on its obligations if Congress fails to raise that limit.
US Senator John McCain strains to hear a reporter's question as he departs the Senate floor after a late-night vote rejected budget legislation from the Republican-controlled House of Representatives at the US Capitol in Washington. (Reuters)
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