As the clock ticked, the White House has ordered some government agencies to close. US President Barack Obama has stressed the "very real" consequences of lawmakers failing to avert the government shutdown.
Just ahead of the midnight deadline, the US government began to order a shutdown of federal agencies for the first time in 17 years.
"Unfortunately, we do not have a clear indication that Congress will act in time for the president to sign a continuing resolution before the end of the day tomorrow, October 1, 2013," said Sylvia Mathews Burwell, director Of the White House Office of Management and Budget in a memo.
"Agencies should now execute plans for an orderly shutdown due to the absence of appropriations."
Immediately ahead of the deadline, President Obama recorded a message to the military telling them they would remain on "normal duty," but added that defense department civilians could face temporary periods of unpaid leave.
The Senate's Majority Leader Harry Reid, a Democrat, blamed "anarchists" in the House of Representatives for forcing the shutdown. "This is a very sad day for our country," he said.
Obama had appeared on national television on Monday afternoon, ahead of a midnight deadline, to spell out the implications of a shutdown on the US economy.
With Republicans seeking to block or amend Democrat healthcare reforms as a condition for funding the government, Obama warned that any shutdown, which would force 800,000 government workers from their jobs without pay, could have disastrous economic consequences.
"A shutdown would have a very real economic impact on real people right away," said the president in his speech, adding that such an event would hinder economic recovery. "It would throw a wrench into the gears of our economy at a time when those gears have gained some traction."
Unless agreement can eventually be found, a large number of non-essential public-funded institutions, including federal regulatory agencies, federal museums and national parks, would be expected to shut down.
Republicans have demanded amendments to the Affordable Care Act, popularly known as Obamacare, as a condition in approving funding for next year's budget in the House of Representatives, where the party has a majority.
'Refighting the election'
In his address, the president criticized the Republican Party for appeasing its "extreme right wing," and warned that time was running out. "One faction of one party, in one house of Congress, in one branch of government doesn't get to shut down an entire government just to refight the results of an election."
"Congress needs to keep our government open, needs to pay our bills on time, and never, ever threaten the full faith and credit of the United States of America."
The Democrat-led Senate has rejected Republican attempts to modify the healthcare legislation, first by withdrawing funding, then by delaying it for a year.
US House speaker, Republican John Boehner, said that delaying the president's healthcare program was an issue of "fairness," with many employers not able to meet the demands of rising healthcare costs.
The White House on Monday evning said Obama had phoned Boehner, asking him to drop attempts to tie government funding with the healthcare legislation.
On the currency markets, the US dollar dipped ahead of the looming shutdown.
rc / ch (AP, AFP, dpa, Reuters)