The White House ordered federal agencies to suspend a vast array of activities shortly before midnight, after a day of frantic legislative volleying left Senate Democrats and House Republicans at an impasse over government spending and the 2010 federal health-care law. The next steps to resolve the stalemate remained unclear.
Markets that have slipped recently face a test on Tuesday morning of how they will view the developments, given that a larger deadline for Congress—over the need to raise the nation's borrowing limit—is less than a month away.
Many federal workers reporting to their agencies Tuesday morning will undertake a half-day of shutdown preparations before more than 800,000 employees in the government's workforce of about 2.9 million are sent home. While essential functions such as law enforcement and air-traffic control will continue, a large array of federal activities, among them Internal Revenue Service audits and surveillance for flu outbreaks, will be suspended.
"Unfortunately, Congress has not fulfilled its responsibility. It has failed to pass a budget and, as a result, much of our government must now shut down until Congress funds it again,'' President Barack Obama said in a video message to military and defense personnel around the world.
He added that personnel in uniform would remain on duty. "The threats to our national security have not changed, and we need you to be ready for any contingency,'' he said.
On Capitol Hill, a day of frantic legislative volleying between Senate Democrats and House Republicans collapsed late Monday, when House Republicans said they planned to appoint a set of negotiators to work out a resolution with a small group with senators. But the GOP move came with no concessions and brought lawmakers no closer to reaching a budget deal.
Senate Majority Leader Harry Reid (D., Nev.) rejected the move, saying he wouldn't enter negotiations until the House agreed to reopen the government by extending its funding for several weeks.
"We like to resolve issues, but we will not go to conference with a gun to our head," Mr. Reid said on the Senate floor.
Republicans denounced Senate Democrats for refusing to negotiate. "Our hope this evening is we will be able to put reasonable people in a room," said House Rules Committee Chairman Pete Sessions (R., Texas).
The first partial federal shutdown since 1996 came amid a fight that was less over spending levels than over the federal health-care law championed by Democrats, the Affordable Care Act. Driven by a set of combative Republican conservatives, the GOP-led House moved a series of bills to fund federal agencies for several weeks while delaying the start of the health law or stripping it of funding.
The Senate rejected each one, saying Democrats wouldn't negotiate changes to the health law as a condition of funding the government.
It was a clear indication that in an era of divided government, Congress is proving increasingly unable to fulfill its basic job of setting budget and spending priorities.
The coming days will likely be marked by intense political maneuvering and blame-shifting, with both sides trying to seek political advantage. Polls suggest the GOP would bear the blame for any repercussions, though Democrats at some point run the risk of being seen as defenders of the health-care law, which remains unpopular.
In their final exchange, in the waning hours before Monday's deadline, the House passed a short-term funding measure that would have funded agencies through mid-December while delaying for one year the law's requirement that most individuals carry health insurance or pay a penalty. It also would have limited government subsidies for lawmakers' own health-care premiums and those of their staffs.
The House approved the measure in a 228-201 vote, and the Senate rejected it shortly afterward, 54-46.
Afterward, the House prepared to vote a second time for the same proposal, returning it to the Senate with a measure that would set up a negotiating committee. Mr. Reid said Democrats would refuse until Republicans approved a measure to keep the government open for several months that doesn't include limits on the health law.
To limit the impact of the shutdown on the Pentagon, Congress passed and Mr. Obama signed legislation just before midnight that would ensure that all members of the military be continued to be paid for the duration of the shutdown, even as hundreds of thousands of other government workers will be furloughed without pay.
Republican lawmakers on Monday had been faced with a choice. With the Senate rejecting changes to the health law, they could push once again for the Senate to change its mind, or defer their fight against the health law to another day and pass a funding measure shorn of health-law provisions.
After a 90-minute meeting of the House GOP on Monday afternoon, Republicans decided to press again with another attempt to curb the health law.
While Republicans rallied behind their hang-tough strategy, through the day there were clear signs of growing anxiety about political fallout to the party from a shutdown.
"It is moronic to shut down the government over this," said Rep. Devin Nunes (R., Calif.).
Even before the new move was advanced, some Republicans were urging GOP leaders to drop the fight over the spending bill.
"We have tried robustly on the spending bill, and it hasn't borne fruit," said Rep. Doug Lamborn (R., Colo.). He said the GOP could use other tactics to fight the health law, but "for this week, we may have to give up."
The tea party and other conservatives have for months pressured congressional Republicans to try to undercut the law before Tuesday, when a crucial milestone will be passed—the launch of a new system of health-insurance marketplaces for individuals to buy policies.
Sen. Ted Cruz (R., Texas) led the unsuccessful fight in the Senate to pass the House's initial legislation to eliminate money for the health law while funding the rest of the government.
Mr. Boehner had initially devised a strategy for sidestepping that fight now in order to avoid risking a government shutdown. But House conservatives, working in concert with Mr. Cruz, foiled that strategy and kept up the pressure on the GOP to fight until the last minute.