The US government has begun a partial shutdown after the two houses of Congress failed to agree a new budget.
The Republican-led House of Representatives insisted on delaying President Barack Obama's healthcare reform - dubbed Obamacare - as a condition for passing a bill.
More than 700,000 federal employees face unpaid leave with no guarantee of back pay once the deadlock is over.
It is the first shutdown in 17 years and the dollar fell early on Tuesday.
Goldman Sachs estimates a three-week shutdown could shave as much as 0.9% from US GDP this quarter.
On Tuesday, Mr Obama blamed the House of Representatives for the stalemate and said he would "keep working to get Congress to reopen the government [and] restart vital services".
"This shutdown was completely preventable. It should not have happened," he wrote in a letter to federal government employees.
"And the House of Representatives can end it as soon as it follows the Senate's lead, and funds your work in the United States Government without trying to attach highly controversial and partisan measures in the process."
On Monday, House Speaker John Boehner told reporters he hoped the Senate would agree to a committee between the two chambers known as a conference "so we can resolve this for the American people".
"The House has voted to keep the government open but we also want basic fairness for all Americans under Obamacare," he said.
But on Tuesday morning, the Senate voted 54-46 to reject the request for formal negotiations to end the impasse.
Who is affected?
The BBC's Mark Mardell in Washington says the divide in US politics has grown so bitter that government itself cannot function.
Democrats were never likely to make concessions on healthcare reform - Mr Obama's signature achievement and a central issue in last year's presidential election, our correspondent says.
But Republicans have made demands that they knew would not be met rather than be accused of weakness and betrayal by their own hardliners, he adds.
On Monday, the Democratic-led Senate twice rejected bills from House Republicans that would have funded the government only if funding for President Obama's healthcare law was delayed for a year.
Major portions of the healthcare law, which passed in 2010 and has been validated by the US Supreme Court, took effect on Tuesday regardless of whether there is a shutdown.
President Obama went on national television to criticise Republicans for trying to refight the last election.
A shutdown would have "a very real economic impact on real people, right away," he said, adding it would "throw a wrench" into the US recovery.
"The idea of putting the American people's hard-earned progress at risk is the height of irresponsibility, and it doesn't have to happen."
As the shutdown neared, the Senate's Democratic majority leader blamed Republicans for the imminent halt to all non-essential government operations.
"It will be a Republican government shutdown, pure and simple," said Harry Reid, referring to the Republicans as "bullies".
Mr Obama has signed legislation ensuring that military personnel would be paid. The defence department had advised employees that uniformed members of the military would continue on normal duty, but that large numbers of civilian workers would be told to stay home.
Under the shutdown, national parks and Washington's Smithsonian museums will close, pension and veterans' benefit cheques will be delayed, and visa and passport applications will go unprocessed.
Programmes deemed essential, such as air traffic control and food inspections, will continue.
The US government has not undergone a shutdown since 1995-96, when services were suspended for a record 21 days.
Republicans demanded then-President Bill Clinton agree to their version of a balanced budget.
As lawmakers grappled with the latest shutdown, the 17 October deadline for extending the government's borrowing limit looms even larger.
On that date, the US government will reach the limit at which it can borrow money to pay its bills, the so-called debt ceiling.
House Republicans have also demanded a series of policy concessions - including on the president's health law and on financial and environmental regulations - in exchange for raising the debt ceiling.
Guy Crundwell from Connecticut told the BBC that politicians should be solving the country's problems rather than engaging in a "charade".
"I am very fiscally conservative but for moral issues I lean towards the Democrats, but I'll be damned if I want to see either of them wasting my money on this sort of posturing."