The White House budget office had earlier issued an order for many government departments to start closing down, triggering leave for 800,000 federal workers.
It is the first time in nearly two decades that the US government taken such an action. The shutdown was triggered after congressional Republicans stubbornly demanded changes in the nation's health care law as the price for essential federal funding and President Barack Obama and Democrats adamantly refused.
Only workers deemed essential will be at their desks from Tuesday onwards, leaving government departments such as the White House with skeletal staff.
It'll also likely see most government offices, national parks, monuments and museums close.
It follows the Republican-controlled House of Representatives and the Democrat-controlled Senate failing to agree on a budget.
US CONSULATES IN AUSTRALIA TO STAY OPEN
Australians seeking a visa to work in the US won't be affected by a possible American government shutdown, a consular official says.
The US Congress is immersed in a federal spending stalemate which threatens to halt US public services for the first time since 1996.
The US government could go into shutdown indefinitely if the Congressional impasse is not resolved by 2pm (AEST) on Tuesday.
The last time it occurred, from late 1995, the government was shut down for 28 days.
This is how one newspaper covered the incident.
But the US Consulate in Sydney, which processes visa applications for Australians wishing to work in the US, says a possible shutdown won't affect consular services, which also operate in Melbourne and Perth.
"For the time being, essential services are going to continue and consular services are certainly considered essential," consulate spokesman Dave McGuire told AAP.
"It obviously varies from country to country but here in Australia, we would continue with our staffing as it is."
Passports would still be returned within five working days, Mr McGuire said.
Aussies often flock to the US during the Australian summer to work as ski instructors in Utah and Colorado during the American winter.
President Barack Obama and Democrats want Congress to pass the budget without ideologically-driven conditions but the Republicans want to unwind the White House's signature healthcare plan, dubbed "Obamacare".
We're waiting to see what happens as well," Mr McGuire said.
WHAT ARE THE CONSEQUENCES OF THE SHUTDOWN?
A US government shutdown will hit an economy struggling to sustain its post-crisis rebound, but experts say the impact will only be substantial if Washington's political paralysis lasts several weeks.
More than 800,000 non-essential federal workers will be placed on unpaid leave beginning at midnight (1400 AEST on Tuesday), due to the impasse over funding for fiscal 2014, which begins October 1.
Many offices will be closed, and government services will be frozen or cut back in many areas, with payments to contractors also delayed.
That would cut the flow of money into the economy by hundreds of millions of dollars each day, with the impact accumulating the longer the shutdown goes on.
Financial markets sank around the world on Monday as investors worried about the political stalemate in Washington. Japanese stocks fell 2.1 per cent; European markets, measured by the Euro Stoxx 50 index, lost 0.9 per cent; and the S&P 500 gave up 0.6 per cent.
But economists say a short-lived closure may not do much damage to the US economy overall.
Analysts at Macroeconomic Advisors say a two-week shutdown will cut 0.3 percentage point off of gross domestic product growth, expected to run at a tepid pace of about 2.5 per cent in the third quarter.
"Because we expect any shutdown to be brief, induced effects on private production and repercussions in financial markets would be modest," they said. "But output would rebound in first quarter of next year."
On the other hand, a protracted shutdown would more broadly disrupt private sector output and spark more market turbulence.
And if it ties into the concurrent fight over raising the US national debt ceiling - which many say would be a more dangerous development - the damage could be significant.
Federal Reserve Chairman Ben Bernanke cited both issues on September 18 when he surprised markets by announcing that the Fed will continue its $US85 billion ($A91.39 billion) a month stimulus program.
Bernanke said Fed policy makers were wary of "very serious consequences for the financial markets" of the clash over fiscal issues.
The longer it goes on, the deeper the damage.
Mark Zandi of Moody's Analytics said a month-long shutdown could take up to 1.4 percentage points from growth.
The impact will be scattered. National Parks and museums will close, hurting tourism in some areas. Various permit services, such as the issuing of passports, would halt, hurting businesses and travellers.
Possibly 400,000 civilian defence workers would stay at home, slowing down contracts with private suppliers.
The largest impact would be in the federal hub Washington, which could lose $US200 million a day, Stephen Fuller of George Mason University told the Washington Post.
But Jim O'Sullivan at High Frequency Economics said that, as long as federal workers on leave get paid for the days they miss - which Congress has allowed after past shutdowns - there should not be much impact.
However, there could be bad implications if the closures lead to a plunge in investor confidence in equity markets.
"We see no sign of panic," said O'Sullivan. "Still, perceptions could change if the shutdown lasts for more than a few days and there is no compromise on the debt limit."
A refusal of Republicans in Congress to agree an increase in the country's statutory borrowing limit has analysts increasingly concerned.
The government spends around $US60 billion a month more than it brings in. That money that is already committed and so funding must be found or something else must give.
The Treasury says it will run out of cash and flexibility from October 17, and if the statutory cap on borrowing is not increased, it will have to withhold some cheques.
That could mean missing payments for salaries, retirement and health benefits, or even debt service - though that might not show up until the end of October.
"If the government loses its legislative authority to borrow, it would need to slash spending to pay all of its bills," said Douglas Porter, chief economist at BMO Capital Markets.
Such cuts "could easily tip the economy into recession, and that's not even considering the ripple effects on confidence and markets of a possible technical default", he said.
