The United States Government was set to shut down at 12.01am (5.01pm NZT) today, after Senate Democrats rejected a Bill that would have extended the deadline and kept agencies open to November 21.

The upper chamber voted 55-45 on the Republican-led proposal Tuesday night, which needed 60 votes to pass.

Only two Democrats, senators John Fetterman (Pennsylvania) and Catherine Cortez Masto (Nevada), voted with the GOP for the measure, along with Angus King (I-Maine).

Just one Republican, Senator Rand Paul (Kentucky), joined with Democrats in opposing it. Lawmakers had already voted down a Democratic alternative that was widely expected to fail.

The two parties remain far apart from a potential deal to fund the Government, and it is unclear how long the shutdown may last.

Democrats say they cannot support the GOP funding extension until Republicans agree to concessions on healthcare policy.

Republicans have said they are willing to negotiate on Democrats’ chief demand - an extension of Affordable Care Act subsidies put in place during Covid-19 that will otherwise expire at the end of the year - but not until the Government is open again.

About 750,000 federal employees would be furloughed each day under a shutdown, according to an estimate released today by the non-partisan Congressional Budget Office, putting on hold about US$400 million ($690m) worth of compensation daily. Others would have to work without pay.

US President Donald Trump told reporters that the Government may fire “a lot” of federal workers if a shutdown goes forward, and later said the shutdown empowered the Administration to cut social benefit programmes. He blamed Democrats for the possible disruption.

“They’re taking a risk by having a shutdown. Because of the shutdown, we can do things medically and other ways, including benefits. We can cut large numbers of people,” he told reporters in the Oval Office.

The President added, falsely, that Democratic lawmakers are trying to force the government to take care of undocumented immigrants in part by offering them full healthcare benefits. Undocumented immigrants are legally ineligible for federal health benefits.

He also said the Democrats are still bitter about losing to him in the 2024 presidential election.

A meeting yesterday with Trump, Senate Majority Leader John Thune (R-South Dakota), House Speaker Mike Johnson (R-Louisiana), and Democratic leaders Senator Charles Schumer and Representative Hakeem Jeffries of New York did not yield any breakthroughs.

Democrats in both chambers have argued that the Republican tax and spending bill passed in July will raise healthcare costs for Americans and say they are unified in using the leverage they have in the Senate to secure changes that will provide relief for Americans.

Schumer and Jeffries said they raised several key requests with Trump during the meeting: extending subsidies for people on insurance through the ACA marketplace put in place during the pandemic, which expire at the end of the year; and preventing the Administration from making unilateral decisions on federal spending.

Democratic leaders said that their requests must be included in the funding bill and that the White House must guarantee that it will not unilaterally cut healthcare funds later.

Thune said Democrats needed to keep the Government funded during any other negotiations.

“We’re happy to sit down and talk about these and other issues that they’re interested in,” he told reporters today.

“But it should not have anything to do with whether or not, for a seven-week period, we keep the federal Government open.”

Senator John Barrasso (Wyoming), the No. 2 Senate Republican, cautioned Democrats not to expect Republicans to discuss extending the subsidies if the Government shuts down.

“We should have any negotiations only when the Government is open,” Barrasso told reporters.

Some Democratic senators who were previously undecided said they opted to stick with the rest of their party because negotiations seemed within reach.

Senator Jeanne Shaheen (D-New Hampshire), who voted against the Bill, said she had conversations with colleagues today that convinced her that Republicans and Democrats could negotiate a deal.

“I think there is an opportunity to come to a negotiated agreement, and I think getting this vote done and moving forward is what we need to do at this point,” Shaheen said.

King, who caucuses with Democrats, said that his vote to support the Republican extension was “not an easy one”, but that he decided the additional power the Trump Administration would have under a shutdown would give Republicans “more power to harm the people you’re trying to protect”.

“You don’t stand up to somebody by handing them a weapon to hit you over the head with,” he said.

A negotiated solution didn’t seem likely at any point today.

Adding to rising tension on both sides, Trump had posted a fake video with racist tropes yesterday of Schumer and Jeffries at a news conference outside the White House to his Truth Social account.

It had Schumer saying things about benefits for immigrants that he hadn’t actually said and Jeffries wearing a sombrero he hadn’t been wearing as a Mexican folk song played in the background.

“The next time you have something to say about me, don’t cop out to a racist and fake AI video. When I’m back in the Oval Office, say it to my face,” Jeffries said at a news conference today, where he was joined by dozens of House Democrats.

Schumer said that the video indicated that Republicans “don’t give a damn about the harm they will cause with their shutdown”.

Democrats are relying on pressure from voters to convince Republicans to change their minds, Schumer said after the vote.

“The American people are demanding it, and are going to demand it more and more[in the next two days],” he told reporters.

Republicans have said they are willing to negotiate on extending the ACA subsidies but not as part of a funding extension.

Republicans are divided over the policy, with some moderate members pushing for the change and conservatives insisting they would block any extension.

The House passed the Republican-led funding extension this month primarily along party lines. It is what is known as a “clean” continuing resolution, or CR, because it extends spending levels without adding unrelated policy changes. The measure would add millions of dollars for security across the federal Government, a change lawmakers sought after conservative activist Charlie Kirk was killed.

The measure failed an initial vote in the Senate, and the House adjourned until October 7, forcing Democrats to accept the GOP proposal or close the federal Government.

In recent shutdown near misses, Democrats have insisted on - and often provided the votes for - clean funding extensions, over GOP demands for policy changes.

The White House budget office has warned that the Trump Administration might move to lay off workers if the Government closes.

The American Federation of Government Employees, the largest union of federal workers, and other unions sued the Office of Management and Budget and Office of Personnel Management today over threats of mass firings.

It argued that the agencies have no statutory authority to implement such cuts during a shutdown and have not provided proper justification. The unions urged a federal court to block any planned mass layoffs.

“These actions are contrary to law and arbitrary and capricious, and the cynical use of federal employees as a pawn in Congressional deliberations should be declared unlawful and enjoined by this Court,” lawyers representing the unions wrote.

Trump’s mention of possible layoffs conflicted with guidance slowly emerging from some federal agencies in recent days, in which officials promised there would not be such cuts.

That guidance has begun going out within the State Department, according to two employees familiar with the matter and recordings of meetings obtained by the Washington Post.

Food and Drug Administration Commissioner Marty Makary told staff in a Monday video that the agency would be spared from permanent firings during a shutdown.

“I was able to ensure an exemption because we are in the business of public safety,” Makary said in the video, which was seen by the Post, with its contents confirmed by a federal health official.

- Rachel Roubein and Meryl Kornfield contributed to this report.