President Barack Obama has signed an order authorising \$85bn cuts in domestic and defence spending following the failure of efforts to strike a deal with Republicans on cutting the US deficit.
Mr Obama and Republican leaders in the House and Senate declared themselves still deadlocked after a last-minute White House meeting last night.
The two sides are at odds over the president's insistence on increasing tax revenue as part of any plan to tackle the country's \$16.6trn debt.
Mr Obama signed the order which officially enacts the across-the-board reductions - known as a "sequester" in government budget language. Under the law, the president had until midnight.
The \$85bn cuts apply to the remainder of the 2013 fiscal year, which ends on September 30. But the legislation that requires the spending reduction will continue slashing government spending by about \$1trn more over a 10-year period.
Speaking after the White House meeting, Mr Obama said: "Let's be clear, none of this is necessary."
He blamed the deadlock on Republicans who he said refused to close tax loopholes that benefit the wealthy, adding that "the pain will be real" for the American people.
"I am not a dictator. I'm the president," Mr Obama said, warning he could not force his Republican foes to "do the right thing," or make the Secret Service barricade Republicans leaders in a room until a deal is done.
"These cuts will hurt our economy, will cost us jobs and to set it right both sides need to be able to compromise," Mr Obama added.
Republican John Boehner, speaker of the House of Representatives, walked out of the meeting to say there would be no compromise as long as Mr Obama insisted on higher tax revenue.
Republicans are standing fast against further increasing taxes and will not compromise on achieving debt reduction through spending cuts alone.
The opposition party is still feeling the sting from its most conservative members after agreeing at the end of 2012 to allow the expiration of Bush-era tax cuts for Americans earning \$400,000 or more a year.
Friday's meeting was the first the two sides have held this year on the budget battle, and it lasted less than an hour.
The immediate impact of the cuts on the public is uncertain, but they will carve 5% from domestic agencies and 8% from the Pentagon between now and October 1.
Defence officials say they will be forced to reduce the working week of 800,000 civilian employees, scale back flight hours of warplanes and postpone some equipment maintenance.
The deployment of a second aircraft carrier to the Persian Gulf has also been cancelled.
The US Navy will gradually stand down several hundred planes starting in April, the Air Force will curtail flying hours and the Army will cut back training for all units except those deploying to Afghanistan.
Several major programmes will be unaffected, including the Social Security pension programme, the Medicaid health care programme for the poor and food stamps.
Pentagon chief Chuck Hagel warned that the budget cuts will endanger the US military's ability to conduct its missions.
"This will have a major impact on training and readiness," he said. "Later this month, we intend to issue preliminary notifications to thousands of civilian employees who will be furloughed."
Mr Hagel also acknowledged that the budget cuts "will cause pain, particularly among our civilian workforce and their families".