Looming deadline: Treasury Secretary Janet Yellen said she will try to be more precise about when the nation could start missing payments in her next advisory to Congress. Several analyses back up Yellen’s initial forecast that the X-date – when the nation would default – could arrive in early June.
Our live coverage has ended. Follow the latest US politics news here – or read through the updates below for the latest on the debt talks.
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Prospects grim for passing debt limit hike by June 1, GOP sources say
From CNN's Manu Raju and Melanie Zanona
The prospects for enacting a debt limit hike by June 1 are grim, senior Republican sources tell CNN, even as negotiators signal they’re starting to make progress on a deal.
As of Wednesday evening, the two sides had yet to reach an agreement on key sticking points, sources said. Even if they do, they’ll still need at least a day to turn it into bill text and then another 72 hours to give members time to read the bill before a floor vote in the House. Then it still needs to go through the Senate, where any single senator can hold things up.
That timeline makes it exceedingly unlikely that they can get a bill to President Biden’s desk by June 1 — the date the Treasury Department previously has said the country could default. Still, a number of Republicans have expressed doubt that next Thursday is the hard deadline.
That reality has started to set in among lawmakers, with the House Majority Leader’s office informing members on Wednesday that they can return home for the Memorial Day weekend after votes tomorrow, although they’ll be given 24 hours’ notice if they need to return.
GOP leaders continue to insist a short-term patch is off the table. Regardless, that option would also require some time to get through both chambers.
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Top credit rating agency places US on rating watch negative as debt ceiling fight plays out
From CNN's Samantha Delouya
The U.S. Capitol Dome is seen at the Capitol Building on April 17, 2023 in Washington, D.C.
Anna Moneymaker/Getty Images
Fitch Ratings placed the top-ranked United States sovereign credit rating on rating watch negative Wednesday, reflecting the uncertainty surrounding the current debt ceiling debate and the possibility of a first-ever default.
The agency, one of the top three credit rating agencies along with Moody’s and S&P, placed the US “AAA” on “rating watch negative,” signaling that it could downgrade US debt if lawmakers do not agree on a bill that raises US Treasury’s debt limit.
However, Fitch added that it still believed there will be a resolution before the “X-date.”
Some Democrats express uneasiness about direction of debt talks
From CNN's Manu Raju and Morgan Rimmer
House Democrats indicated that they are concerned that the White House will give up too much in their negotiations with House Republicans, and acknowledged that the House GOP is winning the messaging war.
“The Speaker has decided to make this really a public relations effort, and really turning it into a political process. And so do we sacrifice something in the short term as a result? We sure do,” Rep. Dan Kildee said.
Democrats need to “continue to just press the most reasonable approach that we can take and try to get to yes,” he said.
Rep. Dean Phillips wouldn’t say how he believes the White House has handled the talks but did say he is disappointed that it took so long for the White House to begin negotiating because they lost a chance to fight for key Democratic priorities.
Rep. Alexandria Ocasio-Cortez said that she hopes the White House does not yield to House Republicans on spending cuts. The New York lawmaker said she thinks the “White House is doing the best they can” and criticized Republicans.
“When you have a party that is being reckless,that is refusing actually to negotiate and engage in what they call themselves hostage taking, it’s really about how we figure out how to break through that block of irrationality,” she said.
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Billions of dollars of social security payments could be delayed if the US defaults on its debt
From CNN's Tami Luhby
If the US is not able to pay all its bills for the first time ever, senior citizens could be impacted quickly.
Unless President Joe Biden and House Republicans hammer out a deal to address the debt ceiling soon, the Treasury Department may not have enough funds to fully satisfy all of the nation’s obligations as soon as June 1.
The first batch of Social Security payments – roughly $25 billion’s worth – are scheduled to be sent out on June 2. They mainly go to many of the oldest and most vulnerable of the roughly 66 million retirees, disabled workers and others in the entitlement program, those who started receiving their checks before May 1997.
Payments to more recent enrollees are set to go out on June 14, June 21 and June 28, depending on the day of the month one was born. The amounts are also about $25 billion each week.
But if the debt ceiling impasse is not resolved, those benefits could be delayed, along with paychecks to federal workers and the military, payments to Medicare providers, and federal grants to states and municipalities for Medicaid, highways, education and more.
Many senior citizens are already growing worried, especially in the past week or so as the deadline grows closer, advocates say.
Almost two-thirds of beneficiaries rely on Social Security for half of their income, and for 40% of recipients, the payments constitute at least 90% of their income, according to the National Committee to Preserve Social Security and Medicare. The average benefit for retired workers is $1,827 a month in 2023.
McCarthy unsure whether there will be more negotiations with White House tonight
From CNN's Alayna Treene
Speaker of the House Kevin McCarthy (R-CA) speaks to members of the media at the U.S. Capitol on May 24, 2023 in Washington, D.C.
Kevin Dietsch/Getty Images
House Speaker Kevin McCarthy returned to the Capitol after meetings on the debt ceiling Wednesday.
He got back shortly after 6 p.m. ET, telling reporters he’s “not sure” if there will be another meeting with White House negotiators on the debt ceiling tonight.
“We’re gonna have a discussion here in a moment and I’ll find out,” he said as he entered his office.
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House will recess Thursday after votes but will be called back for debt ceiling vote when needed
From CNN's Kristin Wilson
The House will recess following votes on Thursday as negotiators continue to work on a debt ceiling deal, House Majority Leader Steve Scalise said.
Scalise faced jeers and boos when he began his remarks by saying “As we all know, the House has already voted to address the debt ceiling” and castigating the Senate for not taking up their bill or being in session this week.
The House currently has a scheduled recess next week.
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Progress made in meeting with negotiators at White House — but still no debt limit deal, McCarthy says
From CNN's Nicky Robertson and Manu Raju
Speaker of the House Kevin McCarthy stops to speak to members of the media gathered in National Statuary Hall at the U.S. Capitol on Wednesday, May 24, in Washington, DC.
Kent Nishimura/Los Angeles Times/Getty Images
House Speaker Kevin McCarthy said that the meeting between top GOP and senior White House negotiators on Wednesday moved in a positive direction — but indicated that there are still substantial issues to resolve.
Asked if the White House moved closer to GOP demands on spending cuts, McCarthy told CNN: “There was a number of issues that are out there that we’ve been working on, I think being able to find some ways that we can probably get to fruition on a couple of these, there’s still a number of these out there.”
McCarthy would not provide specific details on sticking points – but said that he is not budging from his demand to cut spending and that work requirements for social safety net programs are on the table.
He reiterated that the only concession he is willing to give is to raise the national debt ceiling.
McCarthy’s comments suggest that the White House may be willing to give in on GOP demands.
“What the White House has asked us for is to raise the debt ceiling,” McCarthy said.
He still believes that there is still enough time to reach an agreement before the default deadline.
“I still believe we have time to make an agreement and get it done,” McCarthy said when asked about his comments earlier this week that they need an agreement this week to avoid default.
One of McCarthy’s negotiators, GOP Rep. Patrick McHenry remained longer at the White House.
The speaker said he does not have another meeting scheduled with President Joe Biden at this time.
“I know the president wants to tax people more … so it really goes to the fundamental problem that we have Democrats want to spend more and tax more,” McCarthy said.
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All 213 House Democrats have signed discharge petition, leaders say, but there's no GOP support
From CNN's Alayna Treene and Haley Talbot
All 213 House Democrats have signed onto a discharge petition Wednesday that can be used as a vehicle to bypass House GOP leadership and force a vote to raise the debt ceiling, leaders announced.
The party took a key procedural step earlier this month to begin setting up the process that would enable House Democrats to bring up a discharge petition.
However, a majority of House members, 218, need to sign onto the bill in order for it to pass, meaning Democrats would need at least five Republican representatives to support it. As of now, no House Republicans have indicated they plan to sign on, and it remains extremely unlikely the petition could get the votes to pass on the House floor.
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Some Americans say they are worried about a potential debt default
From CNN's Alicia Wallace
Americans who are already trying to navigate persistently high inflation, soaring interest rates, banking turmoil and recession fears are now faced with trying to prepare for the “unthinkable:” a potential US debt default.
Earlier this month, Kimberly Dickerson called up her creditors, asking about contingency plans in the event that her Social Security Disability check doesn’t land in June.
“The only way I can say it is, it’s going to be catastrophic,” said Dickerson, 52, of Richmond, Virginia.
Debt ceiling negotiations are continuing on Capitol Hill as a deadline of default looms larger by the day. Average Americans are taking notice and trying their best to protect themselves and their livelihoods.
A cross-section of Americans told CNN they’re becoming increasingly worried not only about the threat of the US defaulting on some or all of its financial responsibilities but also the effects of any spending cuts made in negotiations.
Teri House of Kansas met with a financial adviser about whether she could bear the cost if her elderly mother’s federal assistance is interrupted, putting the Navy veteran’s established memory care services at risk.
Meanwhile, just outside Detroit, veteran Christopher Land is nervous too. He said his family would immediately feel the impacts of a failed debt ceiling negotiation, and he’s concerned about what it would mean for his fellow residents in need.
“Our retirement savings were wiped out by medical debts years ago,” said Land, 41, whose wife is disabled. “A default could be really bad for us. I’m employed by a city government. We are on public assistance. We have loans. We’re living on the right side of the paycheck-to-paycheck line, but not by a lot.”
In Tucson, Arizona, Alejandro Terrazas fears he may lose a chunk of his retirement savings and rainy day funds if the impasse continues.
“I’m getting up there in years, but I’m not ready to retire probably for 10 more years, and if it’s some temporary thing, I won’t make any moves,” said Terrazas, 60. “But most of my money in retirement is in the stock market, except for the house I own.”
McCarthy: House members should stay close to DC over holiday weekend in case of vote on a debt ceiling deal
From CNN's Nicky Robertson
House Speaker Kevin McCarthy speaks with reporters moments after returning from a meeting with President Joe Biden and other congressional leaders at the White House to discuss the debt ceiling, on Capitol Hill on Tuesday, May 16, in Washington, DC.
Jabin Botsford/The Washington Post/Getty Images
House Speaker Kevin McCarthy said that members should plan to be close to Washington, DC, over Memorial Day weekend so they can return to vote on a debt-ceiling deal if necessary.
McCarthy reiterated that the only “stumbling block” in the negotiations with the Democrats is spending.
Republican negotiators spent about four hours with their White House counterparts today at the Eisenhower Executive Office Building.
McCarthy said he spoke to his team half an hour before the interview.
“I just talked to them 30 minutes ago, I think today they would say they’re making progress,” McCarthy said.
At the outset of the interview, McCarthy said “things are going a little better.”
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Progressive Caucus Chair Pramila Jayapal lays out 4 White House proposals Republicans have rejected
From CNN's Annie Grayer
Representative Pramila Jayapal, a Democrat from Washington, during a news conference at the US Capitol in Washington, DC, on Wednesday, May 24, 2023.
Al Drago/Bloomberg/Getty Images
House Progressive Caucus Chair Pramila Jayapal said Wednesday that the White House told her that House Republicans have rejected $3 trillion worth of policies that would have gone toward deficit reduction throughout the debt ceiling negotiations process.
The policies proposed by the White House that House GOP has rejected:
Ending tax subsidies for big oil that would have brought in $31 billion
Closing the carried interest and other tax loopholes that would have raised more than $60 billion
Increasing the number of drugs that Medicare can negotiate prices for that would have saved $200 billion
A billionaire minimum tax and a corporate global minimum tax would bring in almost $1 trillion
Progressives called on their Republican colleagues to join them in signing a discharge petition to raise a clean debt ceiling. Asked by CNN if any Republicans seem willing to cross party lines and buck House GOP leadership, Jayapal said, “There is going to be a moment here, and it’s coming very, very soon” where Republicans are going to have to make a choice.
Jayapal also called on President Biden to use the 14th amendment if House GOP continues to refuse to sign onto any revenue-raising policies or onto a discharge petition.
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Debt limit negotiators leave meeting at Eisenhower building
From CNN's DJ Judd
Negotiators were spotted leaving the Eisenhower Executive Office Building on Wednesday afternoon as House Republicans and the White House work to come to an agreement on the debt ceiling.
White House negotiators Steve Ricchetti and Louisia Terrell and House GOP negotiator Rep. Patrick McHenry were in the group.
They assembled at noon Wednesday to continue discussions on the debt limit, CNN’s Arlette Saenz reported earlier today.
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Dow closes around 250 points lower
From CNN's Nicole Goodkind
US stocks fell on Wednesday, with the Dow ending the day down by around 250 points as Wall Street appeared to be waking up to the growing possibility of a default.
There are just four trading days left until Janet Yellen’s June 1 “hard deadline” for the United States to raise the debt ceiling or risk defaulting on its obligations.
Treasury yields, meanwhile, moved higher across the curve Wednesday as worries of a default grew.
Minutes from the Federal Reserve’s May policymaking meeting, released Wednesday afternoon, did little to buoy investors’ outlooks.
The meeting notes showed that central bank policymakers were divided at their last meeting as to whether or not another rate hike was needed to slow the economy and cool inflation. Officials also expressed worries about the United States defaulting on its debt, and Fed economists also reaffirmed their forecast of a mild recession later in the year.
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Yellen says she will try to narrow forecast for debt default "X-date"
From CNN’s Tami Luhby
Treasury Secretary Janet Yellen appears before the Senate Appropriations Committee during a hearing to review the fiscal year 2024 budget for the Department of the Treasury, on Capitol Hill in Washington on Wednesday, March 22.
Haiyun Jiang/The New York Times/Redux
Treasury Secretary Janet Yellen said Wednesday that she will try to be more precise about when the nation could start missing payments in her next advisory to Congress.
But she repeated that it’s tough to pinpoint the X-date, when the nation may not be able to satisfy all its bills, even a few weeks in advance because of the inherent uncertainty of incoming revenue and outgoing obligations.
In her letter to Congress on Monday, she said it is “highly likely that Treasury will no longer be able to satisfy all of the government’s obligations if Congress has not acted to raise or suspend the debt limit by early June, and potentially as early as June 1.”
She stressed on Wednesday that if negotiations between the White House and House Republicans fail to produce a deal in time, “there will be some difficult choices to make.”
“Treasury and President Biden will face very tough choices if Congress doesn’t act to raise the debt ceiling,” Yellen said. “And if we hit the so-called X-date without that occurring, there will be some obligations that we will be unable to pay.”
The secretary declined to detail exactly what Treasury can do in terms of payments, but said that “as a general matter, prioritization is not really something that’s operationally feasible.”
“Our payment systems have been constructed in order to pay our bills, not to decide which bills to pay and which bills not to pay,” she said.
Treasury has sent a memo to federal agencies asking if they can delay making certain payments to conserve cash, a source familiar with the matter told CNN. The Washington Post first reported on the memo.
Some House Republicans, however, don’t think that the true deadline is on June 1. They argue that Yellen should be more “transparent” about her forecasts.
“It looks like they’re hedging now and opening up the door to move that date back,” House Majority Leader Steve Scalise said Tuesday.
Multiple analyses have estimated that the X-date will probably occur in early June, but not necessarily June 1. The Bipartisan Policy Center on Tuesday projected that Treasury will most likely lack the cash to meet all of its obligations sometime between early June and early August, with an “elevated risk” between June 2 and June 13.
If Treasury can continue paying the bills into the middle of next month, then it’s likely the government won’t default until later in the summer. The agency will get another injection of funds from second quarter estimated tax payments, which are due June 15, and from $145 billion in an “extraordinary measure” that becomes available at the end of that month.
CNN’s Alayna Treene and Kristin Wilson contributed to this report.
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White House says negotiators are "absolutely empowered" to negotiate on behalf of Biden in debt limit talks
From CNN's DJ Judd
White House press secretary Karine Jean-Pierre speaks during a press briefing at the White House, Wednesday, May 24.
Evan Vucci/AP
White House negotiators are “absolutely empowered” to negotiate on behalf of President Joe Biden in the debt limit discussions, press secretary Karine Jean-Pierre said Wednesday, pushing back against reports that the negotiators have been hamstrung by the White House.
“They’re absolutely empowered – this is a team that the president selected himself, these are long-term advisers, long-time advisers, I should say, to the president,” Jean-Pierre said.
Pressed in a follow-up question by CNN’s Phil Mattingly, Jean-Pierre declined to weigh in on what the White House thinks of lead House GOP negotiators Patrick McHenry and Garret Graves.
Discussions between lead negotiators are still underway at the Eisenhower Executive Office Building, Jean-Pierre added.
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Why a key credit rating provider is confident America won't suffer its first-ever default
From CNN’s Matt Egan
Even though time is running out to get a debt ceiling deal through Congress, one of the key players that will decide the fate of America’s credit rating is convinced disaster will be averted.
Even though there are just eight days to go before the government could run out of cash, Foster said Moody’s is confident the federal government will not suffer a first-ever default.
“If we were less confident, we would change our outlook to negative,” Foster said.
The coming days and weeks could test that confidence.
House Republicans and the White House are, so far, struggling to find a compromise on how to raise the debt ceiling. Cash levels at the US Treasury are dwindling and the accounting gimmicks officials are using to avoid default won’t last much longer.
Wall Street is even starting to wake up to the debt ceiling dangers ahead, with the stock market finally buckling a bit following days of calm.
Asked why he is confident the United States won’t default, Foster pointed to historical precedent, adding, “There has never been a default.”
The Moody’s executive also referenced comments from Republican and Democrat leaders alike about the importance of America paying its bills.
However, given the tight timetable between now and the June 1 deadline set by the Treasury Department, Moody’s isn’t ruling out the idea that the federal government could be forced to delay payments on other items beyond payments to bondholders.
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Fed officials were worried about a US default when they hiked rates earlier this month
From CNN's Bryan Mena
A potential US default was a big concern for Federal Reserve officials when they voted to raise interest rates earlier this month, according to minutes from that meeting released on Wednesday.
Officials raised the central bank’s benchmark lending rate by a quarter point to 5-5.25% in the first week of May. Among the many developments officials discussed, the economic fallout of a US default was one of them, including how the central bank would respond.
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When will the US government run out of cash? It's a moving target
Analysis from CNN's Zachary B. Wolf
The clock is ticking down to a US default, but it’s not entirely clear when the US will officially run out of cash. It’s also not clear what a potential deal to avert a first-ever default will look like.
The day the US government will run out of cash is actually a moving target.
The US actually exceeded its borrowing authority back in January, but Treasury Secretary Janet Yellen authorized “extraordinary measures” – essentially moving money around – to give lawmakers time to act.
She has said those extraordinary measures will be exhausted as soon as June 1, but third-party estimates suggest it could end up taking weeks or even months longer.
The government takes in and spends money every day. It also takes cash from public debt it has sold to cover expenses.
The Treasury Department publishes a daily balance sheet. Last Thursday it showed an operating cash balance of $57 billion, including billions in deposits – everything from income taxes and Medicare premiums to the foreign military sales program – and $205 billion in cash from debt.
CNN’s Tami Luhby writes that if the US can limp to the middle of June, an expected infusion of estimated tax payments could forestall the so-called X date until later in the summer. Treasury officials might not even know until a day or two before the X date occurs.
The default date for the nation's debt is fast approaching. Here's how it could affect you
From CNN's Tami Luhby and Elisabeth Buchwald
A poster at a bus shelter shows the national debt in Washington, DC, on May 21.
Mandel Ngan/AFP/Getty Images
President Joe Biden and House Republicans have a short amount of time to prevent the US from defaulting on its debt, which would impact millions of Americans and unleash economic and fiscal chaos here and around the world.
Treasury Secretary Janet Yellen has warned the government may not be able to pay all of its bills in full and on time as soon as June 1.
Social Security payments: Payments to about 66 million retirees, disabled workers and others receive monthly Social Security benefits could be delayed in a debt default scenario, though it’s possible Treasury could continue making on-time payments because of the entitlement program’s trust fund, said Shai Akabas, director of economic policy at the Bipartisan Policy Center.
Almost two-thirds of beneficiaries rely on Social Security for half of their income, and for 40% of recipients, the payments constitute at least 90% of their income, according to the National Committee to Preserve Social Security and Medicare.
Other government payments could also be affected, including funding for food stamps; federal grants to states and municipalities for Medicaid, highways, education and other programs.
Federal employees and veterans benefits: More than 2 million federal civilian workers and around 1.4 million active-duty military members could see their paychecks delayed. Federal government contractors could also see a lag in payments, which could affect their ability to compensate their workers.
Also, certain veterans benefits, including disability payments and pensions for some low-income veterans and their surviving families, could be affected.
The economy: A debt default could trigger an economic downturn, which would prompt a spike in unemployment. It would come at a particularly fragile time — when the nation is already dealing with rising interest rates and stubbornly high inflation.
How much damage would be done would depend on how long the crisis continues. If the default lasts for about a week, then close to 1 million jobs would be lost, including in the financial sector, which would be hard hit by the stock market declines. Also, the unemployment rate would jump to about 5% and the economy would contract by nearly half a percent, according to Moody’s.
“It would be a body blow to the economy, and it would be a manufactured crisis,” said Bernard Yaros, aneconomist at Moody’s.
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Dow drops nearly 300 as Wall Street worries over debt ceiling negotiations
From CNN's Nicole Goodkind
US stocks were lower in midday trading on Wednesday as concerns mounted on Wall Street over the stalled debt ceiling negotiations.
Until today, investors had remained largely optimistic that the debt ceiling would be lifted before the so-called X-date, Treasury Secretary Janet Yellen’s June 1 deadline for the United States to raise the debt ceiling or risk defaulting on its obligations.
But with just over a week left until that deadline, investors appear to be waking up to the reality that a deal may not be made.
Defaulting on the US debt would be “potentially catastrophic,” JPMorgan Chase CEO Jamie Dimon said earlier this month. “The closer you get to it, you will have panic. Markets will get volatile, maybe the stock market will go down, the Treasury markets will have their own problems,” he said. “This is not good.”
Wall Street’s key measure of volatility, the VIX, spiked by more than 10% on Wednesday.
US Treasury yields also rose Wednesday across the curve as investors weighed the risk of a default.
The Dow was down 283 points, or 0.9%, on Wednesday afternoon.
McCarthy signals debt ceiling deal not close and defends refusal to offer concessions to Democrats
From CNN's Haley Talbot, Lauren Fox and Manu Raju
US Speaker of the House Kevin McCarthy, speaks to the press about the debt ceiling negotiations at the US Capitol in Washington, DC, on May 24. The White House and Congressional Republicans are still locked in crunch talks to try and avert the first debt default in US history, which Treasury officials have warned could come as soon as June 1.
Saul Loeb/AFP/Getty Images
House Speaker Kevin McCarthy reiterated Wednesday morning that the two sides are still far apart on debt ceiling negotiations.
He said the only concessions Republicans are offering are spending caps and work requirements — which Democrats already rejected.
Pressed on why additional concessions aren’t being offered to Democrats on the debt limit, McCarthy said: “We’ve offered a lot of concessions. The cap on the spending is a Democrat idea. The work requirement was a Democrat idea.”
He went on to say that he believed Democrats are being influenced by “extreme” members of their party.
“I can’t help it if the Democrats would become so extreme, and now it’s a party of Bernie Sanders within the party where Joe Biden was elected. Joe Biden is the President of the United States. He is the head Democrat. But if AOC (Rep. Alexandria Ocasio-Cortez) and Bernie Sanders is going to run their party, that’s not my fault. I’m not even sure Bernie Sanders is a registered Democrat,” he added.
The speaker’s team is on their way to the White House to meet with negotiators.
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McCarthy says he doesn't believe that there will be a default
House Speaker Kevin McCarthy was asked if Republicans should take the blame if the US defaults on its debts due to no deal being made. He said, “First of all, I don’t think there will be a default.”
On who deserves blame, McCarthy said that should not land with the GOP because “we’re the only ones who acted.”
Some context: McCarthy met with President Joe Biden at the White House on Monday, a meeting the speaker and the president both said was “productive,” but that did not yield a breakthrough in negotiations or end in a deal.
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McCarthy says he's hoping that negotiators can make progress today
Speaking at a news conference Wednesday, House Speaker Kevin McCarthy was asked if there has been progress in the negotiations. The speaker responded, “There’s differences. We know where it’s at.”
McCarthy went on to reiterate his position that the US government should spend less money than it has the past year.
He went on to blame Democrats for increasing spending when they were in the majority. However, on the negotiations, McCarthy said, “I think we can make progress today. I’m hoping that we can make progress.”
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Yellen is concerned about “substantial financial market distress,” even if a deal is reached
From CNN's Elisabeth Buchwald
A trader works on the floor of the New York Stock Exchange on May 24.
Brendan McDermid/Reuters
Even if lawmakers come to an agreement on the debt ceiling to avoid a default, Treasury Secretary Janet Yellen said she is concerned that the current impasse could usher in “substantial financial market distress” comparable to 2011.
After lawmakers raised the debt ceiling in 2011, the United States debt was downgraded for the first time. That caused a significant stock market decline and a jump in US Treasury yields.
Financial markets are “beginning to see some pressures” akin to 2011, she said.
Yields on US Treasuries have spiked in recent days as lawmakers fail to resolve the debt ceiling. Shorter-maturity bonds are seeing bigger spikes, signifying that investors view them as a riskier investment in the event that the government defaults on its debt.
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IMF chief confident US will not default on debt: "Don't kiss your dollars goodbye just yet"
From CNN's Rob North
The US Treasury Department in Washington, DC, on May 8.
Mandel Ngan/AFP/Getty Images
IMF managing director Kristalina Georgieva believes the debt ceiling standoff will be resolved, and countries shouldn’t start swapping their vast US dollar reserves for other currencies just yet.
“History tells us that US will wrestle with this notion of default but come the 11th hour it gets resolved, and I have confidence that they will see that playing again,” she said at the Qatar Economic Forum, adding that the protracted nature of the talks was “unnecessary.”
The United States is the best place in the world to park money. Unrelenting demand for US government debt keeps interest rates low and makes the dollar the world’s reserve currency. And US government bonds are the most attractive investment in the world.
World is watching: But its ability to borrow trillions from countries such as China and Japan is based on an unblemished reputation for paying them back. If that reputation is tarnished, the dollar’s attractiveness as a store of value would be damaged.
Still, Georgieva said that the US dollar would likely retain its reserve currency despite increasing discussion among some countries to reduce their reliance on the greenback, a move known as “de-dollarisation.”
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McCarthy's top negotiator defends GOP refusal to offer concessions
From CNN's Morgan Rimmer and Manu Raju
U.S. Rep. Patrick McHenry (R-NC) listens as House Speaker Kevin McCarthy (R-CA) speaks to reporters outside the West Wing following debt limit talks with U.S. President Joe Biden at the White House on May 22.
Leah Millis/Reuters
Rep. Patrick McHenry, who Speaker Kevin McCarthy tapped as a top negotiator in debt limit talks with the White House, defended Republicans’ refusal to offer any concessions in the negotiations, argued the White House badly miscalculated in its strategy and also said President Joe Biden must agree to cut spending in order to get a deal.
McHenry said the White House must agree to spending cuts, arguing that would “unlock” the negotiations. At the moment, the White House has offered to freeze federal spending at current levels, not to make further cuts.
“I want to be reasonable and make sure that we can ensure that we pass raising the debt ceiling. But the predicate to get this out of the House is that we have to cut spending. That unlocks the rest of the negotiations,” said McHenry. “The White House team understands that.”
McHenry added that the White House had miscalculated its strategy when it assumed the House would not be able to pass its own bill to raise the debt limit.
“Their strategy presumed that we could not raise the debt ceiling. We did, we raised it out of the House. They’re stuck in the Senate and can’t get anywhere.”
McHenry would not say whether or not he believes a bill can be signed into law by June 1. “We’ll see,” he replied.
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Yellen: "There will be some difficult choices to make"
From CNN's Elisabeth Buchwald
U.S. Secretary of the Treasury Janet Yellen at the ICBA Capital Summit on May 16 in Washington, DC.
Alex Wong/Getty Images
Treasury Secretary Janet Yellen on Wednesday refused to say whether her agency will prioritize certain payment obligations over others in the event that the United States defaults on its debt.
“Prioritization is not really something that’s operationally feasible,” she said in a virtual address at The Wall Street Journal’s CEO Council conference. But she conceded that “there will be some difficult choices to make,” without providing more details.
“I am not going to get into what exactly is possible and what is not possible, because I think the most important thing to recognize is that we must raise the debt ceiling,” Yellen said.
Looming deadline: By Yellen’s estimates, lawmakers have around a week to reach raise the debt ceiling. Otherwise, the country will default on its debt, which could usher in the next recession.
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US stock markets open lower as debt ceiling debate continues
From CNN’s Nicole Goodkind
Traders work the floor at the New York Stock Exchange on May 23.
Angela Weiss/AFP/Getty Images
US markets opened significantly lower on Wednesday morning as investors fret about the ongoing debt ceiling debates.
Treasury Secretary Janet Yellen reinforced her warning to Congress that it has only a little time left to address the debt ceiling to avoid a first-ever default. Several other analyses back up Yellen’s forecast that the so-called X-date – when the nation would default – could arrive in early June, though they don’t necessarily think it’s as early as June 1. And Wall Street is feeling the heat.
Negotiations are continuing to unfold in an attempt to reach a debt limit deal, but major differences between House Republicans and the White House have yet to be bridged.
Investors are also focused on the Federal Reserve’s May meeting minutes, expected out today at 2 p.m. ET. Traders will pore over the notes for information about whether or not the Fed is considering an upcoming pause in economically painful interest rate hikes.
Shares of Abercrombie & Fitch, meanwhile, soared nearly 23% in early trading after the company reported first quarter earnings. The mall retailer beat estimates, reported a profit and raised its guidance for the rest of the year.
U-Haul, e.l.f. Beauty, American Eagle and Guess? will report earnings after the market close today.
Here’s how the markets looked at Wednesday’s opening:
The Dow was down 163 points, or 0.5%, on Wednesday morning.
McCarthy's comments about raising the debt ceiling as the only concession rankle White House
From CNN's Jeremy Diamond and Arlette Saenz
Surrounded by reporters, Speaker of the House Kevin McCarthy (R-CA) speaks with CNN's Manu Raju in-between meetings at the U.S. Capitol on May 22 in Washington, DC. McCarthy met with U.S. President Joe Biden later in the day to continue debt limit negotiations at the White House.
Chip Somodevilla/Getty Images
House Speaker Kevin McCarthy’s comment Tuesday that raising the debt ceiling is the only concession he will make rankled a White House that just a day earlier viewed conversations with McCarthy as productive, according to two sources familiar with the negotiations.
When CNN’s Manu Raju asked McCarthy what concessions he was willing to make, the speaker said:
When Raju pressed the speaker, asking if that is his only concession, McCarthy said, “Everything we’re going to do is going to make America stronger.”
A Democratic official slammed McCarthy’s comment, accusing him of refusing to compromise and being beholden to the most conservative members of his caucus as negotiations languish.
The official criticized McCarthy’s demand that defense spending increase while non-defense spending decrease as extreme and out of step with budget deals over the last decade.
While McCarthy and his negotiators have blamed the White House for the significant gap between the sides on spending, the Democratic official argued the White House has been seeking a compromise deal in good faith, offering to cap spending for two years and claw back a significant share of unsound Covid-19 relief funds — positions the White House would not have espoused outside the context of the negotiations.
By contrast, the official noted that while McCarthy says he understands a deal needs to be bipartisan, he has rejected any revenue increases or compromise on the balance between defense and non-defense spending, which could be needed to secure Democratic votes.
The back-and-forth comes after a day during which talks between McCarthy’s and the White House’s negotiators showed little signs of progress, with the country inching ever-closer to potential default.
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McCarthy: Talks are still "productive," but Democrats need to agree to spend less
From CNN's Lauren Fox and Nicky Robertson
House Speaker Kevin McCarthy said talks ahead of the looming debt ceiling default deadline are still “productive,” but that there cannot be any more progress until Democrats agree to spend less money next year than this year.
McCarthy told CNN’s Lauren Fox, “We have to spend less than we spent last year.”
When pushed on exactly how much less, McCarthy responded, “Well that’s part of the negotiation. Democrats don’t even want to spend less — they want to spend more, that’s unreasonable.”
McCarthy told reporters that White House and Hill negotiators will meet again sometime this morning. The Speaker said he has not spoken directly with President Joe Biden since Monday.
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Treasury secretary will appear before Congress on June 7
From CNN's Matt Egan
U.S. Treasury Secretary Janet Yellen speaks during a news conference at the Treasury Department in Washington on April 11.
Elizabeth Frantz/Reuters
Treasury Secretary Janet Yellen is scheduled to appear before the House Financial Services Committee on June 7, a person familiar with the matter confirmed to CNN.
The hearing is scheduled just days after the June 1 deadline Yellen has set as the earliest date Treasury may run out of cash to meet all of its obligations. Several other analyses back up Yellen’s forecast that the so-called X-date – when the nation would default – could arrive in early June, though they don’t necessarily think it’s as early as June 1.
It’s not clear if the debt ceiling impasse will be settled by the time of this hearing. If not, Washington could be in the midst of a full-blown debt ceiling crisis.
The Treasury Department declined to comment on news of the hearing, which was first reported by Punchbowl News.
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McCarthy told GOP conference "we are nowhere near a deal," according to sources
From CNN's Clare Foran, Lauren Fox, Nicky Robertson and Haley Talbot
President Joe Biden met with House Speaker Kevin McCarthy on Monday to discuss the debt limit in the Oval Office of the White House.
Alex Brandon/AP
Negotiations are continuing to unfold in an attempt to reach a debt limit deal, but major differences between House Republicans and the White House have yet to be bridged, and the pressure is only intensifying as the risk of default grows ever more real with each day.
Republicans have long said that spending cuts must be paired with any increase in the debt limit – an issue that is proving to be the central sticking point as Democrats argue the cuts Republicans want are too extreme, though the White House has expressed a willingness to cut some spending.
Asked if there is any general agreement on cuts, GOP Rep. Garret Graves, who has served as a chief negotiator during the talks, said on Tuesday, “No, that’s our biggest gap.”
Graves made clear that a wide array of significant differences remain, even as the timeline to avoid default grows shorter.
Underscoring just how far apart the two sides are, House Speaker Kevin McCarthy told Republicans during a closed-door meeting on Tuesday, “We are nowhere near a deal,” according to sources in the room.
The window to secure a deal is rapidly closing and the stakes are incredibly high with the Treasury Department continuing to say the US could default by June 1. A first-ever default for the US would likely trigger a global economic catastrophe.
Congressional Democrats, meanwhile, continue to push back against positions Republicans have staked out in negotiations and express heightened concern over the ticking clock.
House Democratic Caucus Chair Pete Aguilar argued that Republicans have been pushed to take extreme positions by far-right members of the GOP conference.
“This is tough, this is not where we should be. Speaker McCarthy is being held captive by the Freedom Caucus,” Aguilar told reporters on Tuesday.
What you need to know about the debt ceiling as the threat of default looms
From CNN's Tami Luhby and Kaanita Iyer
Alberto Mier/CNN
The clock is ticking faster on the nation’s debt ceiling drama. Exactly when the federal government will no longer be able to pay its bills in full and on time is not known, but it could come as soon as early June.
That doesn’t give House Republicans and the White House a lot of time to work out a deal to avoid a default. Negotiators are trying to hammer out an agreement, but multiple sticking points remain.
House Speaker Kevin McCarthy pushed his package to raise the debt ceiling by $1.5 trillion through the House in a close vote in late April. But the White House is balking at some of the provisions, including deep spending cuts and additional work requirements for those receiving public assistance.
What is the debt ceiling? Established by Congress, the debt ceiling is the maximum amount the federal government is able to borrow to finance obligations that lawmakers and presidents have already approved – since the government runs budget deficits and the revenue it collects is not sufficient. Increasing the cap does not authorize new spending commitments.
The debt ceiling, which currently stands at $31.4 trillion, was created more than a century ago and has been modified more than 100 times since World War II.
Though it was originally designed to make it easier for the federal government to borrow, the limit has become a way for Congress to restrict the growth of borrowing – turning it into a political football in recent decades.
Still, fears of a default have prompted lawmakers to pass legislation to raise or suspend the ceiling every time, most recently in December 2021. So the US has never actually defaulted on its debt.
What happens if the US does default on its debt? Once the extraordinary measures and cash on hand are exhausted, the debt ceiling crisis would start having very real impacts.
Treasury would likely have to temporarily delay payments or default on some of its commitments, potentially affecting interest and principal payments on US debt, Social Security payments, veterans’ benefits and federal employees’ salaries, among other obligations. But it might prioritize paying interest and principal first in an attempt to minimize the fallout.
No one knows exactly how Treasury would handle the situation since it has never happened. A default would also wreak havoc on the US economy and the global financial markets, as well as shake confidence in the safety of the Treasury market and raise borrowing costs. Even the threat of one in 2011 caused the only credit rating downgrade in the nation’s history.
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CNN Poll: 60% of Americans say Congress should only raise debt limit if spending cuts are also made
The poll comes as the June 1 “hard deadline” is fast approaching and lawmakers continue to negotiate to avoid economic catastrophe.
Few see President Joe Biden or the Republicans in Congress as acting responsibly in negotiations over the debt limit, with most in both parties more concerned that their side will give up too much than that the United States will default on its debt.
Still, a broad majority of Americans favor raising the debt ceiling — 84%, with just 15% saying Congress should not do so under any circumstances.
Besides the 60% who support raising the ceiling alongside spending cuts, 24% say it should happen no matter what.
These findings come amid widespread doubts about the nation’s political leaders more broadly.
Few Americans say that Biden (31%) or the Republican leaders in the House of Representatives (29%) have the right priorities. Among independents, 60% say that neither Biden nor GOP leaders are paying enough attention to the country’s most pressing problems.
Though 71% of all Americans say that not raising the debt limit would cause a crisis or major problems for the country — and many foresee a major negative impact on the stock market (60%), the nation’s credit rating (59%) and the overall economy (58%) — relatively few see a deeply negative impact on their own finances as a likely outcome (35%).
Less than half say that failure to raise the debt ceiling would cause a major negative impact on the unemployment rate (43%).
About half of Americans say they have been following the negotiations over the debt limit very (14%) or somewhat closely (36%) — below the 70% who said they were following very or somewhat closely in 2011, when President Barack Obama and Republicans in Congress were negotiating a debt ceiling increase.
Majority support for raising the debt ceiling in some fashion cuts across party lines, but most Republicans (79%) and independents (58%) say the limit should only be raised if spending cuts are enacted at the same time, while Democrats are split between supporting a debt ceiling increase no matter what (46%) and raising it only alongside spending cuts (45%).
More about the poll: The CNN Poll was conducted by SSRS from May 17-20 among a random national sample of 1,227 adults drawn from a probability-based panel. Surveys were either conducted online or by telephone with a live interviewer. Results among the full sample have a margin of sampling error of plus or minus 3.7 points; it is larger for subgroups.
