May 26, 2023 Latest on the debt ceiling negotiations

President Joe Biden talks to reporters as he departs the White House on May 26.

President Joe Biden said a debt ceiling deal is “very close” and that he hopes to know by this evening whether there will be an agreement as both sides race against the clock to avoid a first-ever default. 

“There’s a negotiation going on. I’m hopeful we’ll know by tonight whether we’re going to be able to have a deal,” Biden told reporters Friday before he left Washington, DC, to Camp David for the weekend. 

Asked by CNN’s Jeremy Diamond about Democrats saying he shouldn’t bow on work requirements, Biden said: “I don’t bow to anybody.”

A senior White House official said earlier Friday that the Biden administration believes it is “on track” to get a deal passed in time to avert a June 5 deadline. The official said the White House thinks parties are “in the final stages of negotiations.”

What Republicans are saying: Key GOP negotiator Rep. Patrick McHenry also struck an optimistic tone Friday night about the state of the debt ceiling talks, saying he agrees with Biden’s assessment that they are close to a deal. 

But the Republican from North Carolina said of Biden’s tone, “That is a hopeful sign to me. And I’ve rarely used that term in the last 12 days that I’ve been involved in this. So the hopeful sign that the president is saying those things, tells me his White House team, you know, might be in a better disposition than what we’ve seen in previous days.”

He declined to say whether he thinks the White House is moving in the GOP’s direction on work requirements, which has been a chief sticking point. 

White House spokesperson Andrew Bates on Friday sharply criticized Republican proposals to include work requirements as part of the debt ceiling and budget deal, saying the White House is “standing against this cruel and senseless tradeoff.” 

On timing, McHenry said: “These are the things we have to just work through. And I don’t know how long that’s gonna take. I don’t know if that’s hours or days.”

McHenry signaled the two sides are trading legislative text as they go along instead of just toplines, so they’re not starting from scratch when they go to write the actual bill.

CNN’s Melanie Zanona, Kristin Wilson and Manu Raju contributed reporting to this post.

White House spokesperson Andrew Bates sharply criticized Republican proposals to include work requirements as part of the debt ceiling and budget deal, saying the White House is “standing against this cruel and senseless tradeoff.” 

Asked by CNN’s Jeremy Diamond about Democrats saying he shouldn’t bow on work requirements, President Joe Biden said earlier this evening that he doesn’t “bow to anybody.”

The dome of the US Capitol is seen on April 17 in Washington, DC.

Lael Brainard, director of the National Economic Council, said the new June 5 timeline “underscores the urgent need for Congress to act swiftly to prevent default.” 

Brainard also backed up the Treasury Department’s ability to now provide a firmer estimate, noting that it has estimated since January that the X-date would be in early June and that “with the benefit of additional data on outlays and receipts, the Treasury Department is now able to make a more specific estimate of June 5.”

Treasury Secretary Janet Yellen listens during a signing ceremony for the Indonesia Infrastructure and Finance Compact at the International Monetary Fund headquarters in Washington, DC, on April 13.

The Treasury Department will send out more than $130 billion in payments in the first two days of June, including ones to veterans and Social Security and Medicare recipients.

This will leave the agency with “an extremely low level of resources,” Treasury Secretary Janet Yellen wrote in a letter Friday to House Speaker Kevin McCarthy and other congressional leaders.

In that same letter she updated her estimated default deadline to June 5. Yellen had previously estimated that the earliest possible day a default could occur was June 1.

During the week of June 5, Treasury is scheduled to make an estimated $92 billion of payments and transfers – but it projects that it will not have the resources to meet all these obligations, she continued.

Ever since the US hit its borrowing cap in January, Treasury has been forced to rely on cash and extraordinary measures to pay the bills until Congress either raises or suspends the debt ceiling.

The agency had $38.8 billion of cash on hand, as of Thursday, according to federal data. The amount bounces around as Treasury takes in revenue and makes payments, but the balance has declined from $238.5 billion at the start of the month, when the coffers were relatively flush from tax collections in April.

Treasury had about $67 billion remaining in extraordinary measures as of Wednesday, down from around $220 billion at the end of January.

Yellen’s new estimate is in line with projections from other groups, including the Congressional Budget Office. Many have said the X-date will likely fall in early June.

House Minority Leader Hakeem Jeffries slammed “MAGA Republicans,” in particular GOP Rep. Garret Graves, for not willing to budge on work requirements in order to reach a debt deal as the threat of a default looms. 

“That’s exactly the type of reckless Republican rhetoric that is driving our country toward a default for the first time in American history,” the Democrat from New York told CNN’s Wolf Blitzer Friday. 

Such comments leave “many to rationally conclude that what the extreme MAGA Republicans want to do is crash the economy, trigger a recession because they believe, as many of them have said, that it will be in their political benefit in 2024,” he added.

Earlier Friday, Graves, a House GOP negotiator, doubled down on the controversial work requirements policy, making clear that they’re not willing to back down. Republicans are advocating for policy that would require more low-income Americans to work in order to receive government benefits, particularly food stamps and Medicaid.

The policy has been a sticking point in the negotiations, and Jeffries said “extreme MAGA Republicans” are pushing for work requirements to be included in the deal that “they know they cannot accomplish through the normal legislative process.” 

“That is the reason why we’re in this situation,” Jeffries said. 

Jeffries would not guarantee that House Democrats will deliver the votes needed to pass any negotiated deal, saying part of the challenges Democrats face is “it’s unclear how many votes House Republicans can produce.” 

GOP negotiator Rep. Patrick McHenry speaks to reporters as he leaves the speaker's office in Washington, DC, on May 26.

As he left the speaker’s office, GOP negotiator Rep. Patrick McHenry said there are still “tough things that remain” in debt ceiling negotiations, but a deal is “within reach” and the House could pass a bill to avoid a June 5 default if an agreement comes quickly.

Asked by CNN on whether a deal was still possible, McHenry said, “The deal is within reach, it just has to be agreed to, and we’re waiting for the White House to understand the current set of terms we’re dealing with.”

He said the Treasury Department’s new June 5 X-date means “we’re in the window” to meet the deadline.

He said there are issues that are “not resolved” on “important matters.”

Asked if work requirements for social safety net programs remain the key sticking point, he said it’s more than just that detail.

“It’s the overall package that changes the trajectory of our fiscal house the United States,” the lawmaker said.

A senior White House official said the new June 5 X-date does not fundamentally change the timeline for negotiations to reach a debt ceiling deal — but the specific date highlights the urgency of moving quickly to clinch an agreement.

The White House believes it is “on track” to get a deal passed in time to avert a June 5 deadline, the official said.

While the June 5 date, announced by Treasury Secretary Janet Yellen on Friday, gives the White House slightly more breathing room as compared to the previously earliest possible date of June 1, the official said the timeline still remains highly pressurized, and stressed the need to move urgently to reach a deal.

The Treasury Department has not said what it would do if it runs out of funds to pay all the nation’s bills in full and on time before Congress acts on the debt ceiling. Treasury Secretary Janet Yellen has refused to answer that question, which she’s been asked repeatedly.

However, many experts expect that Treasury would prioritize payments on the nation’s debt, which was seriously contemplated in prior debt ceiling impasses, including 2011, but never finalized since lawmakers lifted the borrowing cap in time.

The hope would be to minimize some of the financial and economic fallout of being unable to satisfy all the nation’s obligations, though it would not avoid it completely.

More recently, Yellen has said that if Congress doesn’t act in time, “Treasury and President Biden will face very tough choices.”

Office of Managment and Budget Director Shalanda Young attends a celebration of the Louisiana State University NCAA Division I women's basketball national championship in the East Room of the White House on May 26, in Washington, DC. 

Key GOP negotiator Rep. Garret Graves of Louisiana has returned to Capitol Hill after attending an event at the White House celebrating the LSU Tigers, this year’s NCAA women’s basketball champions.

Graves, as he headed into the speaker’s office, said he spoke to Office of Management and Budget (OMB) director and fellow Louisianan Shalanda Young while at the White House. 

Graves said work requirements continue to be a “huge sticking point.”

Treasury secretary Janet Yellen testifies before the House Committee on Ways and Means during a hearing President Joe Biden's budget proposal, on Capitol Hill in Washington, DC on March 10.

The earliest possible X-date for when the US government could run out of cash to pay its bills has been updated to June 5, according to a letter that US Treasury Secretary Janet Yellen sent House Speaker Kevin McCarthy on Friday.

The letter comes as House Republican lawmakers and the White House continue negotiations to secure an agreement to prevent a potentially catastrophic default.

The updated date will give lawmakers more time to reach and pass a deal. Yellen had previously estimated that the earliest possible day a default could occur was June 1.

In an update to congressional leaders on Monday, Yellen wrote it was “highly likely” the US will run out of money to pay its debts by early June, “potentially as early as June 1.”

Treasury Department officials have repeatedly emphasized that there is no Plan B to avert default and stressed the need for Congress to lift the debt ceiling ahead of the X-date.

Negotiators are racing against the clock to forge an agreement, and a source familiar with the discussions said negotiators were moving closer to an agreement, but still negotiating over several major sticking points.

The House GOP whip team is having a phone call at 8 p.m. ET Friday to discuss what the process over the next few days will be if a deal to raise the debt ceiling is reached, two sources familiar with the call told CNN.

This call is not discussing the substance of a deal itself as there still is no deal, the sources said. It aims to get members on the same page on what it would take to turn a deal into legislative text ready for a vote — a complicated multi-step process made even more difficult by the time crunch, according to the sources.

The timeline: House lawmakers left Washington for the Memorial Day weekend and will be given 24 hours’ notice to return if and when a deal is reached.

House Speaker Kevin McCarthy has said the House would need four days to push legislation through. In the Senate, opponents of a deal could cause a multi-day delay through a filibuster. But both chambers are capable of accelerating timelines when necessary.

Stocks rose Friday, ending a volatile week of trading as Wall Street remained hopeful that a debt ceiling deal would be reached.

The broad-based S&P 500 and Nasdaq Composite ended the week in the green. The Dow ended the week down.

The Nasdaq on Friday saw its best day since late April, just one day after a 24% surge in Nvidia stock helped boost the tech-heavy index.

Still, the White House and congressional leaders have yet to reach a deal to raise the country’s debt limit, and just two trading days remain until June 1, which is the earliest expected date that the US could fail to fulfill all its financial obligations.

Meanwhile, a hotter-than-expected Personal Consumption Expenditures price index led traders to raise their bets that the Federal Reserve will hike rates in June. Traders now see a roughly 66% chance of a quarter-point hike next month, according to the CME FedWatch Tool. That’s up from a roughly 17.4% probability a week ago.

The Dow rose 329 points, or 1%.

The S&P 500 gained 1.3%.

The Nasdaq Composite increased 2.2%.

As stocks settle after the trading day, levels might still change slightly.

The exterior of the U.S. Department of Treasury building on March 13 in Washington, DC.

Nearly five months before the US was projected to hit the debt ceiling, a small team inside the Treasury Department began alerting top officials to early effects already being felt in the US financial system. 

The cost of insuring US debt, as measured by the price of credit-default swaps, was rising — a sign that investors were beginning to view US bonds and other securities as increasingly risky.

That early warning — and subsequent ones over the last month as the swaps pricing has surged — came out of the Treasury Department’s Markets Room and its eponymous team of nine financial analysts who are responsible for monitoring and analyzing global financial markets to inform the policy work of top Treasury Department and White House officials.  

As the US rapidly approaches a potential default date in early June, top US officials are increasingly relying on the Markets Room to monitor for signs of disruption in the financial markets. 

“So, we’re spending a lot of time with them better understanding what the costs are today, in order to make sure that we’re in a position to share that information with Congress, in order to prevent us from getting into a position where for the first time in our history, we’re unable to pay all of our obligations on time,” he said.

That work begins each day before dawn when staffers take turns waking up around 3:30 a.m. ET to compile data about overnight market developments and begin making calls to contacts working in European and Asian markets. 

At around 7 a.m. ET, those data and insights land in the inboxes of top policymakers at the White House and Treasury Department. 

At 9 a.m. ET, before the US markets open, Treasury Secretary Janet Yellen and her senior leadership team huddle virtually with the Markets Room and other key Treasury Department aides for a briefing on the state of the financial markets and issues to watch for that day. 

In recent weeks, that daily briefing has heavily focused on reverberations of the debt limit standoff, from updates on auctions of Treasury bills to market reactions and commentary from market analysts and economists.

Read more.

The Capitol Dome is seen on Capitol Hill on Wednesday, May 3, 2023, in Washington, DC.

The countdown is on and the stakes are high as House GOP lawmakers and the White House continue to race the clock to secure an agreement to prevent a first-ever default. 

It’s now Friday afternoon in Washington, DC, and there is still no debt limit deal.

There have been signs that negotiations have gained some momentum, but major differences between the two sides still remain and time is running short as the risk of default grows.

If you are just tuning in, catch up below on the latest:

Where negotiations stand today

Key sticking points

A tight timeline

What if the Treasury runs out of money?

CNN’s Clare Foran, Manu Raju, Jeremy Diamond, Lauren Fox, Kristin Wilson, Haley Talbot, Morgan Rimmer and Tami Luhby contributed reporting to this post. 

The International Monetary Fund’s managing director, Kristalina Georgieva, warned of a massive disruption in the world economy if the United States defaults on its debt, which could come in less than a week.

“Inevitably we would be, at the time, of contraction in the US and in the world economy and that would come as a shock upon shock upon shock,” she said.

US Treasury Secretary Janet Yellen said the government may not be able to fulfill all of its financial obligations as soon as June 1, which includes payments to Social Security recipients, federal workers and interest payments. It’s unclear what payments the government would prioritize or how it would try to fulfill its financial duties.

Georgieva said earlier this week at a conference in Qatar that she is confident that the United States will ultimately raise its debt ceiling and avoid a default and that the US dollar will likely remain the global reserve currency.

“I want to finish by expressing my firm belief that the solution would be found but, of course, it is frustrating for everyone to have a solvable problem that is in the hands of policymakers continuing to linger into the 12th hour,” she said Friday.

A GOP negotiator said that House Republicans are not willing to drop work requirements on social safety net programs to get a deal on the debt ceiling. 

This remains a huge sticking point to avoid default. Rep. Garret Graves, a Republican from Louisiana, said significant disagreements remain with the White House.

“If you’re really going to fall on the sword for that, versus actually negotiating something that changes the trajectory of the country for spending. I mean, it’s crazy to me that we’re even having this debate,” he said. 

He suggested the issue centers on work rules for food stamps and temporary assistance programs for needy families, not Medicaid.

How much money does Treasury have left to pay the bills? That’s a figure that fluctuates daily.

The operating cash balance, detailed in the Daily Treasury Statement, is one of several important data points in determining whether Treasury has enough funds to pay all its obligations on time and in full. But the amount rises and falls as revenue comes in and payments are made.

As of Wednesday, the cash balance was just under $50 billion. The day before, it was $76.5 billion, while last Thursday it was $57 billion. Overall, the balance has been on the decline from the start of the month, when it was at $238.5 billion, thanks to tax collections in April.

Other important factors include the amount left in extraordinary measures, changes in intra-governmental debt levels, the revenue Treasury takes in daily and the payments it must make every day.

The agency had about $92 billion remaining in extraordinary measures as of May 17, down from around $220 billion at the end of January. Treasury has been updating the figure weekly.

All these figures together play into the so-called X-date — or the day the Treasury Department will miss its debt payments — which is why it is so difficult to estimate in advance.

Treasury Sec. Janet Yellen, who has repeatedly highlighted the uncertainty in the date, may not know when Treasury will start missing payments until a day or two in advance, experts have said.

GOP Rep. Patrick McHenry shrugged when asked if he thinks negotiators can secure a debt ceiling deal tonight. 

“Everyone wants a tweet; I want an agreement that changes the trajectory of the country,” said the lawmaker from North Carolina, who is a key negotiator on the deal.

When asked if he thinks they will get it done, he shrugged.

When pressed for specifics on negotiations and hangups, he wouldn’t get into details, but said, “We are in the middle of a lot of different conversations and a lot of different paper going back and forth … the details are thornier and the consequences are greater.”

He complained about leaks concerning the negotiations, saying that they “don’t serve getting an agreement.”

“If we can close it out, we can meet the deadline and the obligations we have to the American public,” he said.

When asked if there are in-person meetings scheduled, he said “not yet” before returning to House Speaker Kevin McCarthy’s office. 

After exiting the speaker’s office a bit later, McHenry said talks can either fall apart or quickly come together.

Asked about resolving the sticking point of work requirements on social safety net programs — and whether that’s standing in the way of a deal — he said, “everything’s complicated.”

“Everybody wants the details but the larger issue here is an agreement that changes the trajectory of our nation’s finances. And that’s what we’re working on. And that makes it difficult. It’s of consequence,” he said.

Pedestrians pass by the US Treasury Department in Washington, DC, on May 8. 

The exact date when Treasury Department will run out of sufficient funds to pay all of the federal government’s bills in full and on time isn’t known.

Treasury Sec. Janet Yellen has said it’s “highly likely” the agency will not have enough funds to pay all the bills in full and on time in early June, possibly as soon as June 1, if Congress doesn’t act.

But June 1 is not a firm so-called X-date, when Treasury could start missing payments.

Other analyses, including those from the Congressional Budget Office, the Bipartisan Policy Center, Goldman Sachs and others, say that the X-date could come in early June, but not necessarily June 1.

Many are trying to read the tea leaves to discern when the X-date could arrive. JPMorgan analysts noted on Thursday the Treasury is auctioning a total of $169 billion in Treasury bills settling on June 1, which “suggests that it is confident it will not exhaust all its resources by that date.” JPMorgan forecasts the X-date to be June 7.

If Treasury makes it to mid-June, it will likely have enough funds to pay all bills until later in the summer. It will get a big infusion of second quarter estimated taxes, due June 15. Also, it will have an infusion of roughly $145 billion from an extraordinary measure at the end of June.

Democratic New York Rep. Gregory Meeks, a senior member of the House Financial Services Committee, said he was concerned about a possible first-ever default as negotiators continue to hash out a debt ceiling deal.

He said invoking the 14th Amendment “was always a last option, not something that should go forward,” and that “the best thing to be done here is for us to get a deal where both sides make compromises.”

Meeks said “Plan B is getting at least five Republicans” to sign on to a discharge petition, calling out the Republican members of New York’s congressional delegation specifically to do so.

On Wednesday, all 213 House Democrats signed onto a discharge petition that can be used as a vehicle to bypass House GOP leadership and force a vote to raise the debt ceiling. However, a majority of House members, 218, need to sign onto the bill in order for it to pass. It remains extremely unlikely the petition could get the votes to pass on the House floor.

On Thursday, President Joe Biden said that congressional leaders have all agreed “there will be no default.”