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May 25, 2023 Latest on debt ceiling negotiations | CNN Politics

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McCarthy speaks on debt ceiling talks

00:55 - Source: CNN

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.

White House officials and Republican negotiators are continuing to move closer to an agreement to raise the debt ceiling while also capping spending, two sources familiar with the matter said late Thursday.

The agreement is not yet finalized and there are a series of other outstanding issues beyond spending levels, with both sides especially far apart on work requirements for social safety net programs. 

Under the potential agreement, the debt ceiling would be raised for two years while also capping federal spending — except for defense and veterans spending — for the same period, two sources familiar with the negotiations said.

A separate source who's also familiar with negotiations said the two sides are still working out details on the length of the spending caps deal, which Democrats have insisted should only last for as long as a debt ceiling raise.

Based on current discussions, non-defense discretionary spending levels would be cut to a level slightly below funding levels for the current fiscal year. 

Discretionary spending would be allowed to rise by 1% in the second year of the agreement, the sources said.

Both sides still remain far apart on work requirements with Republicans still looking to add them to Medicaid, SNAP and TANF.

GOP negotiator Garret Graves told CNN Thursday evening that progress is slow, voicing frustration with the White House over key aspects of the negotiations, especially work requirements. 

Fitch Ratings is putting two government-backed mortgage giants on watch for credit ratings downgrades as the standoff over the debt ceiling lingers.

It said the decision to put Fannie Mae and Freddie Mac on watch for downgrades "reflects the uncertainty" on the US credit rating. Fitch is one of the top three credit rating agencies along with Moody's and S&P.

Fitch added that it is unclear how much support the government-sponsored enterprises, or GSEs, can expect from Washington if the United States were to default on some of its obligations.

Some context: Fannie Mae and Freddie Mac do not issue loans, rather they purchase loans from lenders to hold, sell or repackage as investments. Their role in the mortgage market helps lenders issue more loans and keep lending stable and affordable. The Federal Housing Finance Agency is the government regulator that oversees Fannie and Freddie.

The move comes just a day after Fitch put the United States itself on rating watch negative due standoff in Washington surrounding the debt ceiling.

The exterior of the Treasury Department building is pictured March 13 in Washington, DC.

Chip Somodevilla/Getty Images

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.

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House Speaker Kevin McCarthy left the Capitol on Thursday evening with no deal on the debt ceiling, saying there was back and forth with the White House but that hammering out an agreement wasn't easy.

McCarthy would not get into specifics and left for the day.  

Rep. Patrick McHenry, a GOP negotiator, remains in the speaker's office with his two children and is not expected to be here much longer, according to an aide. 

With no bill to vote on, House lawmakers are expected to leave for the holiday weekend — though they will be given 24 hours' notice to return if a deal is reached.

Republican Sen. Tim Scott of South Carolina waves to members of the New Hampshire Federation of Republican Women at Saint Anselm College's New Hampshire Institute of Politics in Manchester, New Hampshire, on May 25.

Nicholas Pfosi/Reuters

Republican Sen. Tim Scott of South Carolina on Thursday advocated for work requirements for federal aid programs as he campaigned in New Hampshire amid ongoing negotiations in Washington over raising the nation's debt ceiling. 

Scott, who announced his bid for the GOP presidential nomination earlier this week, argued implementing work requirements would reduce government spending and help differentiate "those who cannot do for themselves, as opposed to those who will not do for themselves." 

Where negotiations stand: House Republicans are using the standoff over the debt ceiling to advocate for a longstanding goal of requiring more low-income Americans to work in order to receive government benefits, including food stamps and Medicaid. 

As part of the negotiations, the White House and House GOP are discussing a deal that would lift the ceiling through 2024 while placing caps on the 12 annual spending bills Congress must pass by the end of the fiscal year, a source told CNN. 

Rep. Patrick McHenry speaks to members of the press in a hallway of the U.S. Capitol on May 25, in Washington, DC.

Alex Wong/Getty Images

A Republican negotiator said "the work continues" on a debt ceiling deal and that it's still going to take time to pull it all together.

"I think there's a sense of understanding from both teams that we have serious issues still to work out and come to terms with and that's gonna take some time. That's all there is to it," Rep. Patrick McHenry said.

But, he also said the people working on the deal recognize that the X-date deadline is not negotiable. That's the date the US Treasury Department said the country will default, which could be as soon as June 1.

Rep. Bob Good talks with reporters outside the Capitol during the last votes of the week on Thursday, May 25.

Tom Williams/CQ-Roll Call/Getty Images

A group of 35 hardline Republicans sent a letter to House Speaker Kevin McCarthy Thursday calling for additional demands in the debt ceiling talks and floating a new strategy.

The latest move is part of a pressure campaign to pull the debt ceiling deal as far right as possible. 

What they are asking for: In the letter, they urged McCarthy to include provisions to beef up border security and block the FBI's new headquarters — even though it wasn't in the House-passed GOP debt ceiling bill.

They also called on the speaker to force the Treasury Secretary to "prove" her work when she estimates the default date. 

The group also called to immediately pass a standalone bill to claw back unspent Covid funds and some IRS funding, which they said would help provide immediate cash and push back the X-date in order to buy themselves more time. 

View the full letter here:

Traders work on the floor of the New York Stock Exchange on May 25, in New York City. 

 Spencer Platt/Getty Images

US stocks were mixed on Thursday as investors were encouraged by stellar quarterly results from AI-backer Nvidia despite an ongoing standoff in debt ceiling negotiations.

Markets were also buoyed by economic news. Gross domestic product — the broadest measure of economic output — grew faster in the first three months of the year than previously estimated, the Commerce Department reported on Thursday.

There is some concern, however, that the economy's resilience complicates the path forward for the Federal Reserve.

Policymakers have been attempting to slow the economy through rate hikes to fight elevated inflation. The GDP data could mean that more economically painful hikes lie ahead.

Investors are also growing increasingly concerned about stalled debt ceiling negotiations and the lack of progress toward a potential deal.

There are just three trading days left until Treasury Secretary Janet Yellen's June 1 estimated deadline for the US to raise the debt ceiling or the county risks defaulting.

Treasury yields, aside from the one-month, moved higher across the curve on Thursday, as worries of a default grew.

The Dow closed down 35 points, or 0.1% on Thursday. The S&P 500 was 0.9% higher. The Nasdaq Composite gained 1.7%.

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

House Democrats left their caucus meeting Thursday afternoon even more entrenched in their opposition to including work requirements in any debt limit deal.

Republicans have been using the debt ceiling standoff to advocate for one of their longstanding goals - requiring more low-income Americans to work in order to receive government benefits, particularly food stamps and Medicaid.

Cleaver said he's been pleasantly surprised at fellow Democrats' willingness to dig in and not give Republicans key concessions. He said he's still hearing lawmakers call for Biden, instead of striking a deal, to invoke the 14th Amendment to avoid a debt crisis — a controversial potential strategy that the Treasury secretary cast doubt on this week.

Rep. Rosa DeLauro, a Democrat from Connecticut and her party's top member on the House Appropriations Committee, agreed the requirements are a "non-starter."

Democratic Rep. Maxine Waters from California also pushed back on any consideration of work requirements.

Exploring all avenues: House Minority Leader Hakeem Jeffries is still pushing for Republicans to support a long-shot discharge petition. The procedural move could force a floor vote on the debt ceiling without the blessing of Republican leadership but requires the support of a majority of House members.

"If we wanted to do something bipartisan, we've created a vehicle. Five Republicans can join 213 Democrats to make sure that America pays our bills and we don't default," Jeffries said.

CNN's Tami Luhby contributed to this report.

The White House said debt ceiling negotiators had "productive discussions" Thursday, although an agreement has not yet been reached.

Both sides agree that "default is not an option," White House press secretary Karine Jean-Pierre said. And President Joe Biden insisted Thursday that "there will be no default."

But with the House of Representatives expected to recess Thursday ahead of the holiday weekend, negotiators are running out of time before the projected June 1 deadline for what could be the nation's first-ever default.

Here's what you should know to get up to speed:

Today's discussions: GOP negotiator Rep. Patrick McHenry said there are still "fundamental disagreements" that needed to be resolved. Biden said he won't agree to a debt ceiling deal that will cut spending or impact important programs for middle-class Americans while House Speaker Kevin McCarthy said he would not cut any funding for the Pentagon.

Among the paths forward under discussion, negotiators have considered clawing back some of the $80 billion in funding for new IRS agents that was included in the Inflation Reduction Act, a GOP source confirmed to CNN. 

The two sides also discussed a deal that would lift the debt ceiling through 2024 while placing caps on the 12 annual spending bills that Congress must pass by the end of the year, a source familiar with the negotiations told CNN.

Default implications: The calm in the stock market could quickly go away if the debt ceiling standoff continues much longer, according to one analyst. If Treasury interest rates spike, market mayhem could follow soon after, according to financial services analyst Jaret Seiberg, who said the US would suffer a credit ratings downgrade the day after the X-date, noting that the US Treasury wouldn't announce any skipped payments until after markets close on the X-date.

Democrat frustrations: Democratic Rep. Jamaal Bowman, a House progressive, pressed Biden to stop negotiating with House Republicans on the debt limit and labeled the GOP "economic terrorists." He said he was "very concerned" that Biden will give in to Republican demands for spending cuts. Other House Democrats urged Biden to be more vocal in the negotiations during a closed-door caucus meeting, according to multiple sources in the room.

House recess: Speaker McCarthy appears set to send members home after votes on Thursday. Biden is set to travel to the presidential retreat at Camp David and his Wilmington, Delaware, home over the Memorial Day holiday. 

A Social Security card sits alongside checks from the U.S. Treasury on October 14, 2021 in Washington, DC. 

Kevin Dietsch/Getty Images

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.

Read more here.

House Minority Leader Hakeem Jeffries, joined by fellow Democrats, speaks with reporters about the debt ceiling, at the Capitol in Washington, Thursday, May 25.

J. Scott Applewhite/AP

House Democrats voiced frustrations that President Joe Biden has not been more vocal in debt ceiling negotiations in a closed-door caucus meeting, according to multiple sources in the room. 

A common question asked during the meeting was: Where is Biden? 

Separately, House Democrats raised concerns that Biden could be alienating them in the kind of deal he cuts with Republicans. 

A source in the room said there is just a lot of "pushback about having to vote for a bad deal — people really unhappy with potential for work requirements in the deal."

House Minority Leader Hakeem Jeffries made no promises in the meeting but made clear the White House understands the concerns and is fighting hard in the negotiations, the sources added. 

Earlier Thursday, Biden addressed debt ceiling negotiations in unrelated remarks from the White House and said negotiators are "making progress." He also said that he will not agree to a debt ceiling deal that will cut spending or impact important programs for middle-class Americans.

Debt ceiling negotiators are discussing clawing back some of the $80 billion in funding for new IRS agents that was included in the Inflation Reduction Act, a GOP source confirms to CNN. The talks could be used as a sweetener for Republicans as the two sides try to find an agreement on top line spending numbers. 

Republicans included a claw back of IRS funding in their House passed GOP debt ceiling bill, and a group of hardline Republicans renewed their calls for such a provision in a letter on Thursday.

The White House said earlier on in the negotiations that rolling back the IRA was off table.

CNN has reached out to the White House for comment. 

The Associated Press was the first to report that IRS funding is something being discussed in the talks.

President Joe Biden announces his nomination of Air Force General Charles Brown, Jr., to serve as the next Chairman of the Joint Chiefs of Staff, in the Rose Garden of the White House in Washington, DC, May 25. 

Mandel Ngan/AFP/Getty Images

President Joe Biden said that he will not agree to a debt ceiling deal that will cut spending or impact important programs for middle-class Americans.

In remarks from the White House, the president criticized the bill Republicans passed last month.

The president then went on to push for his debt ceiling deal proposal.

"I put forward a proposal that will cut spending by more than $1 trillion, that freezes spending for the next two years. That's on top of the nearly $3 trillion in deficit reduction  I previously proposed — through a combination of spending cuts and new revenue raises." Biden said.

He added, that he'd like the wealthy to begin "pay their fair share," which will help reduce the deficit.

President Joe Biden said that talks continue on a debt ceiling deal, with negotiators "making progress."

"Speaker (Kevin) McCarthy and I have had several productive conversations and our staffs continue to meet as we speak, as a matter of fact, and they're making progress. I've made it clear time and again defaulting on our national debt is not an option," he said ahead of remarks in the Rose Garden to nominate Gen. Charles Brown as Joint Chiefs chairman.

"It is time for Congress to act now. I want to be clear, the negotiations we're having with Speaker McCarthy is about the outlines of what the budget will look like, not about default. It's about competing visions for America," he said.

Negotiators for the White House have had "productive discussions" with House Speaker Kevin McCarthy's team and both sides agree that "default is not an option," the White House said.

Issues persist: Still, Jean-Pierre acknowledged, differences remain over the two parties' conflicting view of the budget priorities, with Republicans demanding spending cuts in exchange for raising the debt limit ahead of the projected June 1 deadline for default.

The White House declined to specify whether Biden has spoken with McCarthy since the two met in person on Tuesday, but Jean-Pierre suggested that Biden is giving debt ceiling negotiators "space" to continue negotiations without interfering. 

She said the president and his negotiating team "are going to continue to fight for the President's vision and for his priorities, and they're going to do that in good faith," adding that both sides understand there needs to be a bipartisan agreement to move forward, one that can win support from Democrats and Republicans in both chambers on Congress.

"There's no alternative to this, this is the path that we need to take. And that's what we're focused on to make sure that we're getting things done for the American people," Jean-Pierre said.

She defended Biden's decision to travel to the presidential retreat at Camp David and his Wilmington, Delaware, home over the Memorial Day holiday. The House is also expected to recess Thursday for the holiday.

Joint Chiefs of Staff Chairman General Mark Milley testifies before the Senate Appropriations Subcommittee on Defense May 11, in Washington, DC.

Win McNamee/Getty Images

A default on the national debt would take a significant toll on the US military and morale among its troops, Chairman of the Joint Chiefs of Staff Gen. Mark Milley said Thursday.

"Paying troops, the morale of troops, weapons systems, contracts — all of that would be impacted," Milley said at a news conference. "Readiness clearly would be impacted. So, our large-scale exercises that we do at various training centers would probably either slow down or come to a halt in many, many cases."

"I think it'd be very, very significant, without a doubt, and it would have absolutely clear, unambiguous implications on national security," he added.

A trader works the floor of the New York Stock Exchange at the opening bell, on May 25, in New York City.

Timothy A. Clary/AFP/Getty Images

Wall Street has mostly shrugged off the debt ceiling drama in Washington, as investors bet a compromise will eventually emerge. Yet the calm in the stock market could quickly go away if the standoff continues much longer.

"We believe the market's TARP-like moment is likely to occur on June 2," Jaret Seiberg, financial services analyst at TD Cowen Washington Research Group, wrote in a note to clients Thursday.

June 2 is the day after the United States could cross the "X-date," the deadline where the government would potentially run out of cash if Congress fails to address the debt ceiling.

"TARP-like moment" is a reference to September 29, 2008 - the day the Dow plunged 778 points, or nearly 7%, after the House of Representatives initially voted down the Wall Street bailout known as the Troubled Asset Relief Program, or TARP.

The selloff was so massive that lawmakers returned just days later to approve TARP. 

Although US stocks have started to buckle in recent days as Washington struggles to reach a debt ceiling deal, the losses have been minimal.

Seiberg warns there could be market turbulence prior to the June 1 deadline.

It would become difficult to price debt because US Treasuries are a cornerstone of modern finance, serving as a key benchmark by which all other forms of credit are priced. If Treasury interest rates spike, market mayhem could follow soon after.

Seiberg expects the United States would suffer a credit ratings downgrade the day after the X-date, noting that the US Treasury wouldn't announce any skipped payments until after markets close on the X-date.

Deputy Treasury Secretary Wally Adeyemo speaks at a news conference on recent enforcement actions against cryptocurrency at the U.S. Justice Department Building on January 18, in Washington, DC.

Anna Moneymaker/Getty Images

Deputy Treasury Secretary Wally Adeyemo told CNN Thursday in an exclusive interview that Americans "should all be worried" that Congress has yet to raise the debt ceiling and warned of an economic "catastrophe."

Asked how worried Americans should be about the economy today, Adeyemo responded, "I think we should all be worried the Congress has not taken the action they need to do which is raising the debt limit. Not doing so would be a catastrophe for the economy that would have an impact across not only the United States but across the global economy."

Adeyemo also addressed the Treasury Department "Markets Room," where officials are closely monitoring for additional warning signs for the US economy. 

He also spoke about the reverberations the financial markets are already feeling because of the debt ceiling crisis and said that the cost of borrowing has already gotten more expensive. 

"So, as the debt limit manufactured crisis goes on, and costs go up for the government, it also means that costs will go up for the American people as well," he warned. 

Adeyemo declined to outline what contingency plans the Treasury Department has in store should the US hit the debt ceiling or whether Treasury would prioritize certain payments over others.  

"There is no plan that would work to preserve the United States' credibility if we default on our debt," Adeyemo said. "What I can tell you is that there's no plan that would allow us to meet all of our commitments other than Congress, raising the debt limit."

The White House and House Republicans are discussing a deal that would lift the debt ceiling through 2024 while placing caps on the 12 annual spending bills that Congress must pass by the end of the year, a source familiar with the negotiations tells CNN.

Such a mechanism would allow Congress to pass 12 appropriations bills at agreed upon spending levels, and if they don't, establish a short-term bill to automatically pare back spending to those levels.

The exact spending levels are still being determined, the source added.  

This agreement would create a process around spending cuts and give Congress the room to figure out how specifically to meet those cuts.

Remember: Each chamber of the US Congress has 12 appropriations subcommittees that produce one bill each year to determine government spending on their area of oversight.

Federal Reserve Bank of Boston President Susan M. Collins said in a moderated discussion on Thursday that not raising the debt ceiling would have a significant impact.

Fed officials were concerned about the possibility of the United States defaulting on its debt when they voted to raise interest rates by a quarter point earlier this month, minutes from that meeting showed.

St. Louis Fed President James Bullard said at an event hosted by the American Gas Association on Monday that raising the debt ceiling is "a must-pass" vote for Congress.

Fed officials, Wall Street economists and other professional forecasters have all estimated that the economic effects of a US default, which could come as soon as one week from Thursday on June 1, would be substantial.

Members of the hard-right House Freedom Caucus are signaling they could oppose a deal between House Speaker Kevin McCarthy and the White House, while also warning that dropping some of the spending cuts they have pushed for would "collapse the Republican majority for this debt ceiling increase."

Asked how many House Republicans could vote against a deal, Good replied that "a majority" could find it unacceptable.

"I don't want to make predictions because … I've just heard some rumors that there may be some sort of a deal that would be less than desirable I believe to a majority of Republicans, and so if that's true I'm disappointed that that would be the case," he said.

Rep. Ralph Norman, a Republican from South Carolina, said he is also concerned about the direction of the talks.

"Yeah, I am," he said. "It looks like we're watering it down, which is not acceptable."

Rep. Chip Roy, a Republican from Texas and member of the House Rules Committee, warned it will take a hefty price to get his vote for the debt ceiling. He also would not commit to backing anything in the rules committee until he sees it.

On his own, Roy doesn't have the power to block anything, but it is another sign of how conservatives are viewing the emerging deal.

Rep. Byron Donalds, a Republican from Florida, signaled he'd be a hard conservative to win if the deal with the White House isn't similar to the debt limit bill passed by House Republicans in April.

Donalds said he didn't feel members are being kept in the loop on the closely held negotiations.

"I am trying to be calm with my statements, but what I am trying to really stress is — at some point the American people do need to understand exactly what's happening in this room, because if a deal is made just to try to save face on both sides of the aisle, history tells us that is a terrible thing."

House Speaker Kevin McCarthy said earlier Thursday he's not concerned about conservative Republicans not supporting an eventual deal, saying "they just need to be updated."

Rep. Jamaal Bowman, D-N.Y., walks up the House steps of the US Capitol on May 18.

Bill Clark/CQ-Roll Call, Inc/Getty Images

Democratic Rep. Jamaal Bowman, a House progressive, pressed President Joe Biden to stop negotiating with House Republicans on the debt limit and labeled the GOP as "economic terrorists."

"I'm very frustrated. I called on the president to invoke the 14th Amendment and mint a coin and do not negotiate with hostage-takers," he told CNN's Manu Raju. His comment to "mint a coin" refers to the decade-old idea that the president can issue a $1 trillion "commemorative" coin and deposit it with the Federal Reserve.

"I mean, we don't negotiate with terrorists globally, why are we gonna negotiate with the economic terrorists here that are the Republican party?" Bowman continued.

He added that he is "very concerned" that Biden will give in to Republican demands for spending cuts.

More background: The US Chamber of Commerce has strongly pushed back against efforts from progressives to urge the White House to use the 14th Amendment to avoid a default.

The Chamber, a pro-business trade group that often supports Republicans, sent Biden a letter Friday warning of economic, financial and legal turmoil should the administration attempt to take this controversial route to address the debt ceiling.

Experts have also warned that invoking the 14th Amendment would likely spark a constitutional crisis and Treasury Secretary Janet Yellen recently cast doubt on the idea.

CNN's Matt Egan contributed reporting to this post. 

U.S. Speaker of the House Kevin McCarthy (R-CA) speaks to reporters as he arrives at the U.S. Capitol on May 25.

Kevin Dietsch/Getty Images

House Speaker Kevin McCarthy told reporters Thursday that he would not cut any funding for the Pentagon as part of the debt ceiling negotiations.

When asked by CNN about the timeline, McCarthy would not guarantee Thursday that a deal to raise the debt limit will pass by June 1, the possible "X-date" for default. Instead, McCarthy pointed to the debt ceiling bill passed through the GOP-led House in April, saying Republicans have "done everything they can" to avoid the current stalemate.

"There is a bill that has passed the House that sits in the Senate," he told CNN's Manu Raju. "I sat down with the President February 1, we passed a bill in April, long before they ever said the deadline was June 1."

The bill was considered a political win for the speaker and believed to strengthen his hand for negotiations to come — but also dead on arrival in the Senate. Senate Majority Leader Chuck Schumer has said he won't bring the Republican bill to the floor.

Asked whether he seemed more cheerful today because he had made a concession in negotiations, moving Republicans closer to a deal with the White House, McCarthy replied: "I'm always an optimist and I don't give up on anything. And I thought yesterday was a productive day and we still could have a more productive day today."

The speaker said a deal could come "at any time."

"I thought we could have had a deal back in February, so at any time. Just trying to get things finished," he told CNN's Lauren Fox.

On other Republicans: McCarthy said he is not concerned about conservative Republicans opposing any deal that doesn't have the spending cuts they have pushed for, even after Rep. Chip Roy said this morning that he doesn't like the direction negotiations are moving.

"Not at all, I just think they just need to be updated," he said.

McCarthy said he checked in with Senate Minority Leader Mitch McConnell yesterday, and had also spoken to the former president.

"I did talk to President Trump the other day. It came up, but just for a second," added McCarthy. "He was talking about: 'Make sure you get a good agreement as you move forward.'"

Rep. Patrick McHenry (R-NC) speaks with reporters as he arrives to a House Republican conference meeting on Capitol Hill on May 23.

Anna Moneymaker/Getty Images

As debt ceiling negotiations hit a more urgent pace Thursday, with some key figures expressing optimism about the prospect of a deal, a lead GOP negotiator said the two sides still have a long way to go.

Asked by CNN if spending levels have been resolved, McHenry said: "Nothing is resolved."

McHenry said he's "sincerely worried" about a potential downgrade of US credit rating.

"I am worried about the consequences of us not coming to terms and raising the debt ceiling. I made that very clear," McHenry said.

The U.S. Capitol is seen on May 16, in Washington, DC.

Alex Brandon/AP

In the last 24 hours, debt ceiling negotiations have hit a much more urgent pace, a source familiar with the situation tells CNN, prompting some of the optimism reflected this morning. 

While little has been closed out in talks, progress is slowly being made on all the corners of this negotiation — from permitting reform to a potential caps deal.

One of the trickier issues that could bedevil these negotiations in upcoming days is the issue of work requirements, which haven't been as widely hashed out yet. The White House has shown little interest in touching requirements on Medicaid, but as CNN's Manu Raju reported last night, there are active talks over dealing with state waiver issues in Temporary Assistance for Needy Families (TANF) and age requirements in Supplemental Nutrition Assistance Program (SNAP). 

One thing both sides do seem to be settled on is recapturing unspent Covid-19 pandemic funding. The source warned that money is going out, so it's hard to pin down an exact amount that would bring into government coffers, but it's probably around $30 billion.  

Remember: As is true in any negotiation, these talks can come together — and fall apart — several more times before a deal is actually reached. But at the moment, things are on a swifter track than they had been, with the June 1 deadline looming and Fitch credit ratings agency's warning Wednesday of a potential downgrade if Congress doesn't take action soon.

No meetings are currently scheduled, but that is expected to change. 

U.S. Speaker of the House Kevin McCarthy (R-CA) speaks to reporters as he arrives at the U.S. Capitol today in Washington, DC. McCarthy spoke on the ongoing debt limit negotiations.

Kevin Dietsch/Getty Images

House Speaker Kevin McCarthy said negotiators worked late into the night and are inching closer to a potential debt ceiling deal.  

"We worked well past midnight last night and yesterday … was a very good day. I thought we made some progress. There's still some outstanding issues, and I've directed our teams to work 24/7 to try to solve this problem," McCarthy told reporters Thursday morning on Capitol Hill.

In a separate interview on Fox News also this morning, while McCarthy still expressed positivity about the negotiations, he said, "I don't know if we will have a deal today." 

"This deal won't solve all the problems. The president took a lot of things off the table," he said, insisting that his conference is "very united in this process."

On the Hill, he reaffirmed that he believes the June 1 deadline is a real deadline, despite some allegations from conservatives that Treasury Secretary Janet Yellen is playing games with it. 

Meanwhile, in the Fox interview, McCarthy brushed off that it would be an economic catastrophe if the date passes without a deal, saying "look, we know there's money coming in. We know there's ability to get things done." 

"Whoever the Treasury Secretary is, whatever they say the date is, I will take. But there's money that comes in every single day. You get to the 15th, a lot of money comes in," he said.

McCarthy would not tell reporters about specific areas where there is agreement in negotiations, but CNN has reported that the two sides have agreed on recapturing unspent Covid-19 funds. Pushed by CNN on whether Democrats have agreed to spending less money next year, McCarthy wouldn't get into details but said if there is going to be a deal, they'll have to agree to that. 

McCarthy was pressed on what impact the Fitch credit ratings agency's warning has had on the negotiations and if it makes him nervous about getting a deal sooner. McCarthy reiterated that is why he met with Biden and asked repeatedly to get back together. 

"If you wait 97 days not to negotiate, you must never be concerned about that," he said of threat of downgrade. 

Asked about the timeline for when this must be done, McCarthy said, "every hour matters." 

"That's why we worked well past midnight last night. The team they have is very professional, very bright. They know where the differences are and we're gonna work 24/7," he reiterated.

Republican negotiator Rep. Garret Graves said that there's still more to do on differences over spending, and he does not have plans to go to the White House today but spoke with them this morning. 

"Still have a good bit to do, the speaker's made it clear that this is a top priority," he said.

He added that he has "been in touch with the White House this morning, going to keep talking to them, and obviously objective is to get this closed as quickly as possible."

When asked by CNN if he plans to go back to the White House today, he said, "not right now."

The U.S Treasury building seen on May 14 in Washington DC.

Ken Cedeno/Sipa USA/AP

A deadlocked Washington that has taken America to the brink of default could jeopardize the United States' perfect credit rating, Fitch said in a stern warning Wednesday.

The credit ratings agency placed top-ranked US credit on rating watch negative, reflecting the uncertainty surrounding the current debt ceiling debate and the possibility of a first-ever default.

The move comes as as Republican and Democratic politicians negotiate to raise the US debt limit, though no deal has yet been reached. With Treasury Secretary Janet Yellen saying the US may be unable to pay its bills as soon as June 1, the country faces the possibility of an unprecedented default, which could have disastrous effects both in the United States and all over the world.

Fitch, 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. 

"The Rating Watch Negative reflects increased political partisanship that is hindering reaching a resolution to raise or suspend the debt limit despite the fast-approaching x date (when the U.S. Treasury exhausts its cash position and capacity for extraordinary measures without incurring new debt)," the company said in a statement. 

However, Fitch added that it still believed lawmakers would pass a resolution before the "X-date."

The White House on Wednesday pointed to Fitch Ratings' move as cause for urgency on raising the debt ceiling.

"This is one more piece of evidence that default is not an option and all responsible lawmakers understand that. It reinforces the need for Congress to quickly pass a reasonable, bipartisan agreement to prevent default," a White House spokesperson said in a statement.

The Treasury Department on Wednesday night also emphasized that, and said a potential downgrade shows why Congress must immediately address the debt ceiling.

Read more here

A trader works on the trading floor of the New York Stock Exchange on May 24. U.S. stocks ended lower on Wednesday.

Xinhua/Shutterstock

There are just four trading days left until the United States hits its "X" day — the ominous-sounding hard deadline for the government to raise the debt ceiling or risk defaulting on its obligations, according to the US Treasury. Investors are starting to squirm. 

It's not like this took Wall Street by surprise. The US government hit its self-imposed debt ceiling back in January, forcing the Treasury to start taking extraordinary measures to keep the government paying its bills and escalating pressure on Capitol Hill to avoid a catastrophic default. Treasury Secretary Janet Yellen has been warning of a June 1 deadline for nearly a month.

US markets have largely shrugged off talk of a default. All three major indexes climbed higher last week. And analyst notes discussing the topic have been heavily caveated that there's a near-zero chance of an actual default. "A debt ceiling deal is a certainty and every market actor knows it," wrote David Bahnsen, chief investment officer of The Bahnsen Group on Wednesday.

But markets have experienced a vibe shift in the last 24-48 hours. The Dow plummeted more than 250 points Wednesday as investors were appeared to wake up to the reality that for the first time in US history, the government could renege on its bills. Treasury yields, which move in the opposite direction to prices, were higher as worries of a default grew.

What's happening: Negotiations between President Joe Biden and Republican House Speaker Kevin McCarthy are hitting snags and time is running out. 

House Republicans are insisting on spending cuts before they will agree to raise the nation's debt ceiling past $31 trillion. Democrats argue that Congress already spent the money and must be allowed to repay America's debt holders without an embarrassing and economically disastrous default.

Fitch — one of the top three credit rating agencies along with Moody's and S&P — signaled on Wednesday evening that it could downgrade the United States' perfect rating if lawmakers do not agree to raise the debt limit.

The warning is "just the latest sign that policy brinkmanship over the debt ceiling is extracting a growing price on the US economy and placing in jeopardy well-functioning financial markets that are critical to the health of the American real economy," said Joseph Brusuelas, chief economist at RSM LLC. 

Keep reading here.

U.S. Speaker of the House Kevin McCarthy (R-CA) speaks to members of the media at the U.S. Capitol on May 24 in Washington, DC. 

Kevin Dietsch/Getty Images

House Speaker Kevin McCarthy appears set to send members home after votes on Thursday, signaling that debt negotiations with the White House will continue as the risk of a first-ever default grows.

While the speaker urged lawmakers to stay close to the nation's capital over Memorial Day weekend, his top deputy, House Majority Leader Steve Scalise, announced that the House will recess following votes on Thursday as negotiators continue to work on a debt ceiling deal.

"Following tomorrow's votes, if some new agreement is reached between President Biden and Speaker McCarthy, members will receive 24 hours notice in the event we need to return to Washington for any additional votes, either over the weekend or next week," he said.

Negotiators are trying to make progress on a handful of outstanding issues - in addition to cutting federal spending, which remains a major sticking point. Two sources familiar with the matter said the White House is weighing the GOP demands in exchange for winning the lone concession offered by McCarthy: raising the debt limit.

The two sides have agreed to rescind some Covid-19 relief aid, an issue first proposed by House Republicans, according to multiple sources.

Hours of meetings on Wednesday moved negotiations in a positive direction, McCarthy told reporters, but each day that passes without a bipartisan deal to raise the debt ceiling brings the nation closer to default - which could be catastrophic for the global economy and have financial effects on countless Americans.

Warning signs are beginning to pop up: Fitch Ratings placed the top-ranked US 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.

Read more about where things stand here.

The Peace Monument with a figure of Grief weeping on the shoulder of History is seen in front of the US Capitol in Washington, DC, on May 19.

Mandel Ngan/AFP/Getty Images

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.

U.S. Secretary of the Treasury Janet Yellen at Johns Hopkins University's School of Advanced International Studies (SAIS) on April 20 in Washington, DC.

Anna Moneymaker/Getty Images

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.

Visitors outside the US Capitol building in Washington, DC, on May 23.

Nathan Howard/Bloomberg/Getty Images

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."

Read what other Americans are saying.

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