May 22, 2023 Latest on US debt ceiling negotiations

House Speaker Kevin McCarthy said Monday that the White House and House Republicans need to get a deal this week in order to avoid the nation’s first-ever default. 

McCarthy is scheduled to meet with President Joe Biden later today at 5:30 p.m. ET. Treasury Secretary Janet Yellen's "hard deadline" for the US to raise the debt ceiling. 

McCarthy defended the demands Republicans are making now on the debt ceiling, as he was pressed over why they didn’t make those spending cuts when Donald Trump was President. 

“The outcry was the speaker was different. The speaker was Nancy Pelosi,” he said.

McCarthy downplayed the possibility of a revolt among the right flank over any deal he cuts with the White House, but he didn’t say he would only put a bill on the floor if it got a majority of Republican support. Instead, he said, “I firmly believe what we’re negotiating right now, a majority of Republicans will see that it is a right place to put us on a right path.”

Where things stand: Pressed if Biden has agreed to the spending levels that Republicans have been pushing for, McCarthy replied, “Nothing is agreed to. We've had very good discussions, very professional going through. I have the highest respect for the individuals he has down here working on it." 

He would not say if work requirements for certain social safety net programs were a red line for him, but defended Republican demands to include them, saying, “every study has shown it helps people.”

“There is a number of places we've been discussing, a number of places the president discussed. That's why we're going to get together, and we're not going to cut the deal here, but we're going to work together, solve this problem and make America stronger," he said.

Wall Street is taking a no-worries attitude about the ticking time bomb in Washington that threatens to blow up the world economy. That might be a problem.

Debt ceiling-inspired selloffs have been almost nonexistent. The Nasdaq is still up by a staggering 22% on the year. And CNN's Fear and Greed Index of market sentiment is nearing "extreme greed" mode.

Perhaps this indifference is because investors have seen this drama before. They know how it ends: with politicians waiting until the last minute before giving in and finally raising the debt ceiling before disaster strikes.

No one wants to see markets panic, needlessly shrinking the 401(k) plans, nest eggs and college savings plans of millions of Americans. Unfortunately, there is a growing sense that a bit of market mayhem might be necessary.

On Friday, it looked like the White House and Republicans were getting closer to a deal on the debt ceiling before talks unexpectedly broke down.

But even news of that setback was greeted with a collective shrug on Wall Street. Stocks retreated from their highs but the Dow ended the day with a loss of just 109 points, or 0.3%. That's not exactly going to get people to call their lawmakers.

In some ways, the calm mood in markets is acting like a feedback loop. Investors are betting it'll all get taken care of. Lawmakers are in no rush because the markets are not freaking out. Rinse and repeat.

"Both political parties may need to see incremental market turmoil before settling on an agreement," said Nicholas Colas, co-founder of DataTrek Research.

Read more about this here.

House Speaker Kevin McCarthy reiterated to reporters Monday that decisions regarding raising the debt ceiling have to start being made to get a deal worked out before June 1, which is Treasury Secretary Janet Yellen's "hard deadline" for the US to raise the nation’s borrowing limit.

“We don’t like governing by deadline,” McCarthy said. Adding that the meetings, so far, have been “professional and productive.”

The optimistic tone comes after negotiations hit a snag and were put on pause Friday, and representatives of each side spent most of the next two days criticizing the other while defending their own positions.

McCarthy also said that he has been clear with President Joe Biden from the beginning about Republican priorities. “We’re not going to raise taxes. We’re going to spend less money than we spent this year," he said.

McCarthy also said that he believes that a majority of Republicans will support a negotiated deal. "I firmly believe what we're negotiating right now, a majority of Republicans will see that it is a right place to put us on a right path," he said.

McCarthy said that cutting defense spending is not on the table.

“I look at what’s happening in the world today. Look where the president just went. The G7 all focused on China. Look what the president has done with the funding, what we have voted for Ukraine. Look at our weaponry we had shipped a lot to Ukraine we’ve got to replace. I don’t think you should put America in jeopardy. So, no," he said.

He also suggested that the House could give up their planned Memorial Day recess if a deal isn’t reached. 

“Oh yeah. We’re going to stay and do our job,” he said. 

McCarthy reiterated that currently "nothing is agreed to" but there have been "good discussions" between negotiators. The top House Republican warned something has to get done "this week" to move through Congress in time. He said "it is still possible" to make the June 1 date.

Hear the exchange:

The White House and congressional Republicans have yet to reach a debt ceiling deal, and the possibility of a US default looms on the horizon.

Business owners, along with the rest of the country, are in wait-and-see mode, bracing for a possible recession and job losses in the event of a prolonged default.

While some still think a default is unlikely, the nonpartisan Congressional Budget Office (CBO) said earlier this month that there is a “significant risk” the federal government won’t be able to pay all of its obligations in the first two weeks of June. Treasury Secretary Janet Yellen warned that could happen as soon as June 1.

“We all hope that we don’t default. But hope is not a plan,” said Joshua White, assistant professor of finance at Vanderbilt’s school of management. “Companies need to have a plan.”

But there are some things businesses can do to prepare, according to experts:

Read more about this here.

Republican Rep. Patrick McHenry, one of House Speaker Kevin McCarthy’s key negotiators in the debt limit talks with the White House, told reporters that discussions are sensitive at the moment.

He would not discuss the details of the talks, including work requirements and spending caps.

"The hope is that we resolve this. It is in my interest and the American people’s interest that we resolve this. And with divided government, everyone knows that there are serious tradeoffs," McHenry said.

"I'm concerned about getting a deal that can pass the House, the Senate, and signed by the president. It's a complicated piece of math, it is," he added.

McHenry noted that there are "no" meetings planned with White House negotiators for the rest of the day. President Joe Biden and McCarthy are set to meet at 5:30 p.m. ET on Monday.

Moments ago, the White House negotiators left the House speaker’s office after about three hours. They did not comment to reporters. 

GOP Reps. Garrett Graves and Patrick McHenry also departed the speaker’s office shortly after. Graves would not talk to the press. 

McHenry did speak at length, saying it is a sensitive time for negotiations. 

House Speaker Kevin McCarthy snuck out a back way of the Capitol and has left the campus. He did not speak. 

McCarthy is set to meet again with President Joe Biden this afternoon at the White House.

House Republicans are seeking spending cuts in the federal budget in exchange for their support to raise the debt ceiling. On Sunday, President Joe Biden acknowledged “significant” disagreement with Republicans, insisting that while he’s willing to reduce spending, tax “revenue is not off the table” as part of the deal.

Rep. Garret Graves of Louisiana, who is leading Republican negotiations on the debt ceiling, earlier this month outlined four areas where he thought there could be agreement:

Republicans have long insisted they won’t raise the debt limit without spending reductions, but Democrats have sounded the alarm over the cuts Republicans want.

Sources familiar with the White House’s thinking acknowledge that part of the reason for the temporary breakdown in talks Friday is that White House negotiators view the extent of the spending reductions House Republicans are pushing for as unacceptable, though the White House has expressed a willingness to cut some spending.

The budget proposal GOP negotiators presented over the weekend would set budget caps for six years, with the cap structure remaining the same as the House-passed bill at fiscal year 2022 levels, according to a source with direct knowledge of the matter.

The proposal included at least two items that weren’t part of their initial bill: immigration provisions and additional changes to the work requirements for food stamps, the source said. Biden said Sunday that much of what Republicans have proposed “is simply, quite frankly, unacceptable.”

Read more about this here.

The United States risks could run out of money to pay its bills if Congress is not able to reach an agreement on the debt ceiling. It could happen as soon as June 1, according to warnings from Treasury Secretary Janet Yellen, and could have potentially have far-reaching and dire consequences for Americans, including people who receive benefit payments or run a small business or who are trying to buy a home.

We’re hoping to hear from you about how closely you’re watching these developments; what actions, if any, you’ve taken to prepare in case of a default; and how you think this could affect you, your job and your family.

Please share your experiences and thoughts with us below:

As negotiators continue to work to reach a deal on the debt limit, House Democrats are trying to force consideration of a discharge petition to avoid default. 

The parliamentary move was made last week by Rep. Brendan Boyle, the top Democrat on the House Budget Committee, in an effort to garner enough signatures to go around House Speaker Kevin McCarthy and force a debt limit vote. But the petition, which requires 218 votes to be activated, is still short of that number. As of Monday morning, 210 members have signed on. 

No Republicans have supported the move, and three Democrats – Reps. Ed Case of Hawaii, Jared Golden of Maine and Mary Peltola of Alaska — have yet to sign the discharge petition. 

Peltola is expected to sign this week when she returns to Washington after tending to a family death. 

CNN has reached out to Golden and Case.