May 22, 2023 Latest on US debt ceiling negotiations

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.”

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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. 

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.

Here are just three ways that Americans could be affected by debt default:

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, an economist at Moody’s.

House Speaker Kevin McCarthy returned to the Capitol this morning, attacking Democrats over spending ahead of the critical afternoon meeting with President Joe Biden at the White House.

“We'll sit down we'll talk about that, but the underlying issue here is the Democrats since they took the majority have been addicted to spending and that's going to stop we're going to spend less than we spent last year,” McCarthy told CNN’s Manu Raju when pressed on if the president has moved closer to their demands on spending. 

“We have to get the spending addiction (to) stop,” he added to CNN’s Lauren Fox. 

McCarthy was also pressed by Raju on whether they need a deal by the end of the week. He dodged, slamming Democrats for the delay.

“Back on February 1, I wanted to be able to do a deal, our negotiation and agreement just months ago, so we were never near the deadline,” he said. 

“So I don't worry about a default because the Senate could always take up our bill to make sure there is none,” he added. 

Republican negotiator Rep. Patrick McHenry told reporters this morning that yesterday's call between President Joe Biden and House Speaker Kevin McCarthy did help negotiators get back in the room even if talks are still slow going. 

"We have an updated sense of our realities," the Republican from North Carolina said. 

"Both sides are working in good faith, but we have tough issues ...we gotta deal with. It's a difficult proposition." 

President Joe Biden will meet with House Speaker Kevin McCarthy at 5:30 p.m. ET, the White House said in an updated schedule.

Biden and McCarthy spoke on the phone Sunday as the president was aboard Air Force One, heading back to Washington after his shortened trip to Japan.

McCarthy told reporters Sunday that the call was “productive" — but that came after Biden had sharply criticized Republicans at a news conference in Hiroshima, where he said he wasn’t able to promise fellow world leaders gathered for Group of Seven talks that the US would not default.

Time is running short to raise the nation’s borrowing limit and the US could default as soon as June 1, the Treasury Department has warned, a position that Treasury Secretary Janet Yellen repeated on Sunday. If lawmakers and the White House are unable to reach a deal, a global economic catastrophe would likely be triggered.

CNN's Clare Foran, Haley Talbot and Ted Barrett contributed reporting to this post. 

Cash levels at the US Treasury are shrinking and could drop to dangerously low levels by June 9, according to projections from economists at Goldman Sachs.

Treasury Secretary Janet Yellen reiterated over the weekend that early June is a “hard deadline” for Congress to raise the debt ceiling, with the federal government running out of cash as soon as June 1.

Goldman Sachs thinks there might be wriggle room – but not much. 

In a report to clients late Friday, Goldman Sachs economists wrote that by June 8 or June 9, cash at the Treasury is likely to drop under $30 billion – the bare minimum level Treasury has used in the past to project the deadline. 

The Treasury’s operating cash balance plunged to $57.3 billion as of the close of business on Thursday, down from $238.5 billion at the start of the month, according to federal data.

Goldman Sachs thinks there is a 70% chance that Congress will reach a deal to address the debt ceiling, and a 5% chance that the deadline gets pushed back.

That leaves a 25% chance of no deal in Congress, with the most likely outcome (15%) a short-term extension by Congress. 

Goldman Sachs says there is a 6% chance that Treasury is forced to stop making most payments while continuing to make interest and principal payments on US debt, and a 4% chance that Treasury ignores the debt limit to continue borrowing and make all scheduled payments. 

“While we expect a deal to occur ahead of the deadline,” Goldman Sachs economists wrote, “we also expect a few more twists along the way, and suspect that markets are likely to price in additional risk before the debt limit is finally raised.”

House Republicans are insisting on spending cuts before they will agree to raise the nation’s debt ceiling past $31 trillion.

Democrats argue Congress already spent the money and must be allowed to repay America’s debt holders without an embarrassing and economically disastrous default.

President Joe Biden returned early from a trip to Asia to restart negotiations with House Speaker Kevin McCarthy, a California Republican. They are set to meet again Monday afternoon.

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.

If you haven’t been following the debt drama, here are answers to some questions to get you up to speed:

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