In Washington, Treasury Secretary Janet Yellen announced on Friday that the projected debt ceiling deadline has been extended to June 5, which is four days later than previously estimated. President Biden expressed optimism, stating that a resolution to the government’s financial crisis seemed “very close.”

Despite the extension, Yellen reiterated her warning to Congress in a letter, emphasizing that failing to raise the borrowing limit would result in severe hardship.

Yellen’s letter was issued as Congress adjourned for the long Memorial Day weekend. She revealed that the Treasury Department had implemented an extraordinary measure, not utilized since 2015, to bring the U.S. financial situation to its current state.

The X-date refers to the point at which the government lacks sufficient financial reserves to cover all its expenses, having exhausted the measures implemented since January to stretch existing funds.

Earlier on Friday, House Speaker Kevin McCarthy noted that his Republican debt negotiators and the White House were facing a critical moment, working hard to finalize an agreement with President Joe Biden to control federal spending and raise the nation’s borrowing limit before the imminent deadline. They had aimed to reach a deal by the weekend. However, the Treasury now warns that the government could run out of funds as early as a week from Monday, leading to a potentially catastrophic default with global economic repercussions.

Concerned retirees and social service groups were among those making contingency plans for a possible default as lawmakers departed for the long holiday weekend. The next round of Social Security payments is scheduled for the following week.

“The world is watching,” said International Monetary Fund Managing Director Kristalina Georgieva after meeting Friday with Yellen. “Let’s remember we are now in the 12th hour.”

Democratic President Biden and Republican Speaker of the House were making progress in narrowing their differences as they worked to finalize details of a two-year agreement. The agreement aims to limit federal spending and raise the legal borrowing limit beyond the next presidential election.

Any deal reached would require political compromise and support from both Democrats and Republicans to pass through the divided Congress.

Acknowledging the urgency of the situation, Speaker McCarthy referred to it as a “crunch” as he arrived at the Capitol, acknowledging that more progress needed to be made.

While the broad outlines of the deal have been taking shape, including spending cuts for 2024 and a 1% cap on spending growth for 2025, the two sides remain at odds over various provisions. The proposed agreement would lift the debt ceiling, currently at $31 trillion, for two years to cover the nation’s incurred expenses.

According to a person familiar with the talks, both sides are firmly holding their positions on whether to agree to Republican demands for stricter work requirements for individuals receiving government food stamps, cash assistance, and health care aid.

House Democrats have staunchly opposed work requirements for health care and food aid.

When asked if Republicans would back down on work requirements, one member, Graves, strongly responded, “Hell no, not a chance.”

House Republicans have taken a risk by leaving town for the Memorial Day holiday, displaying political boldness. Lawmakers are expected to return to work tentatively on Tuesday.

President Biden will also be away for the weekend, heading to the presidential retreat at Camp David, Maryland, on Friday and returning to his home in Wilmington, Delaware, on Sunday. The Senate is currently on recess and will resume after Memorial Day.

Weeks of negotiations between Republicans and the White House have not yielded a deal, partly due to the Biden administration’s refusal to negotiate with McCarthy on the debt limit. The administration argued against using the country’s full faith and credit as leverage to extract other partisan priorities.

“We have to spend less than we spent last year. That is the starting point,” said McCarthy.

Meanwhile, Speaker McCarthy is facing pressure from the conservative wing of the House, urging him not to concede to any agreement, even if it means surpassing the deadline.

In addition, Fitch Ratings agency has placed the United States’ AAA credit rating on “ratings watch negative,” issuing a warning about a potential downgrade.

Although President Biden has currently ruled out invoking the 14th Amendment to raise the debt limit on his own, House Democrats have announced that they have all signed onto a legislative “discharge” process. This process would compel a vote on the debt ceiling, but they would need at least five Republicans to break ranks with their party and join the majority in order to advance the plan.