Earlier, Treasury Secretary Janet Yellen said the dreaded X-date, when the government runs out of money unless it can borrow, will now be June 5, not June 1. Yellen, however, warned that the deadline extension does not change the urgency.

“Waiting until the last minute to suspend or increase the debt limit can cause serious harm to business and consumer confidence, raise short-term borrowing costs for taxpayers, and negatively impact the credit rating of the United States,” she said in a letter to top Republican Kevin McCarthy.

There were glimmers of optimism. According to unconfirmed US media reports, a deal taking shape would include an agreement to extend the government’s borrowing authority for two years, meaning no repeat of the current drama before the 2024 presidential election.

Democrats, however, would have to offer concessions on Republican demands for sweeping spending limits on social safety and other domestic programmes.

House Speaker McCarthy told reporters that negotiators had “made progress” but added: “Nothing is agreed to until it’s all agreed to.”

A first US debt default in history would likely trigger stock market sell-offs, huge job losses and recession, with major spillover into global economies.

IMF Managing Director Kristalina Georgieva cited new data that she said showed the “US economy has proven resilient”, but urged a “speedy resolution” to the debt issue.

“We think of the US Treasury market as an anchor for the global financial system, and this anchor needs to hold,” she said.

Chinese agency first to downgrade US credit rating as debt-ceiling concerns widen

With the country getting a three day Memorial Day holiday weekend, members of Congress are leaving Washington on their own 10-day recess.

Even President Joe Biden – to the consternation of some in his own party – is heading to his Camp David retreat and his private home in Delaware.

Yet Wally Adeyemo, the deputy Treasury secretary, told CNN that both Biden and McCarthy were focused on avoiding catastrophe.

“The president decided, the speaker has said it, and we have to get something done before June,” Adeyemo said. “The president is committed to making sure that we have good faith negotiations with the Republicans to reach a deal because the alternative is catastrophic for all Americans.”

On Thursday, Biden had also tried to reassure the country, saying: “There will be no default.”

The debt ceiling raise is an annual accounting manoeuvre that usually passes with relatively little notice. It simply allows the government to keep borrowing money to pay for bills already incurred through the budget.

This year, the increasingly hard-right Republican Party has decided to turn the debt ceiling into leverage to force Biden to roll back favourite Democratic spending priorities.

Republicans call this taking responsibility for the US$31 trillion national debt. The White House accuses the opposition party, which controls the House of Representatives, of taking the economy hostage.

McCarthy Says Republicans and White House ‘have time’ to reach debt deal

Democratic minority leader Hakeem Jeffries slammed the Republicans from the House floor on Thursday, accusing them of risking “a dangerous default in a crisis that they’ve created”.

Economists have spent months raising the prospect of economic catastrophe should the government default, and top military brass added their own dire prognosis Thursday, warning that the crisis would have a “significant negative impact” on troops.

“Readiness clearly would be impacted,” Mark Milley, chairman of the Joint Chiefs of Staff, told reporters.

McCarthy has pointed to a recent CNN poll showing 60 per cent support for a debt ceiling hike if accompanied by cuts, although 51 per cent of respondents in a new Monmouth University survey said they wanted the two issues to be separated.

Although lawmakers are on recess, McCarthy has said they will get 24 hours’ notice if they are required to return for a vote.