(Bloomberg) -- Congressional Republicans and the White House still have ground to cover before reaching an agreement on averting an approaching US debt default, House Speaker Kevin McCarthy said Thursday night.

“We know where our differences lie,” McCarthy told reporters at the Capitol, adding that he planned to work through the holiday weekend there. 

“We do not have an agreement yet. We knew this would not be easy. It’s hard, but we’re working. And we’re gonna continue to work till we get this done,” he said.

With a week to go before the US Treasury potentially runs out of money, the two sides communicated back and forth by telephone but didn’t meet in person. 

Negotiators are haggling over two years of spending caps for domestic programs. They are closing in on a deal to allow defense spending to rise 3 % next year in line with Biden’s budget request, people familiar with the talks said.

Republican negotiators holed up in McCarthy’s suite of offices as reporters waited by the entryway. The Capitol’s marble hallways emptied as most lawmakers left for the long Memorial Day weekend. 

Representative Garret Graves of Louisiana, one of the negotiators, described the progress as “slow” as he left the offices Thursday night. He said the White House was holding firm in refusing Republican demands to add work requirements to the eligibility criteria for Medicaid and other social welfare programs. 

“We have a lot of hang ups,” he said. “But that’s one of the bigger issues.” 

Progressive Democrats have demanded that President Joe Biden hold the line against work requirements.

Earlier, Representative Patrick McHenry of North Carolina, another GOP negotiator, emerged to tell reporters that Republicans and Biden still had “serious issues” to work out and “that’s going to take some time.” He added, “It’s tough.”

Earlier in the day, McHenry said the list of issues dividing the two camps had grown shorter.

Biden said at an afternoon White House event that he and McCarthy “had several productive conversations” and “our staffs continue to meet.”

Should a deal be reached soon, Tuesday is emerging as the likely day for a House vote. The Senate would then have to act quickly to send it to Biden’s desk before June 1, the date by which Treasury Secretary Janet Yellen has said her department could run out of cash. 

The following day sees a payment due to millions of Social Security beneficiaries, putting pressure on politicians to resolve the impasse.

‘Glad the Market’s Closed’

US stocks rose as investor enthusiasm for companies linked to artificial intelligence outweighed concerns about a debt default. Anxiety eased slightly over repayment of Treasury debt maturing around the time of a potential default, with yields for Treasury bills due June 1 down 1.3 percentage points at mid-day, though still more than 2 points higher than debt due just two days earlier.

McHenry, asked what he would tell investors about the negotiations’ progress, quipped, “Glad the market’s closed.”

Fitch Ratings Wednesday placed the AAA credit rating for the US on watch for a potential downgrade. The US lost its AAA grade at S&P Global Ratings during a similar partisan standoff on the debt ceiling in 2011.

Listen for more: Unraveling the US Dance With a Debt-Ceiling Disaster (Podcast)

The White House and Treasury said the Fitch move demonstrated the urgency of reaching a speedy resolution to the dispute. But McCarthy said that he wasn’t worried about Fitch’s announcement, and that negotiators didn’t need the ratings agency to remind them of the importance of concluding a deal.

Negotiators have been clashing over the scale and length of limits on spending to be included in a bill raising or suspending the debt ceiling. Economists have warned that even with a deal that avoids a devastating payments default, caps on government outlays could help to tip the US into a recession.

The administration has also objected to Republican moves to expand work requirements for some recipients of federal assistance. A White House official on Thursday said both sides are dug in on the issue and the president is fighting policies that push Americans into poverty or take away their health care.

The two sides have made some progress, however. There is an emerging agreement to include a measure easing approval of power transmission lines, according to a person familiar with the negotiations. That could be the backbone of broader agreement to speed permits for energy projects.

In the Senate, it could take agreement of all senators to rush past parliamentary obstacles that might add days to the debate.

Senator’s Warning

Mike Lee, a Utah Republican, on Thursday morning threatened to prevent that from happening if the agreement isn’t to his liking. He tweeted that he would “use every procedural tool at my disposal to impede a debt-ceiling deal that doesn’t contain substantial spending and budgetary reforms.”

Yet he didn’t say whether he might slow down a temporary debt-ceiling extension if talks push past the deadline.

McCarthy told reporters he had been in touch with both his counterpart in the Senate, Republican leader Mitch McConnell, as recently as Wednesday and former President Donald Trump “the other day.”

--With assistance from Ryan Teague Beckwith, Akayla Gardner, Zach C. Cohen, Laura Litvan and Jennifer Jacobs.

(Updates with Representative Graves, in seventh paragraph.)

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