US Treasury Secretary Janet Yellen has updated the country's debt default deadline to June 5. This extension provides additional time for negotiations between Republican House Speaker Kevin McCarthy and Democratic President Joe Biden to raise the federal government's self-imposed debt ceiling of $31.4 trillion and prevent a dire economic scenario, DW reported.

Previously, Yellen noted that a default could happen as early as June 1. Despite the deadline shift, Yellen emphasized that the situation's urgency remains unchanged. 

In a letter addressed to McCarthy, she highlighted the detrimental consequences of suspending or increasing the debt limit. Yellen said it could "cause serious harm to business and consumer confidence, raise short-term borrowing costs for taxpayers, and negatively impact the credit rating" of the US.

She added: "If Congress fails to increase the debt limit, it would cause severe hardship to American families, harm our global leadership position, and raise questions about our ability to defend our national security interests."

Biden expressed optimism late Friday, stating that a deal was very close to being reached. Speaking to reporters at the White House, he said, "I'm hopeful we'll know by tonight whether we're going to be able to have a deal."

READ NEXT: US Debt Default 

Partisan Divide Persists as Republicans Push for Work Requirements, Democrats Seek Compromises in Spending Deal

Republicans are advocating for spending cuts by implementing stricter requirements on benefits like food assistance and healthcare for low-income beneficiaries, whom the GOP wants to have jobs, Al Jazeera reported.

On the other hand, Democrats are opposing the new work requirements for recipients of the benefit programs and pointed out that Republicans seemed to show little concern about raising spending limits during former President Donald Trump's administration, 

It was recently reported that Kevin McCarthy and Joe Biden are nearing an agreement. The proposed deal reportedly includes provisions to increase military spending, re-allocate unused COVID-19 relief funds designated for disaster relief and vaccine research, and reduce Internal Revenue Service (IRS) funding.

The agreement would also restrict non-military discretionary spending, affecting several things such as housing, education, road safety, and other federal programs. Given the growing inflation, implementing a spending cap could likely serve as a de facto cut to social safety net programs. 

US Debt Deadline Looms: Congress Must Raise US Debt Ceiling by June 5 to Avert Default and Economic Crisis

According to Reuters, as the June 5 US debt default deadline approaches, Congress faces the crucial task of deciding whether to suspend or raise the debt limit so the US can borrow more.

According to Reuters, Biden and McCarthy are discussing an agreement that would lift the limit for two years. However, they remain at odds on whether to stiffen work requirements for some anti-poverty programs.

Although even if they reach an agreement, leaders from both parties will have to work hard to get enough votes for approval in Congress. Most lawmakers have already left Washington for the Memorial Day holiday. However, House leaders told them to be ready to return for votes when an agreement was made.

They said lawmakers have three days to think about the deal before voting. A single lawmaker in the Senate has the power to delay action for days. At least one has threatened to do so, and that was Republican Mike Lee.

Some credit-rating agencies have reportedly placed the US on review for a possible downgrade, which would increase borrowing costs and downgrade its standing as the foundation of the world's financial system.

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This article is owned by Latin Post.

Written by: Bert Hoover

WATCH: No Debt Ceiling Deal yet With One Week Until Treasury's Estimated Default Deadline - From CBS News