Here's what needs to happen for Congress to raise the debt ceiling and avoid default

• Congress is rushing to pass a deal to raise the debt ceiling and fund the government before it leaves for the month of August.
• Lawmakers hope to avoid a potential U.S. default on its debt, which would be devastating for financial markets and the global economy.
• House Speaker Nancy Pelosi says she hopes her chamber can vote on a debt limit and spending agreement by July 26, which would set up the Senate to pass it before Congress leaves for the month of August.

Speaker Nancy Pelosi, D-Calif., conducts her weekly news conference in the Capitol Visitor Center on Wednesday, June 5, 2019.

Tom Williams | CQ-Roll Call Group | Getty Images

Congress will have to scramble to raise the U.S. debt limit and avoid a potential default that would rattle the world economy.

On Wednesday, House Speaker Nancy Pelosi said she would like to vote on a bill to hike the debt ceiling by July 26 — the chamber's last day of activity before an August recess. She hopes it would give the Senate enough time to pass legislation before it leaves the following week.

Of course, negotiators in Washington will first have to find an agreement that can get through both chambers of Congress. Pelosi said she hopes lawmakers and the White House can reach a deal by Friday, which would allow them to post legislative text over the weekend.

She and Senate Minority Leader Chuck Schumer spoke to Treasury Secretary Steven Mnuchin earlier Wednesday. While officials have cited progress in the talks, sticking points remain.

"It's all about money, right?" Pelosi told reporters Wednesday.

The White House disputed Pelosi's optimism about striking a deal. A senior administration official said Wednesday that "Pelosi's new timeline sounds like happy talk from the Speaker who has been absent from talks for the last 3 months and now is trying to create momentum after a bad couple weeks."

"The reality is, we have a way to go," the official said.

The House speaker and Treasury secretary have discussed a two-year budget deal that would also raise the U.S borrowing limit. The issue took on more urgency last week, when Mnuchin wrote to Congress saying the Treasury Department could run out of cash "in early September, before Congress reconvenes."

Lawmakers hope to avoid a government shutdown before they leave, as current government funding expires at the end of September. Democrats want to strike a budget deal to avoid automatic across-the-board spending cuts known as sequestration.

A two-year spending agreement tied to a debt ceiling increase would accomplish all of those in one swoop. Democrats have opposed a short-term debt limit hike.

If America defaulted on its debt, it could send shock waves through the global economy and financial markets. Even a less disruptive government shutdown could drag on U.S. economic growth.

— CNBC's Ylan Mui contributed to this report.

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