U.S. Senate leaders are giving conflicting reports of just how close Congress and the White House are on a deal to keep the government from defaulting on its $14.3 trillion debt.

Republican leader Mitch McConnell told reporters Sunday that all sides are “really really close.” But Democratic leader Harry Reid said there is still “a ways to go.”

Earlier, the Senate rejected a Reid proposal to let the government keep borrowing money while cutting spending. Republicans earlier had said they would vote against the Reid plan, but its defeat opened the door for the major effort under way to work out a compromise bill for President Barack Obama to sign.

If there no deal is signed by Tuesday, the government would reach its debt limit and start defaulting.

Wall Street and overseas markets are nervously watching developments in Washington. Failure to reach agreement could set back a shaky world economy still struggling to recover from recession.

U.S. stock markets suffered their worst losses this year last week and the value of the dollar slumped.

All sides agree on the need to cut spending and raise the debt ceiling. But they have been squabbling for weeks on what to cut and how fast those cuts should be made.

Past increases in the debt limit have been routine. But Republicans in Congress this time have demanded huge spending cuts with no increase in taxes. Democrats and the White House had been insisting on tax increases, but are reported willing to drop that demand in order to reach a deal.