The deal raises the debt ceiling for two years while limiting some spending, but uncertainty remains over whether it will pass Congress.
U.S. President Joe Biden and House Speaker Kevin McCarthy have reached a tentative agreement to raise the federal government’s $3.4 trillion debt ceiling just days before a deadline to avoid a potentially catastrophic default.
However, the deal McCarthy described on Saturday suggested it might not be absolute and there was no celebration — pointing to the bitter tone of the negotiations and the difficult road ahead to get through Congress before the US runs out. Money for repaying debts on June 5.
The Democratic president and Republican Speaker of the House reached an agreement in principle after a 90-minute phone call.
“I just spoke with the President on the phone. After months of wasting his time and refusing to negotiate, we reached a deal in principle that has value for the American people,” McCarthy tweeted.
The deal, which would raise the debt ceiling for two years while limiting spending during that time, includes some additional work requirements for the poor, according to Reuters.
McCarthy later told reporters on Capitol Hill that “we have more work to do tonight to get it written.”
He said he expected to finish drafting the bill on Sunday, then meet with Biden and vote on the deal on Wednesday.
The deal would avoid an economically destabilizing default as long as the president and speaker manage to get it through a narrowly divided Congress before the Treasury becomes too short on funds to meet all of its obligations.
Both sides will have to carefully find a compromise that will win the House (with a Republican majority of 222 to 213) and the Senate (with a Democratic majority of 51 to 49).
For months, Biden has resisted negotiating with McCarthy over future spending cuts, demanding that lawmakers first pass a “clean” debt-ceiling hike with no other strings and presenting a 2024 budget proposal to counter his March release. budget proposal.
Two-way negotiations between Biden and McCarthy officially began on May 16.
Republicans have pushed for deep spending cuts and other conditions, including new work requirements for some entitlement programs for low-income Americans and stripping funding from the U.S. tax agency, the IRS.
They said they wanted to slow the growth of U.S. debt, which is roughly equal to the annual output of the country’s economy.
Democrats, meanwhile, accused Republicans of playing a dangerous game of brinkmanship with the economy.
The protracted standoff has spooked financial markets, weighing on stocks and forcing the U.S. to pay record high interest rates on some bond issues. Economists say a default would be far more costly, potentially tipping the country into recession, destabilizing the world economy and sending unemployment soaring.
The last time the U.S. was close to default was in 2011, when Washington also had a Democratic president and Senate and a Republican-led House of Representatives.
Congress ultimately avoided a default, but the economy took a heavy toll, including the first downgrade of America’s top credit rating and a sharp sell-off in stocks.