U.S. President Joe Biden and top congressional Republican Kevin McCarthy have reached a tentative deal to raise the federal government's $31.4 trillion debt ceiling, ending a monthslong stalemate.
However, the deal was described in terms that indicated it might not be absolute, and without any celebration, an indication it may have of a difficult path through Congress before the United States runs out of money to pay its debts in early June.
McCarthy spoke briefly to reporters in the Capitol Saturday night, describing the deal as one "worthy of the American people."
The deal would raise the debt limit for two years while capping spending over that time and includes some extra work requirements for programs for the poor.
Biden and McCarthy held a 90-minute phone call earlier Saturday evening to discuss the deal.
"We still have more work to do tonight to finish the writing of it," McCarthy told reporters on Capitol Hill. McCarthy said he expects to finish writing the bill Sunday, then speak to Biden and have a vote on the deal on Wednesday.
Next step: Congress
The deal will avert an economically destabilizing default, so long as they succeed in passing it through the narrowly divided Congress before the Treasury Department runs short of money to cover all its obligations, which it warned Friday will occur if the debt ceiling is not raised by June 5.
Republicans who control the House of Representatives have pushed for steep cuts to spending and other conditions, including new work requirements on some benefit programs for low-income Americans and for funds to be stripped from the Internal Revenue Service, the U.S. tax agency.
They said they want to slow the growth of the U.S. debt, which is now roughly equal to the annual output of the country's economy.
Negotiators have agreed to cap non-defense discretionary spending at 2023 levels for one year and increase it by 1% in 2025, sources said.
The two sides must carefully thread the needle in finding a compromise that can clear the House, with a 222-213 Republican majority, and Senate, with a 51-49 Democratic majority.
One high-ranking member of the hardline House Freedom Caucus said they were in the process of gauging member sentiment, and unsure what the vote numbers might be.
The long standoff spooked financial markets, weighing on stocks and forcing the United States to pay record-high interest rates in some bond sales. A default would take a far heavier toll, economists say, likely pushing the nation into recession, shaking the world economy and leading to a spike in unemployment.
Biden for months refused to negotiate with McCarthy over future spending cuts, demanding that lawmakers first pass a debt-ceiling increase free of other conditions, and present a 2024 budget proposal to counter his issued in March. Two-way negotiations between Biden and McCarthy began in earnest on May 16.
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Democrats accused Republicans of playing a dangerous game of brinkmanship with the economy. Republicans say recent increased government spending is fueling the growth of the U.S. debt.
The last time the nation got this close to default was in 2011, when Washington also had a Democratic president and Senate and a Republican-led House.
Congress eventually averted default, but the economy endured heavy shocks, including the first-ever downgrade of the United States' top-tier credit rating and a major stock sell-off.
The work to raise the debt ceiling is far from done. McCarthy has vowed to give House members 72 hours to read the legislation before bringing it to the floor for a vote. That will test whether enough moderate members support the compromises in the bill to overcome opposition from both hard-right Republicans and progressive Democrats.
Then it will need to pass the Senate, where it will need at least nine Republican votes to succeed. There are multiple opportunities in each chamber along the way to slow down the process.