Joe Biden and Kevin McCarthy agree on US debt ceiling

House Speaker Kevin McCarthy speaks Saturday night. Photo: AP

U.S. President Joe Biden and Kevin McCarthy, the top Republican in Congress, have reached a tentative deal to avert a possible catastrophic debt default.

Although the deal, reached overnight, ended a bitter political impasse , it has yet to put an end to the financial troubles that Janet Yellen, Treasury Secretary, has warned that it could trigger a global economic downturn.

There is pressure to get the deal through Congress by June 5, when the US runs out of money to pay its debts.

Biden called the deal «an important step forward.» and «good news for the American people because it prevents what could be a catastrophic default and lead to an economic downturn, emptying retirement accounts and losing millions of jobs.»

But, he added, the agreement requires compromise. "Not everyone gets what they want" Mr Biden said. "It is the responsibility of management"

Mr. McCarthy announced on Twitter: “I just got off the phone with the president a little while ago. After losing time and refusing to negotiate for months, we came to an agreement in principle worthy of the American people"

He said the plan would " that will lift people out of poverty and make them a labor force, curb the abuse of power".

"there are no new taxes, no new government programs, " Mr. McCarthy said.

U.S. lawmakers are debating whether to raise or suspend the $31.4 trillion debt ceiling that determines how much money the US government can legally borrow. The public debt hit its limit in January, meaning the US can no longer legally borrow money.

After months of negotiations, a tentative agreement was reached in a flood of calls Saturday night.

"Tonight we still have a lot of work to finish writing it" This Mr. McCarthy told reporters on Capitol Hill. He said he expected to finish writing the bill on Sunday ahead of Wednesday's vote.

Among the terms was a pact to cap non-defense discretionary spending at the 2023 level for one year and increase it by 1 percent in 2025, a source familiar with the agreement told Reuters.

The deal will put debt caps on hold until January 2025, as well as spending caps on the next two budgets, offsetting unused COVID funds, speeding up the approval process for some energy projects, and including some additional work requirements for food aid programs for poor Americans.

"This is historic spending cuts, incremental reforms that will lift people out of poverty and make them a workforce, curb government abuses — no new taxes, no new government programs" Mr. McCarthy said.

Republicans, who control the House of Representatives, have pushed for drastic spending cuts and other conditions and have slammed the deal as details emerged.

Mr. Biden has previously refused to negotiate with Mr. McCarthy about future spending cuts, demanding that lawmakers first pass a «clean» test. an increase in the debt ceiling without any other conditions.