US President Joe Biden and House Speaker Kevin McCarthy announced late Saturday an "agreement in principle" to raise the debt limit and avoid a "catastrophic default."
Biden said the agreement protects his and congressional Democrats' priorities, and "is an important step forward that reduces spending while protecting critical programs for working people and growing the economy for everyone."
"The agreement represents a compromise, which means not everyone gets what they want. That's the responsibility of governing," he said in a statement.
"This agreement is good news for the American people, because it prevents what could have been a catastrophic default and would have led to an economic recession, retirement accounts devastated, and millions of jobs lost," he added.
Teams from the White House and Congress will work Sunday to finalize the agreement's language ahead of an expected vote in the House of Representatives and the Senate next week.
Speaking to reporters at the Capitol, McCarthy said: "This is an agreement in principle that's worthy of the American people," adding it will not raise taxes and includes "historic reductions in government spending."
A vote is expected in the House on Wednesday, according to the speaker.
Treasury Secretary Janet Yellen said Friday that the US will run out of money to pay its financial obligations by June 5.
"We have learned from past debt limit impasses that waiting until the last minute to suspend or increase the debt limit can cause serious harm to business and consumer confidence, raise short-term borrowing costs for taxpayers, and negatively impact the credit rating of the United States," she wrote in a letter to McCarthy.
The debt limit was actually hit in January, but the Treasury Department has taken steps to ensure the US continues to pay its bill in the months since.
Yellen said the latest effort occurred Thursday when the agency carried out a $2 billion swap of Treasury securities between the Civil Service Retirement and Disability Fund and the Federal Financing Bank.
