Biden, McCarthy reach tentative debt ceiling deal

US Democratic President Joe Biden and Republican House Speaker Kevin McCarthy reached a tentative deal to raise the nation's debt ceiling, McCarthy said in a statement. A negotiating team is now working on finalizing the text of the deal.

McCarthy: We made a deal 'in principle' with the White House

"I just got off the phone with the president a bit ago. After he wasted time and refused to negotiate for months, we've come to an agreement in principle that is worthy of the American people," he wrote in a post on Twitter.

Speaking to the media minutes later, McCarthy said the bill has "historic reductions in spending, consequential reforms, will lift people out of poverty into the workforce and reign in government overreach." His words indicate that Democrats have likely given into some Republican demands in order to reach an agreement.

"The are no new taxes, no new government programs, there's a lot more within the bill," McCarthy said, without giving more details as he was yet to brief other members of the House. He expects Congress to vote on the bill on Wednesday.

The two leaders came to an agreement on Saturday evening, having spoken over the phone earlier that day, a person familiar with the matter told AP news agency.

This comes after a long standoff as both Democrats and Republicans played hardball in the final race for a deal ahead of a critical June 5 deadline. Reaching a deal was imperative for the US to avoid a downgraded credit rating, likely recession and potentially millions of job losses.

US Republicans have been vying for a two-year budget deal that would hold spending flat for 2024 and impose limits for 2025 in exchange for raising the debt limit for two years, pushing the volatile political issue past the next presidential election.

Democrats, on the other hand, were adamant that the ceiling should be raised without any strings attached.

What is the US debt ceiling?

The UD Congress first introduced the debt ceiling — the upper limit of money that the government could borrow — in 1917. The measure meant the government no longer needed approval from lawmakers over every debt issued. The Public Debt Acts were subsequently passed in 1939 and 1941.

Over the past seven decades, the debt ceiling has been raised a whopping 78 times, including in 2011 when the delay in agreeing to a new limit resulted in the US losing its coveted AAA credit rating, sparking an increase in borrowing costs.

While the US government has not defaulted on its payments yet, crossing the deadline without raising the debt ceiling would mean that it has run out of money to make basic payments, including salaries of tens of millions of public sector workers, such as teachers.

Social Security payments and healthcare subsidies to older and vulnerable Americans, including military veterans, would also be put on hold.