White House, Republicans reach deal on debt limit

Tentative agreement still needs to tread difficult path in Congress

Editor's note: The White House and Republicans have reached an "agreement in principle" to raise the US debt ceiling to avert a possible default amid partisan rancor and deep global concerns. This page looks at the gains and losses for both sides and the next hurdle the government needs to clear.

The White House and Republican negotiators have reportedly reached an agreement in principle to raise the US debt limit for two years, amid a deep partisan divide and a difficult path it has to pass through Congress.

The two sides agreed to cut and cap some government spending over the same period to raise the country's $31.4 trillion debt ceiling by June 5 to avert a potentially catastrophic default, dragging the United States back from the precipice of default.

However, when the deal was announced on Saturday it was done without fanfare, in terms that reflected the bitter tenor of the negotiations and the difficult path it has to pass through Congress before the US runs out of money to pay its debts, Reuters reported.

The agreement includes spending cuts demanded by Republicans, but it is short of the reductions in the sweeping legislation passed by the Republican-led House last month, The Associated Press reported.

It came after the credit rating agency Fitch announced last week that it had placed the US AAA-rated long-term foreign-currency issuer default rating on a "negative watch "as the debt ceiling crisis unfolded.

The deal agreed to would, in effect, freeze federal spending and had the approval of President Joe Biden and the House of Representatives Speaker Kevin McCarthy, according to The New York Times, The Washington Post and Politico. The two spoke by phone on Saturday evening to resolve final sticking points, White House sources said.

Any deal still faces tough votes in the House and Senate before June 5, when the Treasury is projected to run out of money to pay its obligations. As the Treasury Department's remaining funds dwindle, investors continue preparing for what would be an unprecedented government failure to meet its financial obligations.

Passage in the House where Republicans hold a narrow majority is not a sure thing because very conservative GOP members had demanded significantly larger budget cuts in return for lifting the borrowing limit and could reject the agreement.

Biden spoke earlier on Saturday with Democratic leaders in Congress, according to media reports. He was expected to be at the presidential retreat Camp David, Maryland, until Sunday and then at his home in Wilmington, Delaware.

McCarthy told reporters on Saturday morning that negotiators had made progress toward a deal, but "are not there yet".

"I'm not fearful of this bill. Now is it everything I wanted? No, it has to pass the Senate and get signed by the president."