The White House and negotiators have reached an agreement in principle to avert a default, according to people familiar with the matter. President Biden and House Speaker McCarthy held a 90-minute phone call on May 27 to discuss the deal. If approved by Congress, the deal would help the United States avoid default before the Treasury Department runs out of money to cover its expenses on June 5.

US President Joe Biden and House Speaker Kevin McCarthy. Photo: Reuters

Under the agreement, non-defense spending will remain broadly unchanged for the current fiscal year and fiscal 2024, the sources said. There is no budget cap beyond 2025. Negotiators are still working to finalize the text of the agreement.

The breakthrough came after a marathon of negotiations ahead of a June deadline to raise the debt ceiling. Both sides had previously taken a hard line on the issue. Republicans had proposed $130 billion in spending cuts, capping spending next year at 2022 levels, as a condition for reaching an agreement to raise the debt ceiling. They argued that the debt ceiling could not be raised without drastic measures to reduce the deficit, such as cutting spending on social security and limiting access to Medicaid, the health care program for the poor. The Biden administration has opposed these measures, instead proposing some spending cuts and tax increases for the wealthiest people and corporations that currently receive large tax breaks.

VNA