President Joe Biden and his Republican opponents have said they have agreed to raise the US debt ceiling and avoid a default.
President Joe Biden called The deal a ” compromise, ” and House Speaker Kevin McCarthy said it was “worthy of the American people.”
Even though it was worked out over weeks of tough talks, the deal still needs to be passed by a split Congress.
The Treasury has warned that the US will run out of money on June 5 without a deal.
The US government spends more than it brings in from taxes, so it has to borrow money to pay for itself.
In exchange for raising the debt limit, Republicans have asked for spending cuts in education and other social programs.
Details of the initial deal have not been made public, but CBS, the BBC’s partner in the US, said that government spending on things other than defense would stay the same for two years and then go up by 1% in 2025.
It wasn’t clear how exactly a government program that helps people with low means or no income at all buy food would change.
In a statement, President Biden called the deal a good compromise for the country “because it prevents what could have been a catastrophic default that would have caused a recession, ruined retirement accounts, and cost millions of jobs.”
Mr. McCarthy, on the other hand, talked about “historic cuts in spending and reforms that will help people get out of poverty and into the workforce.”
“There are no new taxes, and there are no new government programs,” he said.
Mr. McCarthy also said he meant to finish writing the bill on Sunday so Congress could vote on it on Wednesday.
A US default would the US economy and markets worldwide into chaos.
The US government would quickly run out of money to pay for welfare payments and other programs to help people.
Over an extended period, the problem would push the US economy into a recession, which would cause unemployment to rise.
A US slowdown would hurt many countries worldwide that trade with the US because they couldn’t sell as much to an economy that doesn’t buy as much.
And because the US dollar is the world’s primary currency, a default would cause chaos around the world and cause the prices of many goods to go up.