Biden and McCarthy reach tentative debt ceiling deal, avoiding national default

US President Joe Biden shakes hands as he presents a copy of his speech to House Speaker Kevin McCarthy of Calif., before he delivers his State of the Union address to a joint session of Congress, on February 7, 2023 in the House Chamber of the U.S. Capitol in Washington, DC. Jacquelyn Martin-Pool/Getty Images

• The White House and Speaker Kevin McCarthy have reached an agreement in their debt ceiling talks.
• The tentative agreement would help steer the country away from a catastrophic default on its debts.
• The deal was reached after weeks of contentious negotiations in a divided Congress.

The White House and House Speaker Kevin McCarthy have reached an agreement in principle on a deal to raise the debt ceiling, a breakthrough that helps move the country away from a historic national default.

McCarthy on Saturday said that he anticipated the bill text would be publicly available on Sunday, with a vote anticipated on Wednesday. But the road for passage of legislation before June 5 remains a challenge, as the California Republican must now sell the agreement to a GOP conference filled with conservatives who for years have railed against profligate government spending. And Biden must bring Democrats onboard in a Senate controlled by his party.

"We still have a lot of work to do. But I believe this is an agreement in principle that's worthy of the American people," McCarthy said in a statement confirming the tentative agreement on Saturday evening.

"It has historic reductions in spending, consequential reforms that will lift people out of poverty into the workforce, reign in government overreach," he continued. "There are no new taxes, no new government programs. There's a lot more within the bill."

In a statement, Biden said that the agreement is "good news for the American people" and "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. And, this agreement ... 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.

The president then asked that both chambers of Congress swiftly pass the agreement.

The deal was reached after weeks of contentious partisan negotiations, the consequence of a House narrowly controlled by Republicans and a Senate with a slender Democratic edge. The GOP, spearheaded by McCarthy, has insisted that a debt ceiling raise should be tied to advancing their party's priorities through spending cuts, while Democratic lawmakers overwhelmingly pushed for a clean debt limit increase.

Republican proposals in the debt ceiling negotiations included blocking student-loan forgiveness, bolstering work requirements for welfare programs, and rescinding unspent pandemic funding, Insider previously reported.

Biden vowed to veto such a proposal if it reached his desk.

The exact details of the deal remain unclear. However, two sources confirmed to Reuters that negotiators agreed that discretionary spending would be capped at 2023 levels for two years — in exchange for a similar period of debt ceiling increases.

The agreement would help move the country away from a potential default. Defaulting on the national debt could trigger an economic recession and send the US dollar's value plummeting.

Since its introduction in 1917, the debt ceiling has been raised dozens of times to avoid such outcomes.

This story has been updated.