Published: 10:06, May 29, 2023 | Updated: 12:45, May 29, 2023
Biden, Republicans reach debt-ceiling deal
By Ai Heping in New York

President Joe Biden shakes hands with House Speaker Kevin McCarthy of California, after the State of the Union address to a joint session of Congress at the Capitol, on Feb 7, 2023, in Washington. (PHOTO / REUTERS)

United States President Joe Biden and House Speaker Kevin McCarthy have reached an "agreement in principle" to raise the nation's legal debt ceiling to avert a possible default amid a deep partisan divide and global concerns.

Now Congress must rush to approve the spending cuts package in a matter of days to avert a potentially disastrous US default.

The agreement risks angering both Democratic and Republican sides as lawmakers on Sunday began to unpack the concessions made. Negotiators agreed to some Republican demands for increased work requirements for recipients of food stamps that had sparked an uproar from House Democrats as a nonstarter. But they stopped short of greater overall spending cuts that Republicans wanted.

Support from both parties will be needed to win congressional approval before a projected June 5 government default on US debts.

The president, a Democrat, and the speaker, a Republican, reached the agreement after the two spoke on Saturday evening by phone.

US President Joe Biden looks on as US House Speaker Kevin McCarthy (left) speaks during a meeting on the debt ceiling, in the Oval Office of the White House in Washington, on May 22, 2023. (PHOTO / AFP)

"The agreement represents a compromise, which means not everyone gets what they want," Biden said in a statement late on Saturday night. "That's the responsibility of governing," he said.

Biden called the agreement "good news" for the people of the US "because it prevents what could have been a catastrophic default and would have led to an economic recession, retirement accounts devastated and millions of jobs lost".

McCarthy said in brief remarks at the Capitol that "we still have a lot of work to do".

US President Joe Biden delivers remarks on the bipartisan budget agreement in the Roosevelt Room of the White House in Washington, DC, on May 28, 2023. (PHOTO / AFP)

With the outlines of a deal in place, the legislative package could be drafted and shared with lawmakers in time for a House vote as soon as Wednesday, and later next week in the Senate.

Central to the package is a budget deal that would hold spending flat for 2024 and increasing it by 1 percent for 2025 in exchange for raising the debt limit for two years.

The debt ceiling has been modified 102 times since World War II, according to the US Congressional Research Service.

Agencies contributed to this story.