Last Updated on May 28, 2023 by Bitfinsider

President Joe Biden and Republican congressional leader Kevin McCarthy reached a tentative agreement to suspend the federal government’s $31.4 trillion debt ceiling, resolving a months-long impasse.

However, the agreement was disclosed without any fanfare, reflecting the contentious nature of the negotiations and the arduous path it must take through Congress before the United States runs out of money to pay its debts in early June.

“I have just gotten off the phone with the president. “After months of him wasting time and refusing to negotiate, we’ve reached a worthy agreement in principle for the American people,” McCarthy tweeted.

In a statement, Biden referred to the agreement as “an important step forward” and said, “The agreement represents a compromise, which means that not everyone receives what they want. This is the obligation of government.”

The agreement would suspend the debt ceiling until January 2025, while capping spending in the 2024 and 2025 budgets, recouping unused COVID funds, accelerating the permitting process for some energy projects, and imposing additional work requirements for food assistance programs for impoverished Americans.

After months of negotiation, the provisional agreement was reached in a flurry of phone calls. Biden and McCarthy discussed the agreement over a 90-minute phone call on Saturday evening, McCarthy briefed his members later that evening, and the White House and the House leader then spoke.

McCarthy told reporters on Capitol Hill, “We have more work to do tonight in order to complete the writing.” McCarthy stated that he expects to complete drafting the measure on Sunday, then speak with Vice President Biden and vote on the agreement on Wednesday.

Biden and McCarthy must find a compromise that can pass the House with its 222-213 Republican majority and the Senate with its 51-49 Democratic majority, requiring bipartisan support before the president can approve the bill.

A source familiar with the agreement stated that negotiators have agreed to cap non-defense discretionary spending at 2023 levels for one year and increase it by 1% in 2025.

“It has historic spending cuts, reforms that will lift people out of poverty and into the workforce, and reins in government overreach,” McCarthy said. “There are no new taxes or new government programs.”

The agreement will prevent an economically destabilizing default if it is approved by a narrowly divided Congress before the Treasury Department runs out of money to cover all its obligations on June 5, which it warned would occur if the debt ceiling issue is not resolved by then.