The agreement must now be approved by Congress and risks upsetting both major political parties in the US.
President Joe Biden and House Speaker Kevin McCarthy have reached an “agreement in principle” to raise the nation's legal debt ceiling, but 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 to compromise.
Support from both parties will be needed to win congressional approval before a projected 5 June government default on US debts.
The Democratic president and Republican speaker reached the agreement after the two spoke on Saturday evening by phone.
The country and the world have been watching and waiting for a resolution to a political stand-off that threatened the US and global economies.
McCarthy in brief remarks at the Capitol said that "we still have a lot of work to do.”
The Republican speaker said: “I believe this is an agreement in principle that’s worthy of the American people.”
With the outlines of a deal in place, the legislative package could be drafted and shared with lawmakers in time for House votes as soon as Wednesday, and later next week in the Senate.
Central to the package is a two-year budget deal that would hold spending flat for 2024 and increase it by 1% for 2025 in exchange for raising the debt limit for two years, pushing the volatile political issue past the next presidential election.