WASHINGTON -- President Joe Biden and House Speaker Kevin McCarthy reached an "agreement in principle" late Saturday as they raced to strike a deal to limit federal spending and resolve the looming debt crisis ahead of a June 5 deadline, the House speaker said.
A deal would avert a catastrophic U.S. default, but risks angering both Democratic and Republican sides with the concessions made to reach it.
The Democratic president and Republican speaker reached the agreement after the two spoke earlier Saturday evening by phone, said McCarthy, speaking Saturday night. The country and the world have been watching and waiting for a resolution to a political standoff that threatened the U.S. and global economy.
With the outlines of a deal in place, the legislative package could be drafted and shared with lawmakers in time for votes early this week in the House and later in the Senate.
Central to the package is a two-year budget deal that would hold spending flat for 2024 and impose limits for 2025 in exchange for raising the debt limit for two years, pushing the volatile political issue past the next presidential election.
Negotiators agreed to some Republican demands for enhanced work requirements on recipients of food stamps that had sparked an uproar from House Democrats as a nonstarter.
Biden also spoke earlier in the day with Democratic leaders in Congress to discuss the status of the talks, according to three people familiar with the situation, who spoke on condition of anonymity because they were not authorized to discuss the matter publicly.
The Republican House speaker had gathered top allies privately at the Capitol as negotiators pushed for a deal that would raise the nation's borrowing limit and avoid a first-ever default on the federal debt, while also making spending cuts that House Republicans are demanding.
As he arrived at the Capitol early in the day, McCarthy said that Republican negotiators were "closer to an agreement."
McCarthy's comments had echoed the latest public assessment from Biden, who said Friday evening bargainers were "very close." Biden and McCarthy last met face-to-face Monday.
Their new discussion came as Treasury Secretary Janet Yellen told Congress that the United States could default on its debt obligations by June 5 -- four days later than previously estimated -- if lawmakers do not act in time to raise the federal debt ceiling. The extended "X-date" gives the two sides a bit of extra time as they scramble for a deal.
Both sides have suggested one of the main holdups is a GOP effort to expand existing work requirements for recipients of food stamps and other federal aid programs, a longtime Republican goal that Democrats have strenuously opposed. The White House said the Republican proposals were "cruel and senseless."
McCarthy, who dashed out before the lunch hour Saturday and arrived back at the Capitol with a big box of takeout, declined to elaborate on those discussions. One of his negotiators, Louisiana Rep. Garret Graves, said there was "not a chance" that Republicans might relent on the issue.
Biden, however, was upbeat as he departed for Camp David on Friday evening, saying: "It's very close, and I'm optimistic."
Failure to lift the borrowing limit, now $31 trillion, to pay the nation's incurred bills would send shockwaves through the U.S. and global economy. Yellen said failure to act by the new date would "cause severe hardship to American families, harm our global leadership position and raise questions about our ability to defend our national security interests."
Anxious retirees and others were already making contingency plans for missed checks, with the next Social Security payments due next week.
Biden and McCarthy have seemed to be narrowing on a two-year budget-cutting deal that would also extend the debt limit into 2025 past the next presidential election. The contours of the deal have been taking shape to cut spending for 2024 and impose a 1% cap on spending growth for 2025.
Rep. Patrick McHenry, R-N.C., one of the lead negotiators, told reporters earlier Saturday on Capitol Hill that the parties were either "hours or days" away from an agreement.
"I think we're all tired," said McHenry, who has been involved in negotiations for 11 days. "But that doesn't mean that we're willing to just take something that we think is not acceptable. Our House Republican members expect for us to fight for a good deal."
Rep. Tom Emmer of Minnesota, the Republican whip who is in charge of counting the votes from McCarthy's slim majority to ensure passage of any deal, said he is telling rank-and-file lawmakers not to believe what they're hearing until party leaders deliver the news about any deal.
Any deal would need to be a political compromise in a divided Congress. Many of the hard-right Trump-aligned Republicans in Congress have long been skeptical of the Treasury's projections, and they are pressing McCarthy to hold out.
"We're constantly in touch with our members, letting them know that what is being reported, you should not accept that," Emmer said. "If there's an agreement, we will let them know."
The Republican proposal on work requirements would save $11 billion over 10 years by raising the maximum age for existing standards that require able-bodied adults who do not live with dependents to work or attend training programs.
Current law applies those standards to recipients under the age of 50. The GOP plan would raise the age to include adults 55 and under. It would lower the number of exemptions that states can grant to some recipients subject to those requirements.
Biden has said the work requirements for Medicaid would be a nonstarter. He initially seemed potentially open to negotiating minor changes on food stamps, now known as the Supplemental Nutrition Assistance Program, or SNAP, but his position has appeared to harden.
The deal was structured with the aim of enticing votes from both parties, although it would most likely draw the ire not only of conservative Republicans but also Democrats furious at being asked to vote for cuts they oppose with the threat of default looming.
Still, it gives Republicans the ability to say that they succeeded in reducing some federal spending -- even as funding for the military and veterans' programs would continue to grow -- while allowing Democrats to say they spared most domestic programs from significant cuts.
Lawmakers are not expected to return to work from the Memorial Day weekend before Tuesday, at the earliest, and McCarthy has promised lawmakers he will abide by the rule to post any bill for 72 hours before voting.
The Democratic-held Senate has stayed out of the negotiations, leaving the talks to Biden and McCarthy. Senate Majority Leader Charles Schumer, D-N.Y., has pledged to move quickly to send a compromise package to Biden's desk.
Weeks of talks have failed to produce a deal in part because the Biden administration resisted for months on negotiating with McCarthy, arguing that the country's full faith and credit should not be used as leverage to extract other partisan priorities.
But House Republicans united behind a plan to cut spending, narrowly passing legislation in late April that would raise the debt ceiling in exchange for the spending reductions.
On Saturday, lawmakers from the ultraconservative House Freedom Caucus produced a document Saturday that said the deal under consideration would raise the national debt by $4 trillion and abandon all but a few Republican demands.
"Utter capitulation in progress. By the side holding the cards," fumed Rep. Dan Bishop, R-N.C., a member of the caucus.
Information for this article was contributed by Mary Clare Jalonick, Lisa Mascaro, Stephen Groves, Fatima Hussein, Kevin Freking, Farnoush Amiri, Seung Min Kim and Rick Gentilo of The Associated Press and by Luke Broadwater, Peter Baker and Jim Tankersley of The New York Times.