Amid growing concerns of a potential default by early June, the United States president Joe Biden and Republican Kevin McCarthy have reportedly reached an “agreement in principle” to raise the federal government’s multi-trillion dollar debt ceiling.

According to a May 28 report from Reuters, citing two sources familiar with the negotiations, the “tentative” agreement to raise the U.S. government’s $31.4 trillion debt ceiling was reached after a 90-minute phone call between Biden and McCarthy on May 27.

It was reported that while “the exact details of the deal were not immediately available,” an agreement has been made to limit the U.S. government’s spending for the next two years, excluding expenses related to national security. 

“Negotiators have agreed to cap non-defense discretionary spending at 2023 levels for two years, in exchange for a debt ceiling increase over a similar period” according to the sources.

This comes only weeks after U.S. Treasury Secretary Janet Yellen warned of a default risk as soon as June 1 if the debt limit isn’t suspended or raised, urging Congress to “as as soon as possible.”

Additionally, The U.S. Congressional Budget Office (CBO) published a report on May 12, emphasizing that if the debt limit remains unchanged, there is a significant risk “that at some point in the first two weeks of June, the government will no longer be able to pay all of its obligations.”

One of the sources reportedly emphasized that the “agreement in principle” still has a few components to be finalized, stating:

“But, I’m not sure it’s completely settled. Might be one or two small things they need to finish. But close enough to move forward.”

It was reported that the deal must pass through Congress before the Treasury “runs short of money.” It was warned on May 26 that a default will occur if the debt limit is not raised by June 5. 

This is a developing story, and further information will be added as it becomes available.

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