President Joe Biden and House Speaker Kevin McCarthy reached an “agreement in principle” late Saturday as they raced to strike a deal that to limit federal spending and resolve the looming debt crisis ahead of a June 5 deadline, a person familiar with the situation said. A deal would avert a catastrophic U.S. default.

The Democratic president and Republican speaker reached the agreement after the two spoke earlier Saturday evening by phone, said the person, who was speaking on condition of anonymity because the official was not authorized to speak publicly on the matter. T he country and the world have been watching and waiting for a resolution to 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 next week in the House and later in the Senate.

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.

“Big, thorny issues remain,” one of the top negotiators, Rep. Patrick McHenry, R-N.C., told reporters in the evening.

Some of those outstanding issues, McHenry said then, “the president and speaker have to resolve at that level.”

The Republican House speaker had gathered top allies behind closed doors 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 that bargainers were “very close.” Biden and McCarthy last met face-to-face on the matter Monday.

Their new discussion Saturday by phone came after 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.

But as another day dragged on with financial disaster looming closer, it had appeared some of the problems over policy issues that dogged talks all week remained unresolved.

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.”

They also had appeared to still be laboring over a compromise on federal permitting changes that would ease regulations for developing oil, gas and renewable energy projects and foster new transmission line connections.

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 work requirements issue.

Americans and the world were uneasily watching the negotiating brinkmanship that could throw the U.S. economy into chaos and sap world confidence in the nation’s leadership. House negotiators left the Capitol at 2 a.m. the night before, only to return hours later.

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.

The president, spending part of the weekend at Camp David, continued to talk with his negotiating team multiple times a day, signing off on offers and counteroffers. Biden was upbeat as he departed the White House on Friday evening, saying: “It’s very close, and I’m optimistic.”

All sides also are hearing from other lawmakers, including Sen. Kyrsten Sinema, the independent from Arizona, who has been in the center of big policy debates, and Rep. Josh Gottheimer, D-N.J., of the bipartisan Problem Solvers Caucus.

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. 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.

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 largely stayed out of the negotiations, leaving the talks to Biden and McCarthy. Senate Majority Leader Chuck Schumer of New York 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.

(AP)