Debt ceiling agreement in principle reached between Democrats, Republicans

Treasury Secretary Yellen estimated the debt ceiling would have been breached June 5 without a deal

An agreement in principle was reached Saturday between House Republican leaders and the White House that would prevent the government from breaching debt ceiling and failing to meet all its obligations.

The deal would claw back some unspent COVID-19 pandemic funds and provide a cut from funding granted the IRS in President Biden's Inflation Reduction Act, multiple sources told Fox News and Fox News Digital. It would also suspend the debt limit until after the 2024 presidential election, sources said. 

House Speaker Kevin McCarthy said the deal includes cuts and language aimed at reducing the government's footprint. He said the text of the deal should be out by Sunday, and that he hopes the House can vote on it by Wednesday. 

"We still have a lot of work to do. But I believe this is an agreement in principle that's worthy of the American people. It has historic reductions in spending, consequential reforms that will lift people out of poverty into the workforce, and rein in government overreach. There are no new taxes, no new government programs. There's a lot more within the bill," McCarthy said.

MCCARTHY CITES 'PROGRESS' IN US DEBT-CEILING TALKS WITH WHITE HOUSE

President Joe Biden speaks at the LSU Tigers Championship Celebration event at the White House in Washington D.C., United States on May 26, 2023. (Celal Gunes/Anadolu Agency via Getty Images)

An internal House GOP memo that outlines messaging points for the deal says McCarthy and the White House have agreed to cut non-defense discretionary spending to fiscal 2022 levels, a key asking point for Republicans. It also claws back billions of unspent COVID-19 pandemic funds and includes permitting reform to speed up approvals for energy and infrastructure projects. 

Republican members were told on a conference call late on Saturday night that the deal also imposes a 1% growth cap on federal spending for six years, while spending for defense and veterans would go up, a source told Fox News. Lawmakers expect to be called back for a vote either Wednesday or Thursday, the source said.

However, another source familiar with the talks said both sides agreed to a two-year budget deal and to freeze non-defense discretionary spending at current fiscal 2023 levels rather than rolling it back.

A third source familiar with the details told Fox News Digital that the deal claws back $1.9 billion this year of the $80 billion in funding over ten years granted to the Internal Revenue Service in last year's Inflation Reduction Act, and that the debt limit would be suspended until January 2025.

Rep. Garret Graves, R-La., has been one of McCarthy's top negotiators (Tom Williams/CQ-Roll Call, Inc via Getty Images)

That appears to fall short of Republican goals outlined in the House GOP's Limit, Save, Grow Act, which would have raised the debt limit for about a year while rolling back the current year's spending levels by roughly $150 billion. Several House Republicans were already tweeting late Saturday night that they can't accept the deal based on the details that were emerging.

Rep. Chip Roy, R-Texas, a member of the conservative House Freedom Caucus, said online after the call with McCarthy, "I do not like the ‘deal’ as I understand it from the cheerleading so far… I will have more to follow once I see more details."

THE HITCHHIKER’S GUIDE TO WHERE WE STAND ON THE DEBT CEILING

U.S. Speaker of the House Kevin McCarthy (R-CA), joined by fellow Republican lawmakers, holds a press conference at the U.S. Capitol on March 24, 2023 in Washington, DC. McCarthy spoke after the House passed the Parents Bill of Rights Act, 213-208, sending the bill to the Senate. (Kevin Dietsch/Getty Images)

However another top hardline Republican, House Judiciary Chair Jim Jordan, R-Ohio, told members, "If I understand, for first time in US history, we’re spending less money than year before. That seems like a pretty darn good deal to me."

Republicans got their wish for tighter work requirements for some Americans on federal benefits – the applicable age for work requirements for SNAP recipients would be raised from 49 to 54, while being reduced for veterans and homeless people, among others. But those tougher work requirements would not be required for Medicaid benefits.

President Biden claimed the deal "protects" Democrats' policies but acknowledged that not everyone got what they wanted in a statement released late on Saturday night.

"It is an important step forward that reduces spending while protecting critical programs for working people and growing the economy for everyone. And, the agreement protects my and Congressional Democrats’ key priorities and legislative accomplishments. The agreement represents a compromise, which means not everyone gets what they want," Biden said

"Over the next day, our negotiating teams will finalize legislative text and the agreement will go to the United States House and Senate. I strongly urge both chambers to pass the agreement right away," he said.

McCarthy told reporters after his earlier discussion with Biden, "I just got off the phone with the president a bit ago. After he wasted time and refused to negotiate for months, we've come to an agreement in principle that is worthy of the American people," McCarthy said after his discussion with Biden.

He was due to speak with Biden again at 10:30pm tonight.

Democrats had gone into the talks pushing for a clean debt limit increase without preconditions, something Republicans made clear from the start that they would not accept.

President Biden and House Speaker Kevin McCarthy spoke at about 6 p.m. Eastern time to talk about the progress made so far, and spoke for nearly 90 minutes.