By Brad Brooks and Maria Caspani

LUBBOCK, Texas (Reuters) -The Texas House on Saturday voted to impeach Attorney General Ken Paxton, a conservative firebrand and ally of former President Donald Trump who has been accused by his fellow Republicans of abuse of office.

In historic proceedings, the 149-member House voted 121-23 to impeach Paxton after hours of debate during which the chamber heard speeches from supporters and opponents of impeachment. Two members were present but not voting while three were absent.

Paxton will now be temporarily removed from office pending a trial in the Senate, where his wife, Angela Paxton, is a senator. The Texas Senate is in recess until 1 p.m. CDT (1800 GMT) on Sunday, according to its website.

Paxton has denied the accusations and denounced the proceedings as “illegal, unethical, and profoundly unjust” in a statement on Twitter after Saturday’s vote.

“I look forward to a quick resolution in the Texas Senate, where I have full confidence the process will be fair and just,” he said.

In a message on his social media channel Truth Social ahead of the vote, Trump, who is seeking re-election in 2024, vowed to “fight” Texas House Republicans if Paxton were to be impeached.

The 20 articles of impeachment presented by a Republican-led House committee accuse Paxton of improperly aiding a wealthy political donor, conducting a sham investigation against whistleblowers in his office whom he fired, and covering up his wrongdoing in a separate federal securities fraud case against him, among other offenses.

Paxton’s impeachment proceedings laid bare the rift among Texas Republicans. Some spoke passionately in support of impeaching the state’s top law enforcement official.

“Attorney General Paxton continuously and blatantly violated laws, rules, policies and procedures,” Representative David Spiller said ahead of the vote.

Others vehemently opposed it. John Smithee, a long-serving conservative member of the chamber, said he was not speaking in Paxton’s defense but criticized the process and said there was insufficient evidence.

“There is not word, not one sentence in the testimony before you that would be admissible in any Texas court of law,” Smithee said. “It is hearsay within hearsay within hearsay.”

Paxton has staked out a position on the far right on divisive cultural issues. He has sued the Biden administration nearly 50 times attempting to halt what has he labeled as “unlawful tyrannical policies” on issues including immigration, gun rights and business regulation.

The five-member Texas House General Investigating Committee voted unanimously on Thursday to recommend that Paxton be impeached and removed from office.

Paxton easily won re-election last year after fending off a Republican primary challenge from George P. Bush, a scion of two former presidents.

The committee has heard testimony from its investigators about several years of alleged abuse of office by Paxton, including that he provided friend and donor Nate Paul, a Texas real estate developer, with FBI files related to the bureau’s investigation into Paul.

The impeachment articles also allege Paxton engaged in bribery when Paul hired a woman with whom Paxton was having an extramarital affair.

(Reporting by Brad Brooks in Lubbock, Texas, Daniel Trotta in Carlsbad, California, and Maria Caspani in New York; Editing by Tom Hogue, David Gregorio and Daniel Wallis)

By Steve Holland, Gram Slattery and Katharine Jackson

WASHINGTON (Reuters) -U.S. President Joe Biden and top congressional Republican Kevin McCarthy have reached a tentative deal to raise the federal government’s $31.4 trillion debt ceiling, ending a months-long stalemate.

However, the deal was described in terms that indicated it may not be absolute, and without any celebration — an indication of the bitter tenor of the negotiations, and the difficult path it has to pass through Congress before the United States runs out of money to pay its debts in early June.

“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 tweeted.

The deal would raise the debt limit for two years while capping spending over that time, and includes some extra work requirements for programs for the poor.

Biden and McCarthy held a 90-minute phone call earlier on Saturday evening to discuss the deal.

“We still have more work to do tonight to finish the writing of it,” McCarthy told reporters on Capitol Hill. McCarthy said he expects to finish writing the bill Sunday, then speak to Biden and have a vote on the deal on Wednesday.

The deal will avert an economically destabilizing default, so long as they succeed in passing it through the narrowly divided Congress before the Treasury Department runs short of money to cover all its obligations, which it warned Friday will occur if the debt ceiling is not raised by June 5.

Republicans who control the House of Representatives have pushed for steep cuts to spending and other conditions, including new work requirements on some benefit programs for low-income Americans and for funds to be stripped from the Internal Revenue Service, the U.S. tax agency.

They said they want to slow the growth of the U.S. debt, which is now roughly equal to the annual output of the country’s economy.

Negotiators have agreed to cap non-defense discretionary spending at 2023 levels for one year and increase it by 1% in 2025, sources said.

The two sides have to carefully thread the needle in finding a compromise that can clear the House, with a 222-213 Republican majority, and Senate, with a 51-49 Democratic majority.

One high-ranking member of the hardline House Freedom Caucus said they were in the process of gauging member sentiment, and unsure what the vote numbers might be.

The long standoff spooked financial markets, weighing on stocks and forcing the United States to pay record-high interest rates in some bond sales. A default would take a far heavier toll, economists say, likely pushing the nation into recession, shaking the world economy and leading to a spike in unemployment.

Biden for months refused to negotiate with McCarthy over future spending cuts, demanding that lawmakers first pass a “clean” debt-ceiling increase free of other conditions, and present a 2024 budget proposal to counter his issued in March. Two-way negotiations between Biden and McCarthy began in earnest on May 16.

Democrats accused Republicans of playing a dangerous game of brinkmanship with the economy. Republicans say recent increased government spending is fueling the growth of the U.S. debt, which is now roughly equal to the annual output of the economy.

The last time the nation got this close to default was in 2011, when Washington also had a Democratic president and Senate and a Republican-led House.

Congress eventually averted default, but the economy endured heavy shocks, including the first-ever downgrade of the United States’ top-tier credit rating and a major stock sell-off.

The work to raise the debt ceiling is far from done. McCarthy has vowed to give House members 72 hours to read the legislation before bringing it to the floor for a vote. That will test whether enough moderate members support the compromises in the bill to overcome opposition from both hard-right Republicans and progressive Democrats.

Then it will need to pass the Senate, where it will need at least nine Republican votes to succeed. There are multiple opportunities in each chamber along the way to slow down the process.

The two sides had struggled to find common ground on spending levels. Republicans had pushed for an 8% cut to discretionary spending in the next fiscal year, followed by annual increases of 1% for several years.

Biden had proposed keeping spending flat in the 2024 fiscal year, which starts Oct. 1, and raising it 1% the year after that. He also had called for closing some tax loopholes, which Republicans rejected.

(Reporting by Moira Warburton, Steve Holland and Katharine Jackson; Writing by Andy Sullivan; Editing by Scott Malone, Frances Kerry, Daniel Wallis, Heather Timmons)

By Steve Holland, Gram Slattery and Katharine Jackson

WASHINGTON (Reuters) -U.S. President Joe Biden and top congressional Republican Kevin McCarthy have reached a tentative deal to raise the federal government’s $31.4 trillion debt ceiling, ending a months-long stalemate.

However, the deal was described in terms that indicated it may not be absolute, and without any celebration — an indication of the bitter tenor of the negotiations, and the difficult path it has to pass through Congress before the United States runs out of money to pay its debts in early June.

“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 tweeted.

The deal would raise the debt limit for two years while capping spending over that time, and includes some extra work requirements for programs for the poor.

Biden and McCarthy held a 90-minute phone call earlier on Saturday evening to discuss the deal.

“We still have more work to do tonight to finish the writing of it,” McCarthy told reporters on Capitol Hill. McCarthy said he expects to finish writing the bill Sunday, then speak to Biden and have a vote on the deal on Wednesday.

The deal will avert an economically destabilizing default, so long as they succeed in passing it through the narrowly divided Congress before the Treasury Department runs short of money to cover all its obligations, which it warned Friday will occur if the debt ceiling is not raised by June 5.

Republicans who control the House of Representatives have pushed for steep cuts to spending and other conditions, including new work requirements on some benefit programs for low-income Americans and for funds to be stripped from the Internal Revenue Service, the U.S. tax agency.

They said they want to slow the growth of the U.S. debt, which is now roughly equal to the annual output of the country’s economy.

Negotiators have agreed to cap non-defense discretionary spending at 2023 levels for one year and increase it by 1% in 2025, sources said.

The two sides have to carefully thread the needle in finding a compromise that can clear the House, with a 222-213 Republican majority, and Senate, with a 51-49 Democratic majority.

One high-ranking member of the hardline House Freedom Caucus said they were in the process of gauging member sentiment, and unsure what the vote numbers might be.

The long standoff spooked financial markets, weighing on stocks and forcing the United States to pay record-high interest rates in some bond sales. A default would take a far heavier toll, economists say, likely pushing the nation into recession, shaking the world economy and leading to a spike in unemployment.

Biden for months refused to negotiate with McCarthy over future spending cuts, demanding that lawmakers first pass a “clean” debt-ceiling increase free of other conditions, and present a 2024 budget proposal to counter his issued in March. Two-way negotiations between Biden and McCarthy began in earnest on May 16.

Democrats accused Republicans of playing a dangerous game of brinkmanship with the economy. Republicans say recent increased government spending is fueling the growth of the U.S. debt, which is now roughly equal to the annual output of the economy.

The last time the nation got this close to default was in 2011, when Washington also had a Democratic president and Senate and a Republican-led House.

Congress eventually averted default, but the economy endured heavy shocks, including the first-ever downgrade of the United States’ top-tier credit rating and a major stock sell-off.

The work to raise the debt ceiling is far from done. McCarthy has vowed to give House members 72 hours to read the legislation before bringing it to the floor for a vote. That will test whether enough moderate members support the compromises in the bill to overcome opposition from both hard-right Republicans and progressive Democrats.

Then it will need to pass the Senate, where it will need at least nine Republican votes to succeed. There are multiple opportunities in each chamber along the way to slow down the process.

The two sides had struggled to find common ground on spending levels. Republicans had pushed for an 8% cut to discretionary spending in the next fiscal year, followed by annual increases of 1% for several years.

Biden had proposed keeping spending flat in the 2024 fiscal year, which starts Oct. 1, and raising it 1% the year after that. He also had called for closing some tax loopholes, which Republicans rejected.

(Reporting by Moira Warburton, Steve Holland and Katharine Jackson; Writing by Andy Sullivan; Editing by Scott Malone, Frances Kerry, Daniel Wallis, Heather Timmons)

By Steve Holland, Gram Slattery and Katharine Jackson

WASHINGTON (Reuters) -U.S. President Joe Biden and top congressional Republican Kevin McCarthy have reached a tentative deal to raise the federal government’s $31.4 trillion debt ceiling, ending a months-long stalemate.

However, the deal was described in terms that indicated it may not be absolute, and without any celebration — an indication of the bitter tenor of the negotiations, and the difficult path it has to pass through Congress before the United States runs out of money to pay its debts in early June.

“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 tweeted.

The deal would raise the debt limit for two years while capping spending over that time, and includes some extra work requirements for programs for the poor.

Biden and McCarthy held a 90-minute phone call earlier on Saturday evening to discuss the deal.

“We still have more work to do tonight to finish the writing of it,” McCarthy told reporters on Capitol Hill. McCarthy said he expects to finish writing the bill Sunday, then speak to Biden and have a vote on the deal on Wednesday.

The deal will avert an economically destabilizing default, so long as they succeed in passing it through the narrowly divided Congress before the Treasury Department runs short of money to cover all its obligations, which it warned Friday will occur if the debt ceiling is not raised by June 5.

Republicans who control the House of Representatives have pushed for steep cuts to spending and other conditions, including new work requirements on some benefit programs for low-income Americans and for funds to be stripped from the Internal Revenue Service, the U.S. tax agency.

They said they want to slow the growth of the U.S. debt, which is now roughly equal to the annual output of the country’s economy.

Negotiators have agreed to cap non-defense discretionary spending at 2023 levels for one year and increase it by 1% in 2025, sources said.

The two sides have to carefully thread the needle in finding a compromise that can clear the House, with a 222-213 Republican majority, and Senate, with a 51-49 Democratic majority.

One high-ranking member of the hardline House Freedom Caucus said they were in the process of gauging member sentiment, and unsure what the vote numbers might be.

The long standoff spooked financial markets, weighing on stocks and forcing the United States to pay record-high interest rates in some bond sales. A default would take a far heavier toll, economists say, likely pushing the nation into recession, shaking the world economy and leading to a spike in unemployment.

Biden for months refused to negotiate with McCarthy over future spending cuts, demanding that lawmakers first pass a “clean” debt-ceiling increase free of other conditions, and present a 2024 budget proposal to counter his issued in March. Two-way negotiations between Biden and McCarthy began in earnest on May 16.

Democrats accused Republicans of playing a dangerous game of brinkmanship with the economy. Republicans say recent increased government spending is fueling the growth of the U.S. debt, which is now roughly equal to the annual output of the economy.

The last time the nation got this close to default was in 2011, when Washington also had a Democratic president and Senate and a Republican-led House.

Congress eventually averted default, but the economy endured heavy shocks, including the first-ever downgrade of the United States’ top-tier credit rating and a major stock sell-off.

The work to raise the debt ceiling is far from done. McCarthy has vowed to give House members 72 hours to read the legislation before bringing it to the floor for a vote. That will test whether enough moderate members support the compromises in the bill to overcome opposition from both hard-right Republicans and progressive Democrats.

Then it will need to pass the Senate, where it will need at least nine Republican votes to succeed. There are multiple opportunities in each chamber along the way to slow down the process.

The two sides had struggled to find common ground on spending levels. Republicans had pushed for an 8% cut to discretionary spending in the next fiscal year, followed by annual increases of 1% for several years.

Biden had proposed keeping spending flat in the 2024 fiscal year, which starts Oct. 1, and raising it 1% the year after that. He also had called for closing some tax loopholes, which Republicans rejected.

(Reporting by Moira Warburton, Steve Holland and Katharine Jackson; Writing by Andy Sullivan; Editing by Scott Malone, Frances Kerry, Daniel Wallis, Heather Timmons)

By Steve Holland, Gram Slattery and Katharine Jackson

WASHINGTON (Reuters) -U.S. President Joe Biden and top congressional Republican Kevin McCarthy have reached a tentative deal to raise the federal government’s $31.4 trillion debt ceiling, ending a months-long stalemate.

However, the deal was described in terms that indicated it may not be absolute, and without any celebration — an indication of the bitter tenor of the negotiations, and the difficult path it has to pass through Congress before the United States runs out of money to pay its debts in early June.

“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 tweeted.

The deal would raise the debt limit for two years while capping spending over that time, and includes some extra work requirements for programs for the poor.

Biden and McCarthy held a 90-minute phone call earlier on Saturday evening to discuss the deal.

“We still have more work to do tonight to finish the writing of it,” McCarthy told reporters on Capitol Hill. McCarthy said he expects to finish writing the bill Sunday, then speak to Biden and have a vote on the deal on Wednesday.

The deal will avert an economically destabilizing default, so long as they succeed in passing it through the narrowly divided Congress before the Treasury Department runs short of money to cover all its obligations, which it warned Friday will occur if the debt ceiling is not raised by June 5.

Republicans who control the House of Representatives have pushed for steep cuts to spending and other conditions, including new work requirements on some benefit programs for low-income Americans and for funds to be stripped from the Internal Revenue Service, the U.S. tax agency.

They said they want to slow the growth of the U.S. debt, which is now roughly equal to the annual output of the country’s economy.

Negotiators have agreed to cap non-defense discretionary spending at 2023 levels for one year and increase it by 1% in 2025, sources said.

The two sides have to carefully thread the needle in finding a compromise that can clear the House, with a 222-213 Republican majority, and Senate, with a 51-49 Democratic majority.

One high-ranking member of the hardline House Freedom Caucus said they were in the process of gauging member sentiment, and unsure what the vote numbers might be.

The long standoff spooked financial markets, weighing on stocks and forcing the United States to pay record-high interest rates in some bond sales. A default would take a far heavier toll, economists say, likely pushing the nation into recession, shaking the world economy and leading to a spike in unemployment.

Biden for months refused to negotiate with McCarthy over future spending cuts, demanding that lawmakers first pass a “clean” debt-ceiling increase free of other conditions, and present a 2024 budget proposal to counter his issued in March. Two-way negotiations between Biden and McCarthy began in earnest on May 16.

Democrats accused Republicans of playing a dangerous game of brinkmanship with the economy. Republicans say recent increased government spending is fueling the growth of the U.S. debt, which is now roughly equal to the annual output of the economy.

The last time the nation got this close to default was in 2011, when Washington also had a Democratic president and Senate and a Republican-led House.

Congress eventually averted default, but the economy endured heavy shocks, including the first-ever downgrade of the United States’ top-tier credit rating and a major stock sell-off.

The work to raise the debt ceiling is far from done. McCarthy has vowed to give House members 72 hours to read the legislation before bringing it to the floor for a vote. That will test whether enough moderate members support the compromises in the bill to overcome opposition from both hard-right Republicans and progressive Democrats.

Then it will need to pass the Senate, where it will need at least nine Republican votes to succeed. There are multiple opportunities in each chamber along the way to slow down the process.

The two sides had struggled to find common ground on spending levels. Republicans had pushed for an 8% cut to discretionary spending in the next fiscal year, followed by annual increases of 1% for several years.

Biden had proposed keeping spending flat in the 2024 fiscal year, which starts Oct. 1, and raising it 1% the year after that. He also had called for closing some tax loopholes, which Republicans rejected.

(Reporting by Moira Warburton, Steve Holland and Katharine Jackson; Writing by Andy Sullivan; Editing by Scott Malone, Frances Kerry, Daniel Wallis, Heather Timmons)

By Steve Holland, Gram Slattery and Katharine Jackson

WASHINGTON (Reuters) -U.S. President Joe Biden and top congressional Republican Kevin McCarthy have reached a tentative deal to raise the federal government’s $31.4 trillion debt ceiling, ending a months-long stalemate.

However, the deal was described in terms that indicated it may not be absolute, and without any celebration — an indication of the bitter tenor of the negotiations, and the difficult path it has to pass through Congress before the United States runs out of money to pay its debts in early June.

“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 tweeted.

The deal would raise the debt limit for two years while capping spending over that time, and includes some extra work requirements for programs for the poor.

Biden and McCarthy held a 90-minute phone call earlier on Saturday evening to discuss the deal.

“We still have more work to do tonight to finish the writing of it,” McCarthy told reporters on Capitol Hill. McCarthy said he expects to finish writing the bill Sunday, then speak to Biden and have a vote on the deal on Wednesday.

The deal will avert an economically destabilizing default, so long as they succeed in passing it through the narrowly divided Congress before the Treasury Department runs short of money to cover all its obligations, which it warned Friday will occur if the debt ceiling is not raised by June 5.

Republicans who control the House of Representatives have pushed for steep cuts to spending and other conditions, including new work requirements on some benefit programs for low-income Americans and for funds to be stripped from the Internal Revenue Service, the U.S. tax agency.

They said they want to slow the growth of the U.S. debt, which is now roughly equal to the annual output of the country’s economy.

Negotiators have agreed to cap non-defense discretionary spending at 2023 levels for one year and increase it by 1% in 2025, sources said.

The two sides have to carefully thread the needle in finding a compromise that can clear the House, with a 222-213 Republican majority, and Senate, with a 51-49 Democratic majority.

One high-ranking member of the hardline House Freedom Caucus said they were in the process of gauging member sentiment, and unsure what the vote numbers might be.

The long standoff spooked financial markets, weighing on stocks and forcing the United States to pay record-high interest rates in some bond sales. A default would take a far heavier toll, economists say, likely pushing the nation into recession, shaking the world economy and leading to a spike in unemployment.

Biden for months refused to negotiate with McCarthy over future spending cuts, demanding that lawmakers first pass a “clean” debt-ceiling increase free of other conditions, and present a 2024 budget proposal to counter his issued in March. Two-way negotiations between Biden and McCarthy began in earnest on May 16.

Democrats accused Republicans of playing a dangerous game of brinkmanship with the economy. Republicans say recent increased government spending is fueling the growth of the U.S. debt, which is now roughly equal to the annual output of the economy.

The last time the nation got this close to default was in 2011, when Washington also had a Democratic president and Senate and a Republican-led House.

Congress eventually averted default, but the economy endured heavy shocks, including the first-ever downgrade of the United States’ top-tier credit rating and a major stock sell-off.

The work to raise the debt ceiling is far from done. McCarthy has vowed to give House members 72 hours to read the legislation before bringing it to the floor for a vote. That will test whether enough moderate members support the compromises in the bill to overcome opposition from both hard-right Republicans and progressive Democrats.

Then it will need to pass the Senate, where it will need at least nine Republican votes to succeed. There are multiple opportunities in each chamber along the way to slow down the process.

The two sides had struggled to find common ground on spending levels. Republicans had pushed for an 8% cut to discretionary spending in the next fiscal year, followed by annual increases of 1% for several years.

Biden had proposed keeping spending flat in the 2024 fiscal year, which starts Oct. 1, and raising it 1% the year after that. He also had called for closing some tax loopholes, which Republicans rejected.

(Reporting by Moira Warburton, Steve Holland and Katharine Jackson; Writing by Andy Sullivan; Editing by Scott Malone, Frances Kerry, Daniel Wallis, Heather Timmons)

(Reuters) – A deal reached to raise the U.S. federal government’s $31.4 trillion debt ceiling keeps non-defense spending roughly flat for current fiscal year and 2024, a source familiar with the negotiations said on Saturday,

There are no budget caps after 2025 in the U.S. debt deal, the source added.

(Reporting by Steve Holland; Editing by David Gregorio)

WASHINGTON (AP) — President Joe Biden and House Speaker Kevin McCarthy spoke directly Saturday evening as they raced to strike an agreement that would resolve the looming debt crisis ahead of a June 5 deadline and avert a catastrophic U.S. default.

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. But the two sides have not reached a deal yet.

“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 he said “the president and speaker have to resolve at that level.”

The Republican House speaker 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 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 the country watching and waiting for an outcome, it appeared some of the problems over policy issues that have 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 appear 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 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.

Any deal would need to be a political compromise in a divided Congress. Many of the conservative 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.

By Steve Holland, Gram Slattery and Katharine Jackson

WASHINGTON (Reuters) -U.S. President Joe Biden and top congressional Republican Kevin McCarthy have reached a tentative deal to raise the federal government’s $31.4 trillion debt ceiling, ending a months-long stalemate, two source familiar with the negotiations said on Saturday.

The White House and negotiators for House Republicans have reached an agreement in principle to avert a debt default, two sources familiar with the situation said.

“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,” the second source said.

Biden and McCarthy held a 90-minute phone call earlier on Saturday evening to discuss the deal.

The deal would avert an economically destabilizing default, so long as they succeed in passing it through the narrowly divided Congress before the Treasury Department runs short of money to cover all its obligations, which it warned Friday will occur if the debt ceiling is not raised by June 5.

Republicans who control the House of Representatives have pushed for steep cuts to spending and other conditions, including new work requirements on some benefit programs for low-income Americans and for funds to be stripped from the Internal Revenue Service, the U.S. tax agency.

They said they want to slow the growth of the U.S. debt, which is now roughly equal to the annual output of the country’s economy.

Exact details of the final deal were not immediately available, but 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, sources told Reuters earlier.

The two sides have to carefully thread the needle in finding a compromise that can clear the House, with a 222-213 Republican majority, and Senate, with a 51-49 Democratic majority.

The long standoff spooked financial markets, weighing on stocks and forcing the United States to pay record-high interest rates in some bond sales. A default would take a far heavier toll, economists say, likely pushing the nation into recession, shaking the world economy and leading to a spike in unemployment.

Biden for months refused to negotiate with McCarthy over future spending cuts, demanding that lawmakers first pass a “clean” debt-ceiling increase free of other conditions, and present a 2024 budget proposal to counter his issued in March. Two-way negotiations between Biden and McCarthy began in earnest on May 16.

Democrats accused Republicans of playing a dangerous game of brinkmanship with the economy. Republicans say recent increased government spending is fueling the growth of the U.S. debt, which is now roughly equal to the annual output of the economy.

The last time the nation got this close to default was in 2011, when Washington also had a Democratic president and Senate and a Republican-led House.

Congress eventually averted default, but the economy endured heavy shocks, including the first-ever downgrade of the United States’ top-tier credit rating and a major stock sell-off.

This time around, House Speaker McCarthy had strengthened his hand by overseeing passage of an April bill that paired $4.8 trillion in spending cuts with a $1.5 trillion debt-ceiling hike. The bill had no chance of passing the Democrat-controlled Senate, but showed that McCarthy had the ability to hold together his thin majority just four months into his top leadership role.

Their work is far from done. McCarthy has vowed to give House members 72 hours to read the legislation before bringing it to the floor for a vote. That will test whether enough moderate members support the compromises in the bill to overcome opposition from both hard-right Republicans and progressive Democrats.

Then it will need to pass the Senate, where it will need at least nine Republican votes to succeed. There are multiple opportunities in each chamber along the way to slow down the process.

The two sides had struggled to find common ground on spending levels. Republicans had pushed for an 8% cut to discretionary spending in the next fiscal year, followed by annual increases of 1% for several years.

Biden had proposed keeping spending flat in the 2024 fiscal year, which starts Oct. 1, and raising it 1% the year after that. He also had called for closing some tax loopholes, which Republicans rejected.

(Reporting by Moira Warburton, Steve Holland and Katharine Jackson; Writing by Andy Sullivan; Editing by Scott Malone, Frances Kerry, Daniel Wallis and Heather Timmons)

By Katharine Jackson, Steve Holland and Moira Warburton

WASHINGTON (Reuters) -U.S. President Joe Biden and top congressional Republican Kevin McCarthy have reached a tentative deal to raise the federal government’s $31.4 trillion debt ceiling, ending a months-long stalemate, a source familiar with the negotiations said on Saturday.

The White House and negotiators for House Republicans have reached an agreement in principle to avert a debt default, a source familiar with the situation said.

Biden and McCarthy held a 90-minute phone call earlier on Saturday evening to discuss the deal.

The deal would avert an economically destabilizing default, so long as they succeed in passing it through the narrowly divided Congress before the Treasury Department runs short of money to cover all its obligations, which it warned Friday will occur if the debt ceiling is not raised by June 5.

Republicans who control the House of Representatives have pushed for steep cuts to spending and other conditions, including new work requirements on some benefit programs for low-income Americans and for funds to be stripped from the Internal Revenue Service, the U.S. tax agency.

They said they want to slow the growth of the U.S. debt, which is now roughly equal to the annual output of the country’s economy.

Exact details of the final deal were not immediately available, but 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, sources told Reuters earlier.

The two sides have to carefully thread the needle in finding a compromise that can clear the House, with a 222-213 Republican majority, and Senate, with a 51-49 Democratic majority.

The long standoff spooked financial markets, weighing on stocks and forcing the United States to pay record-high interest rates in some bond sales. A default would take a far heavier toll, economists say, likely pushing the nation into recession, shaking the world economy and leading to a spike in unemployment.

Biden for months refused to negotiate with McCarthy over future spending cuts, demanding that lawmakers first pass a “clean” debt-ceiling increase free of other conditions, and present a 2024 budget proposal to counter his issued in March. Two-way negotiations between Biden and McCarthy began in earnest on May 16.

Democrats accused Republicans of playing a dangerous game of brinksmanship with the economy. Republicans say recent increased government spending is fueling the growth of the U.S. debt, which is now roughly equal to the annual output of the economy.

The last time the nation got this close to default was in 2011, when Washington also had a Democratic president and Senate and a Republican-led House.

Congress eventually averted default, but the economy endured heavy shocks, including the first-ever downgrade of the United States’ top-tier credit rating and a major stock sell-off.

This time around, House Speaker McCarthy had strengthened his hand by overseeing passage of an April bill that paired $4.8 trillion in spending cuts with a $1.5 trillion debt-ceiling hike. The bill had no chance of passing the Democrat-controlled Senate, but showed that McCarthy had the ability to hold together his thin majority just four months into his top leadership role.

Their work is far from done. McCarthy has vowed to give House members 72 hours to read the legislation before bringing it to the floor for a vote. That will test whether enough moderate members support the compromises in the bill to overcome opposition from both hard-right Republicans and progressive Democrats.

Then it will need to pass the Senate, where it will need at least nine Republican votes to succeed. There are multiple opportunities in each chamber along the way to slow down the process.

The two sides had struggled to find common ground on spending levels. Republicans had pushed for an 8% cut to discretionary spending in the next fiscal year, followed by annual increases of 1% for several years.

Biden had proposed keeping spending flat in the 2024 fiscal year, which starts Oct. 1, and raising it 1% the year after that. He also had called for closing some tax loopholes, which Republicans rejected.

(Reporting by Moira Warburton, Steve Holland and Katharine Jackson; Writing by Andy Sullivan; Editing by Scott Malone, Frances Kerry, Daniel Wallis and Heather Timmons)