Washington DC – President Joe Biden and House Republican leader Kevin McCarthy announced a deal Saturday to raise the debt ceiling, dragging the United States back from the precipice of default with only a few days to spare.

Congress will vote on the deal to extend the government's borrowing authority on Wednesday, just shy of the June 5 "X-date" when the Treasury estimates the government will no longer be able to pay its bills, plunging the world's biggest economy into turmoil.

Biden said in a statement that the deal was "good news for the American people, because it prevents what could have been a catastrophic default and would have led to an economic recession, retirement accounts devastated, and millions of jobs lost."

McCarthy, who spoke with Biden on Saturday to close the deal, said there was still "a lot of work to do, but I believe this is an agreement in principle that's worthy of the American people."

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The Republican speaker added he would consult again with the president on Sunday and oversee final drafting of the bill, and the House would "then be voting on it on Wednesday."

Raising the debt ceiling – a legal maneuver that takes place most years without drama – allows the government to keep borrowing money and remain solvent.

This year, Republicans demanded deep spending cuts – largely in social spending for the poor – in return for raising the debt ceiling, saying the time had come for bitter medicine to address the country's mammoth $31 trillion debt.

Biden argued that he would not negotiate over spending issues as a condition for raising the debt ceiling, accusing the Republicans of taking the economy hostage.

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Both sides have now somewhat climbed down.

According to a source familiar with the negotiations, the deal includes freeing up the debt ceiling for two years, meaning there will be no need for negotiations in 2024, when the presidential election will be in full swing.

The big cuts Republicans wanted are not there, though non-defense spending will remain effectively flat next year, and only rise nominally in 2025, the source said.

There will also be new rules for accessing certain federal assistance programs, though the source said the deal protected Biden's signature Inflation Reduction Act and student debt relief plan.

Biden said "the agreement represents a compromise, which means not everyone gets what they want. That's the responsibility of governing."

Biden called the agreement "an important step forward that reduces spending while protecting critical programs for working people and growing the economy for everyone."

He urged Congress to approve it quickly to avoid "catastrophic default."

Treasury Secretary Janet Yellen had initially warned of a possible default around June 1 if Congress failed to raise the ceiling on borrowing, but gave lawmakers some breathing room on Friday when she updated the deadline to June 5.

Even so, the legislation will still have to clear Congress much more quickly than the normal timetable for even the most uncontroversial bills.

Under House rules, lawmakers have to be given 72 hours before voting once a bill is presented. And if it passes the House, it will then have to go through the Senate, where Democrats hold the majority.

McCarthy is hoping to bring the narrow House majority of 222 Republicans with him, but the deal is likely to face opposition from 35 far-right lawmakers who told him to "hold the line" against compromising on far more sweeping spending cuts. That means a large number of Democrats will have to be persuaded to vote with a reduced number of Republicans -- something that rarely happens on big bills.

In a sign of the uphill battle McCarthy might face corralling his party's votes, hardline conservative Representative Lauren Boebert said she would oppose the deal.

"Our voters deserve better than this," she said in a tweet on Saturday night. "You can count me as a NO on this deal."

The Democrats, meanwhile, may face their own rebellion on the left of the party, which objects to any spending restrictions.

Congress was adjourned for an extended holiday weekend but lawmakers will be called back to vote.

If a default occurs, the government wouldn't miss loan repayments until mid-June but in the meantime it would likely have to halt $25 billion in social security checks and federal salaries.