President Barack Obama said Republican and Democratic leaders in the House and Senate have reached an agreement with him to raise the government's debt ceiling and avoid a default.
Mr Obama told the nation on television that more than two trillion US dollars in spending cuts will be imposed gradually so they do not create a drag on the economy.
He said the spending cuts will reduce government spending to the lowest level it has been since when Dwight Eisenhower was president in the 1950s.
He said there will be no initial cuts to entitlement programmes like Social Security and Medicare.
But he said both could be on the table along with changes in tax law as part of future cuts.
Shortly after Senate majority leader Harry Reid and his Republican counterpart, minority leader Mitchell McConnell, endorsed the plan on the Senate floor, Mr Obama went to the White House press room to add his support for the deal.
It meets one of his key demands, raising borrowing power sufficiently to keep the partisan poison pill from returning to the national agenda until after the 2012 election.
It does not include any tax increases that Mr Obama had pressed hard for to include.
House speaker John Boehner, in a conference call with Republican members of the lower chamber, said the deal was a good one that met the demands of all Republicans.
Bowing to the still unknown outcome of congressional action, Mr Obama said important votes remained to be taken but that leaders of both parties in both houses of Congress were agreed to a plan that would initially cut about one trillion US dollars from US spending, "the lowest level of domestic spending since Dwight Eisenhower was president" in the 1950s.
"Is this the deal I would have preferred," Mr Obama asked, answering his own question with one word. "No."
But he said: "Most importantly it will allow us to avoid default and end the crisis that Washington imposed on the rest of American. And it will allow us to lift the cloud of debt and uncertainty" that has hung above the United States for weeks.
No votes were expected in either house of Congress until later today, to give rank and file politicians to review the package.
Tomorrow is the deadline to avoid a US default on payments to investors in Treasury bonds, recipients of Social Security pension checks, those relying on military veterans benefits and businesses that do work for the government.
Mr Obama and many economists and financial experts predicted global chaos and plunging stock markets had no deal been reached by midnight tomorrow.
If approved in today's votes, the compromise would presumably preserve America's sterling credit rating, reassure investors in financial markets across the globe and possibly reverse the losses that spread across Wall Street in recent days as the threat of a default grew.
The broadest outlines of the emerging plan, a deal that involved deep negotiations between Mr McConnell and Vice President Joe Biden, would raise the federal debt limit in two stages by at least 2.2 trillion US dollars, enough to tide the Treasury over until after the 2012 elections.
Big cuts in government spending would be phased in over a decade. Thousands of programmes - the Park Service, Internal Revenue Service and Labour Department accounts among them - could be trimmed to levels last seen years ago.
No benefit cuts were envisioned for the Social Security pension system or Medicare, the federal programmes that provides health care payments to the elderly. But other programmes would be scoured for savings. Taxes would be unlikely to rise.
The first step would take place immediately, raising the debt limit by nearly one trillion US dollars and cutting spending by a slightly larger amount over a decade.
That would be followed by creation of a new congressional committee that would have until the end of November to recommend 1.8 trillion US dollars or more in deficit cuts, targeting benefit programmes such as Medicare, Medicaid and Social Security, or overhauling the tax code.
Those deficit cuts would allow a second increase in the debt limit, which would be needed by early next year.
If the committee failed to reach its 1.8 trillion US dollars target, or Congress failed to approve its recommendations by the end of 2011, lawmakers would then have to vote on a proposed constitutional balanced-budget amendment.
If that failed to pass, automatic spending cuts totalling 1.2 trillion US dollars would automatically take effect, and the debt limit would rise by an identical amount.
Social Security, Medicaid and food stamps would be exempt from the automatic cuts, but payments to doctors, nursing homes and other Medicare providers could be trimmed, as could subsidies to insurance companies that offer an alternative to government-run Medicare.
Any agreement will have to be passed by the Democratic-controlled Senate, which was seen as assured, and Republican-controlled House, which still could face a major tussle, before going to the White House for Mr Obama's signature.