The US debt ceiling is a limit on the amount of debt the government can legally have.
If the debt limit is not increased, the government will default on its loans and potentially cause a catastrophic economic impact.
Leaders Joe Biden
and Kevin McCarthy have reached an agreement to increase the debt ceiling and make spending cuts and work requirements.
The agreement needs to be approved by both chambers of Congress before the deadline on Monday.
Republicans in the House of Representatives are expected to vote against the proposal, with some Democrats also unhappy with the deal.
The proposed deal includes a 3.3% increase in defense spending and suspends the borrowing limit until 2025.
The US economy could face catastrophic consequences if it defaults on its debt payments, including a drop in stock prices, economic contraction, and the loss of jobs.
Defaulting would also harm the global economy as the US is a key player in international trade and finance.
The exact consequences of default are uncertain, but they could happen as soon as Monday, June 5th, when the US Treasury Secretary Janet Yellen set the deadline to raise the debt ceiling beyond the current limit.