The US House of Representatives has approved a package that will slash spending in return for raising the legal level of the US debt in a bid to avoid a catastrophic default.
President Barack Obama negotiated the deal with congressional leaders. The Senate will vote on the deal today.
Here are details of the plan, as released by the White House, the House Rules Committee and the non-partisan Congressional Budget Office:
First Round of Spending Cuts
The package immediately authorises spending cuts of $917bn between 2012 and 2021. The cuts would be in the form of caps on discretionary spending - funding that is authorised at will by Congress - and not from entitlements such as Social Security and the Medicare health care programme for the elderly.
Second Round of Spending Cuts
The package sets up a special committee in Congress - to be evenly divided between members of Mr Obama's Democratic Party and John Boehner's Republican Party - that would find $1.5 trillion in further cuts from all areas.
The committee is required to come up with proposals by 23 November. Both the House of Representatives and Senate would then vote on those proposals by 23 December.
If the committee process fails, then cuts of $1.2 trillion would automatically come into force - divided evenly between military and non-military spending, but not touching Medicare and Social Security.
The Congressional Budget Office said that the total package would result in at least $2.1 trillion in deficit reduction by 2021 compared with March 2011.
The Debt Ceiling
The deal authorises an increase in the debt limit by between $2.1 and $2.4 trillion. The US hit its current ceiling of $14.3 trillion on 16 May and will start running short of cash at midnight Tuesday (0400GMT Wednesday).
The hike would cover the US debt until the start of 2013 - a key goal for Barack Obama who wants to avoid a similar showdown with Congress during his re-election bid next year.
The increase would come in two parts, starting with an immediate hike by $900bn. If Congress cuts spending through the special committee, the ceiling would then go up by another $1.5 trillion; otherwise it would rise by $1.2 trillion as part of automatic spending cuts.
Defence Spending
The package would cut $350bn in defence spending over the next 10 years as part of the first batch of cuts. The special committee would look at further cuts.
The US military budget last year was around $700bn, by far the largest in the world, but the figure is certain to come down as the US winds down commitments in Iraq and Afghanistan.
Some Republicans have argued against steep defence cuts, saying there is insufficient thought on the strategic implications.
Republicans have vowed to resist steep defence cuts in the special committee. The White House hopes the threat of the automatic cuts if the committee fails - which would amount to $600bn - would serve as leverage to press Republicans on the panel.
Taxes
The package would not increase taxes, a key demand of Republicans. Liberal Democrats have been strongly critical, saying that the US should not consider major spending cuts at a time of a weak economy without also raising revenue.
The White House said that Mr Obama could still fight to restore tax rates on wealthy Americans - bringing in nearly $1 trillion in revenue. Mr Obama's Republican predecessor, George W Bush, lowered the taxes on the wealthy, but the cuts are set to expire at the end of 2012.
Democrats have also said that the special committee could propose to raise revenue by cutting subsidies to the oil and gas industries, but Republicans have rejected the idea.
Constitutional Amendment
The package calls for Congress to vote by the end of the year on an amendment to the US Constitution that requires a balanced budget, a longstanding proposal of conservative Republicans who say the country must keep its finances in order.
If Congress approves the amendment, Barack Obama would be authorised to seek another $1.5 trillion hike in the debt ceiling.
Many Democrats argue that the amendment is a gimmick that would not make sense in a future crisis.
Amending the founding US document is an arduous process, requiring two-thirds votes by both the House of Representatives and Senate and ratification from legislatures of at least 38 of the 50 states.
Education
The bill preserves President Barack Obama's initiative to help needy students.
So-called Pell Grants provide up to $5,550 to students who would not otherwise be able to afford university attendance.
The plan provides $17bn for the programme in the 2012 and 2013 fiscal years. But the blueprint also cuts $21.6bn between 2012-2021 from student loans, in part by eliminating a subsidy that allows graduate students to defer payment while still in school.
