US Senators have passed a bill that will raise the debt ceiling and stop the country defaulting on its loans, but cut government spending by $2.1 trillion.
Senators voted 74 to 26 on Tuesday afternoon, a day after last minute wrangling between Democrats and Republicans on Monday, when the House of Representatives voted through the bill.
Although the deal will stop the US from defaulting on its debt, there are serious concerns about the effect the deal will have on the economy.
Speaking after the deal, US President Barack Obama said: "This is just the first step; this compromise requires that both parties work together on a larger plan to cut the deficit, which is important for the long-term health of our economy.
"Since you can’t close the deficit with just spending cuts, we’ll need a balanced approach where everything is on the table. That means making some adjustments to protect healthcare programmes like Medicare. It also means reforming our tax codes so the wealthiest Americans and biggest corporations pay their fair share."
UK economist Aidan Manktelow told the Huffington Post UK that America's long-term future "looks in trouble".
"Due to politics, the US has embarked on a course of austerity when its economy demands greater stimulus. Cutting spending is the last thing they should be doing right now," he said.
The US Democrats had raised concerns over the bill, saying it risked the United States' AAA credit rating being downgraded. However credit ratings agency Fitch said after the deal passed it was commensurate with keeping the rating.
The deal has also been criticised for failing to secure additional funding for the unemployed.
The United States had until midnight to pass the bill or risk defaulting in its debt - a move that would have had significant ramifications for the global economy.