U.S. President Barack Obama has reached an agreement with congressional leaders on a compromise deal to raise the nation’s limit on borrowing and keep the government from an unprecedented default.

Mr. Obama said Sunday night that the proposed deal cuts about $1 trillion in spending over 10 years and sets up a bipartisan panel in Congress to consider up to $1.5 trillion in further reductions. He said that panel will consider all options, including tax increases and cuts to social welfare programs like Medicare. If the panel fails to reach agreement, then the deal requires automatic spending cuts.

Congress must still approve the compromise, which is expected to pass the Senate which is controlled by Democrats. The deal is expected to face more opposition in the Republican-led House. A vote could come Monday, and congressional leaders from both parties say they expect to have enough votes to approve the deal that would raise the $14.3 trillion limit on U.S. borrowing.

The president called the proposal a compromise that lets the country avoid default while making a serious down payment on deficit reduction. He said default would have a “devastating effect” on the U.S. economy.

The White House says the agreement would avoid the need for another vote on raising the the debt limit until 2013, providing greater “certainty” about the fragile economy. It would also delay the issue until after the next U.S. presidential and congressional elections.

As congressional leaders argued about raising the debt ceiling last week, U.S. stock markets suffered their worst losses of the year and the value of the dollar slumped.

All sides agreed on the need to cut spending and raise the debt ceiling. But they have squabbled for weeks on what to cut and how fast those cuts should be made. Republicans and Democrats also split on the need for revenue increases.

Under the proposed agreement, the congressional panel must identify the additional budget reforms by November 23, and Congress must vote on the recommendations before the end of the year.

To encourage lawmakers to act by the deadline, the agreement includes the prospect of automatic cuts to social programs supported by Democrats and military spending favored by Republicans.

The White House said allowing the panel to consider reforms without a looming debt default will give lawmakers the ability to consider “essential reforms” without the political gamesmanship of the past few months.