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The agreement, which increases the debt ceiling through 2012, will keep millions of New York City residents from the possibility of losing critical federal assistance.

City Comptroller John Liu had previously said that without a deal, the total lost revenue in August could exceed roughly $1.4 billion for New York, affecting millions of recipients of Social Security, Medicare and Medicaid.

The deal announced Sunday would initially cut more than $1 trillion from federal spending over a decade.

A bipartisan committee will then tackle another $1.8 trillion in spending cuts in the fall, and would have the power to increase and reform taxes and entitlements.

The agreement would also make Congress vote on a balanced budget amendment.

Failing to reach an agreement "would have had a devastating effect on our economy," Obama said in a televised address Sunday night.

The Associated Press reported that House Speaker John Boehner telephoned Obama at mid-evening to say the agreement had been struck.

A vote on the deal is not expected until Monday at the earliest

Earlier Sunday, a Democrat-backed plan proposed by Senate Majority Leader Harry Reid was blocked by Republicans in a Senate test vote. Work then began on a compromise package that would raise the debt ceiling in two stages through the elections next year, and cut spending by about $3 trillion over a decade.

Had a deal not been reached by Tuesday, the federal government would have faced a possible default on some of its debts and a downgrade of its AAA credit rating.