Washington: US President Barack Obama has said top lawmakers have reached an agreement to reduce the budgetary deficit and avert a debt default that would have had a "devastating" effect on American economy.

"Leaders of both parties, in both chambers, have reached an agreement that will reduce the deficit and avoid default -- a default that would have had a devastating effect on our economy," Obama said in his remarks to the White House press late Sunday night, after the agreement was reached.

"The first part of this agreement will cut about USD one trillion in spending over the next 10 years -- cuts that both parties had agreed to early on in this process. The result would be the lowest level of annual domestic spending since Dwight Eisenhower was President – but at a level that still allows us to make job-creating investments in things like education and research," said Obama.

The bipartisan agreement would raise the debt limit and cut spending between USD two trillion and USD three trillion.

"We also made sure that these cuts wouldn't happen so abruptly that they'd be a drag on a fragile economy," Obama said, noting that this was the best he could get under the current circumstances.

"Is this the deal I would have preferred? No. I believe that we could have made the tough choices required -- on entitlement reform and tax reform -- right now, rather than through a special congressional committee process,” said the US President.

"But this compromise does make a serious down payment on the deficit reduction we need, and gives each party a strong incentive to get a balanced plan done before the end of the year. Most importantly, it will allow us to avoid default and end the crisis that Washington imposed on the rest of America," the US President said.

"It ensures also that we will not face this same kind of crisis again in six months, or eight months, or 12 months. And it will begin to lift the cloud of debt and the cloud of uncertainty that hangs over our economy," Obama said.

He urged members of both parties to support the deal with their votes over the next few days.

Soon after the announcement, leaders of both Democratic and Republicans endorsed the agreement and said they would soon move to get it through the Congress so that Obama can sign it into law before the deadline of August 2 midnight, when the Department of Treasury would run out of money to pay its bills.

"I am relieved to say that leaders from both parties have come together for the sake of our economy to reach historic, bipartisan compromise that ends this dangerous standoff," Senate majority leader, Harry Reid, said.

Senate Minority Leader, Mitch McConnell, said, "At this point I think I can say with a high degree of confidence that there is now a framework to review that will ensure significant cuts in Washington spending.”