Congress urged to raise debt limit

The U.S. Capitol is pictured on the opening day of the 112th United States Congress in Washington, January 5, 2011.

WASHINGTON (Reuters) - The Congress must allow the country to borrow more to avoid a debt default that would wreak havoc on financial markets and imperil the U.S. economy, Democratic and Republican lawmakers said on Sunday.

Threatening not to raise the $14.3 trillion debt ceiling -- the amount of debt the country is legally allowed to issue -- is "like playing with fire," Democratic Senator Charles Schumer said on NBC's "Meet the Press."

"If we didn't renew the debt ceiling ... We might permanently threaten confidence of the credit markets in the dollar, which could create a recession worse than the one we have now or even a depression," he said.

Republican Senator Tom Coburn also predicted a dire outcome if lawmakers were unable to reach an agreement to put the country's fiscal house in order.

"If in fact the bond vigilantes come after the government bonds in the next two to three years, we will have such bigger pain than not raising the debt ceiling," Coburn said on the same television program.

The Obama administration is under pressure to put a cap on spending to curb its $1.3 trillion budget deficit. Coburn said he thought he would vote in favor of raising the debt ceiling only if there was a specific amount of spending cuts on the table.

However, Coburn said he believed the administration and lawmakers could reach an agreement before the U.S. hits the debt ceiling.

A debt default would throw markets into turmoil and dramatically increase the government's borrowing costs. Treasury Secretary Timothy Geithner has warned that the government may hit the ceiling by March 31 and has urged Congress to act before that date.

Although Congress has routinely voted to do so every year since 2002, new Republican rules in the House of Representatives may imperil that effort.

According to a Reuters/Ipsos poll, the U.S. public overwhelmingly opposes raising the debt limit. Some 71 percent of those surveyed oppose increasing the borrowing authority.

(Reporting by Rachelle Younglai; editing by Mohammad Zargham)