WRAPUP 2-Ryan pushes spending cuts as US hits debt limit

* Ryan says spending cuts need to be larger than debt hike

* Democrats launch new attacks on Republican health plans

* Markets unconcerned so far
(Refiles to widen distribution)

By Andy Sullivan and Ann Saphir

WASHINGTON/CHICAGO, May 16 (Reuters) - The United States
reached the legal limits of its borrowing authority on Monday
as a top Republican increased his party's demand for deep
spending cuts as part of any increase.

The remarks by Representative Paul Ryan, the top budget
writer in the House of Representatives, underscored the
divisions that Republicans and Democrats will have to overcome
in order to raise the $14.3 trillion debt limit and avoid a
default that would roil markets across the globe.

The Treasury Department said it was dipping into federal
pension funds to pay the country's bills, one of several
emergency measures that should stave off a default until early
August.

Congress is not expected to raise the debt cap until
sometime this summer as lawmakers search for a deal that would
allow them to back an increase while showing voters that they
are taking steps to get debt under control.

Speaking to top financial executives at the Economic Club
of Chicago, Ryan said any deal would have to include spending
cuts that are larger than the amount of the debt-ceiling
increase -- a tougher stance than conditions that have been
laid out previously by other party leaders.

"For every dollar the president wants to raise the debt
ceiling, we can show him plenty of ways to cut far more than a
dollar of spending," Ryan said.

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Full coverage of U.S. debt ceiling, deficit [ID:nUSBUDGET]

US Treasury's debt limit delay tools [ID:nN09266402]

State of play in debt and deficit talks [ID:nN09265882]

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U.S. public debt and ceiling: r.reuters.com/vyb59r

Detailed U.S. debt: r.reuters.com/xyq59r

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Outside the event, about 100 protesters waved signs reading
"Hands off Medicare" -- a reference to the popular health
program that would face cuts under Ryan's budget plan. With the
2012 campaign season already under way, Democrats see an
opportunity to pick up votes by bashing that approach.

DEMOCRATS LAUNCH NEW ATTACK

The Democratic Congressional Campaign Committee, which aims
to win back control of the House, unveiled a new campaign with
the stark slogan: "Vote Republican, End Medicare."

But House Democratic Leader Nancy Pelosi said the program
should not be immune from budget talks as health costs continue
to outpace inflation.

"I think Medicare's on the table," Pelosi said on CNBC. "We
have to put it all on the table, see what works."

A failure to raise the debt ceiling would eventually force
the United States to default on obligations -- whether payments
to Social Security retirees or interest on the debt. That could
push the country back into recession and cause trouble for
economies and markets across the globe.

So far, markets were little bothered by the United States'
public finances. The benchmark 10-year Treasury bond yielded
3.15 percent in midday trading, well below its historical
average, as investors continued to view U.S. debt as a safe
haven in an uncertain economic environment. [US/]

A top bond manager said it would be foolish for investors
to bet against a debt-limit increase.

Rick Rieder, a top bond trader at BlackRock, said the
market expects that Washington will ultimately strike a deal
that will allow a debt-ceiling increase [ID:nN16299661]

Still, concern about the country's fiscal situation may be
prompting foreign investors to shift their purchases toward
shorter-dated assets, which carry less risk, according to
Treasury data. [US/TIC1]

Lawmakers are eager to show voters they can rein in a debt
load that has more than doubled in the past 10 years due to
wars, tax cuts and the deepest recession since the 1930s.

While Republicans and Democrats have found some common
ground in budget talks, they remain at loggerheads over the
areas that could yield the largest savings. Representative Jim
Clyburn, a top Democrat who has participated in the talks, said
the two sides have yet to address taxes or Medicare.

Republicans are insisting on spending cuts measuring in
trillions, along with an agreement that would hold down
spending over the longer term. Democrats say tax increases will
have to be part of the solution as well.

"If the Democratic caucus feels that the sacrifice being
requested is fair, I think the votes will be there," Clyburn
told Reuters.

(Additional reporting by Richard Cowan and Rachelle
Younglai in Washington and Karen Brettell and Richard Leong in
New York; Editing by Bill Trott)