Obama seeks $1.2 trillion debt limit hike

U.S. President Barack Obama speaks at a campaign event in Washington January 9, 2012.

WASHINGTON (Reuters) - President Barack Obama formally notified Congress on Thursday that he plans a $1.2 trillion increase in the U.S. debt limit, setting the stage for Republicans to level election-year charges that deficits are out of control.

Obama, in a letter to House of Representatives Speaker John Boehner, the top Republican in Congress, said "further borrowing is required to meet existing commitments."

The move by the Democratic president gives Congress 15 days to vote on a resolution of disapproval under terms of budget control legislation passed last year.

Lawmakers are unlikely to muster the votes needed to block the boost in U.S. borrowing capacity, so a replay of last summer's debt limit drama that brought the federal government to the brink of default and cost it its top-tier credit rating is not expected.

But the increase request does give Republicans an opportunity to criticize Obama over the lack of progress in reducing deficits after congressional deficit reduction talks collapsed late last year.

Obama originally intended to launch the process to raise the debt limit on December 30 but House and Senate leaders asked him to delay the move to allow lawmakers to consider it while they are back in session.

To allow for the delay, the U.S. Treasury Department has had to turn to one of the measures it employed to keep the government afloat last summer - dipping into the Exchange Stabilization Fund, which has a dollar balance of $22.7 billion.

A Treasury official said other measures, such as suspending the daily reinvestments of assets in a government pension fund, may also be needed until the debt-limit increase is secured.

(Reporting by Matt Spetalnick and; Aruna Viswanatha; Editing by Eric Walsh)