UPDATE 1-US debt limit hike must be part of fiscal cliff deal-Reid

Thu Nov 29, 2012 3:27pm EST

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* Boehner: No debt ceiling increase without spending cuts

* Treasury on track to hit debt limit last week in December

WASHINGTON Nov 29 (Reuters) - A U.S. debt ceiling increase must be part of any deal to resolve the looming "fiscal cliff" of tax increases and spending cuts, the top Democratic senator said on Thursday, further complicating talks to stave off the austerity measures.

President Barack Obama will not sign any agreement that does not contain a debt limit hike, Senate Majority Leader Harry Reid of Nevada told reporters after meeting with U.S. Treasury Secretary Timothy Geithner.

That demand was underpinned with the White House warning Republican lawmakers that the $16.4 trillion statutory debt limit had to be increased soon and without drama.

"The president believes that it is entirely appropriate that Congress take action on this as part of an end of the year deal," White House spokesman Jay Carney told reporters.

The White House and congressional leaders have made little progress on a deal to avert the series of tax hikes and spending cuts slated to start taking effect Jan. 1 that could tip the U.S. economy into recession.

It was not clear until Thursday that the White House was considering including the debt ceiling increase in this year's talks.

The Treasury is on track to reach the legal limit on its debt in the last week of December, but can use emergency tools to shift funds around to keep paying its bills.

Those measures are expected to give the Treasury extra funding until about mid-February at which time the government will no longer be able to borrow funds to make crucial payments such as the interest on U.S. debt.

"The president absolutely expects Congress to do its job, and one of the jobs that Congress has is to make sure that the United States government pays its bills," Carney said.

Last year, House of Representatives Republicans refused to raise the debt ceiling without spending cuts. Top Republican lawmaker, House Speaker John Boehner of Ohio, repeated his position that any increase in the debt ceiling be matched or exceeded by spending cuts.

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