REFILE-UPDATE 3-U.S. Republicans weigh short-term debt limit increase
* Budget chairman looks ahead to March fiscal deadlines
* Obama has vowed not to negotiate over the debt limit
* At least a three-month extension is under discussion
WILLIAMSBURG, Va., Jan 17 (Reuters) - House Republicans signaled on Thursday they might support a short-term extension of U.S. borrowing authority next month so they can move on to budget battles that could offer them more political leverage.
The move, described as under consideration by House of Representatives Budget Committee Chairman Paul Ryan, appears to be aimed at getting President Barack Obama and his Democrats to start negotiating with them on spending cuts without Republicans being blamed for a debt default and any resulting chaos in financial markets.
"We're discussing the possible virtue of a short-term debt limit extension, so that we have a better chance of getting the Senate and White House involved in discussions in March," said Ryan.
The option, if successful, would put off a fight with Obama over a long-term debt ceiling increase until Republicans and the White House have negotiated their way through two other fiscal deadlines later in the spring.
It follows Obama's refusal to drawn into a negotiation over the debt ceiling. Republicans had hoped to use it as a lever to extract spending cuts from the White House.
Ryan, the party's failed candidate for vice president last year and a likely presidential contender in 2016, spoke to reporters during a retreat of Republican House members in Williamsburg.
The Republican approach - which has not been finalized - would effectively rearrange three looming deadlines in the long war between the parties over deficit reduction.
The first of the fiscal deadlines, the exhaustion of federal borrowing capacity, will happen sometime between mid-February and early March. A failure by Congress to raise this debt ceiling could result in a market-rattling government default.
The second deadline, the delayed launch of automatic spending cuts that were part of the "fiscal cliff", will occur on March 1. A third deadline comes on March 27, when Congress must enact new funding for government agencies and programs.
Ryan did not specify how large the debt ceiling extension would be and how long it would last given the current budget deficit.
Obama has vowed not to negotiate over the debt limit, saying that Congress must simply raise it to ensure that past spending obligations are met. Democrats are attempting to brand any attempts to use it for bargaining leverage as reckless.
Ryan stopped short of threatening to push the country into default if the party's spending cut demands are not met.
But he said Republicans were now considering the best approach to use their leverage over looming fiscal deadlines in February and March to reduce deficits.
"We believe that it would be wrong if we walk out of this spring with no achievement on debt reduction whatsoever because that will hurt the country, that will hurt the economy," Ryan said.
Representative John Fleming of Louisiana said a debt limit extension that would last at least three months was under discussion. The idea would be to create some breathing space so that Congress could negotiate over automatic spending cuts and a new government funding measure.
Asked if he was willing to "shoot the hostage" and allow the United States go into default if Democrats resist spending cut demands, Ryan said he was not willing to "use any metaphors like that at all."
There are 35 newly elected Republican members who did not participate in the grueling fight over the debt limit in 2011, which pushed the United States close to a default, roiled financial markets and prompted an unprecedented credit downgrade from Standard and Poor's.
Some of these members have said they would be willing to force a government shutdown if their demands for reduced spending are not met. If the debt limit is not raised, the government may start to halt some operations to preserve its cash for debt repayments.
Ryan said he supports this kind of prioritization of payments and would be willing to take legislative steps to make it "crystal clear" that the administration has authority to choose among its payment obligations.
The Treasury resisted this in 2011, saying that any missed payment, whether for Social Security benefits or for cleaning supplies, was a technical default.
The duration of a debt-ceiling increase depends on its size. In December 2009 the Treasury Department sought an increase of $1.8 trillion that it calculated would enable borrowing beyond the November 2010 elections.
Congress responded with a $300 billion increase that carried the government only for another three months.
In the past, Obama has threatened to veto such limited extensions. If he were to do that, however, or if the Democratic-controlled Senate were to reject a short-term increase passed by the Republican-controlled House, Republicans could then try to blame the Democrats for a default.
Fitch Ratings warned this week that it could cut the country's top credit rating even if the Treasury prioritized U.S. debt payments to avoid default. But Ryan said that the rating agency also pointed out that it was crucial to reduce the U.S. debt burden.
"We know we have a debt crisis coming, this is not an if question, it's a when question," Ryan said.