Congress agrees to raise U.S. credit limit

WASHINGTON (Reuters) - With the U.S. government fast approaching its current $8.965 trillion credit limit, the Senate on Thursday gave final congressional approval of an $850 billion increase in U.S. borrowing authority.

The Senate voted 53-42 to raise the debt ceiling to $9.815 trillion, the fifth increase in the U.S. credit limit since President George W. Bush took office in January 2001. The U.S. House of Representatives approved the higher debt limit earlier this year as part of the overall budget resolution and the legislation now goes to Bush for his signature.

U.S. Treasury Secretary Henry Paulson commended Congress for quickly passing legislation he said "ensures the U.S. government can deliver on promises already made."

"The Senate's swift action on the debt limit today helps to protect the full faith and credit of the United States and avoids creating unnecessary uncertainty in the U.S. Treasuries market," Paulson said in a statement.

The Treasury Department had been pressing Congress to pass the debt increase quickly. Last week Paulson said the government would hit its current $8.965 trillion debt limit on October 1.

But Sen. Tom Coburn, an Oklahoma Republican, urged lawmakers to reject the debt increase and concentrate on spending cuts instead.

"Families across America don't have the luxury of loaning themselves any money when they've maxed out their credit. But that's what we're going to do," Coburn said.

Lawmakers said the $850 billion increase in borrowing authority, the second largest since Bush took office, should be enough to last the government through next year's congressional and presidential elections.

U.S. debt stood at about $5.6 trillion at the start of Bush's presidency.

"Increasing the debt limit is necessary to preserve the full faith and credit of the United States of America," said Iowa Sen. Charles Grassley, the senior Republican on the Finance panel.

(Additional reporting by Richard Cowan)