By Richard Cowan and David Lawder
WASHINGTON (Reuters) - House of Representatives Speaker John Boehner drew an election-year battle line over the U.S. borrowing limit on Tuesday, saying he would back another increase at year-end only if it was offset by a larger package of spending cuts.
Drawing quick fire from President Barack Obama's Democrats, Boehner said he would "insist on my simple principle of cuts and reforms greater than the debt limit increase."
His remarks to a Peterson Foundation fiscal forum reopened last year's grueling battle over raising the debt cap, which allows the government to spend more than it takes in.
Boehner staked out the same position during the 2011 fight, bringing the United States to the brink of an historic debt default before an 11th-hour deal to force $2.1 trillion in spending cuts over 10 years. The accompanying $2.1 trillion increase in the debt limit is rapidly being depleted.
"Once again, Republicans are playing chicken with our economy and manufacturing an unnecessary crisis," said Representative Chris Van Hollen, the top Democrat on the House Budget Committee.
Boehner's tough words could help him shore up support among fiscal conservatives and Tea Party activists within his party who often have been at odds with the top Republican.
His move also opens another front in Republican efforts to underscore for voters the four straight years of trillion-dollar U.S. deficits during Obama's tenure in the White House following a deep recession.
TAX-CUT EXTENSION VOTE
Boehner stuck to his position that he would accept no tax increases in any deficit reduction talks.
He said the Republican-led House would vote on a plan before the November 6 elections to stave off the year-end expiration of tax cuts enacted under former Republican President George W. Bush. This would buy time for Congress to pass a comprehensive tax reform bill in 2013 to reduce tax rates and eliminate many deductions and credits, Boehner said.
"Any sudden tax hike would hurt our economy, so this fall - before the election - the House of Representatives will vote to stop the largest tax increase in American history," he said.
He told the fiscal forum that that tax reforms would "bring everybody's rates down," but cleaning out the "underbrush" of tax deductions and credits could cause some Americans to pay more in taxes than they do now.
Obama and fellow Democrats have insisted on a balanced package to address the country's deficit problems, including getting more tax revenues from the rich. Failing to do so, they argue, puts too much pressure on the poor and middle class for reining in deficits.
SAME FIGHT, DIFFERENT YEAR
Last August, many conservative "Tea Party" activists elected to Congress on promises of drastically shrinking government urged Boehner and other Republican leaders to allow a default rather than fail to significantly slash ballooning U.S. debt.
The U.S. Treasury is expected to reach the $16.4 trillion debt ceiling sometime after the elections, probably early in 2013, with the exact timing dependent on the strength of revenues. U.S. debt is now about $800 billion below the limit.
U.S. Treasury Secretary Timothy Geithner, speaking at the same fiscal forum, urged Congress to address "unsustainable" U.S. deficits in the near term to ensure the continued confidence of financial markets. Last year's debt-limit fight and the political gridlock it showcased cost the United States its coveted Triple-A credit rating from Standard and Poor's.
"Only Congress of course can act to raise the debt limit. We hope they do it this time without the drama, and the pain and the damage they caused the country last July," Geithner said.
Boehner also reaffirmed his call for reforms to squeeze savings out of large government "entitlement" programs such as the Social Security retirement and Medicare healthcare programs for the elderly. He said changes such as raising retirement ages could be phased in over time to limit any hardship.
At year's end, Congress will be confronted with other important decisions besides the debt limit and the expiration of the 2001 and 2003 Bush tax cuts, which Democrats and Republicans have both referred to as a dangerous "fiscal cliff".
A payroll tax cut backed by Obama is also set to expire then and Congress already has begun looking at ways to replace automatic spending cuts that are set to kick in at the New Year. Meanwhile, Congress might still be grappling with funding many day-to-day government operations in the fiscal year that starts on October 1.
These unresolved issues are contributing to nervousness and indecision among investors, businesses and voters.
Obama said on Tuesday he would meet with Democratic and Republican congressional leaders, including Boehner, at the White House on Wednesday, where he would stress the importance of lawmakers acting on legislative proposals he has made to lift U.S. growth and hiring.
(Additional reporting by Thomas Ferraro and Rachelle Younglai; Editing by Doina Chiacu, Eric Walsh and Andrew Hay)
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