WASHINGTON – The Treasury Department put off a planned debt auction on Tuesday and President Bush urged Congress to increase the government's ability to borrow, saying action was essential "as we fight for freedom" against terrorism.
House Democratic Leader Dick Gephardt said members of his party were eager to cooperate -- if GOP leaders agree to a campaign-season series of votes on the broader issues of taxes, spending and borrowing from Social Security trust funds.
The political jockeying came amid estimates that the current debt limit of $5.95 trillion would probably be reached on Friday. While that would prevent further borrowing, officials said Treasury Secretary Paul O'Neill had other measures at his disposal that could prevent a government default for an unspecified period of time.
The Treasury Department announcement said an auction for two-year notes, scheduled for Wednesday, was postponed until further action.
A few hours earlier, in a letter to House Speaker Dennis Hastert, R-Ill., and to Gephardt, D-Mo., Bush asked that "the bipartisan cooperation you have shown in our war against terror" be extended to the politically thorny issue of the debt limit.
The Democratic-controlled Senate approved legislation unanimously two weeks ago to raise the debt limit by $450 billion.
The GOP-controlled House has not yet acted on the legislation.
Hastert has proposed attaching the increased borrowing authority to separate legislation providing additional funding for the war on terrorism.
But that bill is at the center of House-Senate negotiations, and Senate Democrats are insisting that the debt limit bill be cleared on its own.
The issue is politically charged because many conservative Republicans are loath to acknowledge the government's spending outstrips its revenue. Democrats, meanwhile, contend the need to raise the debt limit stems from tax cuts that Bush and congressional Republicans pushed to passage last year.
They also contend that the return of deficits, after four years of budget surpluses, means that the GOP is responsible for borrowing from Social Security.
In his letter, Bush did not mention the tax cuts when he listed the conditions that require a debt limit increase. Instead, he mentioned an economic slowdown that began in 2000, the Sept. 11 attacks and the ensuing war on terrorism.
In a follow-up letter to Hastert, Gephardt said Democrats can support a longer-term increase in the debt limit "if there is progress on the budget."
He cited proposals by other Democrats that would require the president to submit a budget that is in balance by 2007 without borrowing from Social Security.
Republicans pushed a budget through the House last spring that accommodates Bush's tax cuts, although few Democrats supported it.
Gephardt and the Democrats declined at the time to offer an alternative, in part because it would have required resolving an internal dispute over whether to seek the repeal of some or all of the tax cuts.
Some Democrats signaled they would attempt to turn any budget debate into a campaign-season attack on Republicans.
Rep. David Obey, D-Wis., the senior Democrat on the House Appropriations Committee, issued a statement saying that over 40 percent of the nation's "fiscal mess" is the result of Bush's tax cuts, and that an increase in the debt limit would increase interest rates.
The debt limit impasse lingered while lawmakers reported no progress in their attempt to agree on a compromise spending bill for the war on terrorism.
Budget Director Mitch Daniels told reporters the White House was solidly behind a House bill that provides for less spending, and said Bush would veto any measure that provided more.