Congress Votes to Raise Limit on U.S. Debt : Legislation: Bush is expected to sign it today. Efforts are being made to scale back the Medicare catastrophic care program.

Congress approved legislation Tuesday night that would ensure the government does not default on its debts, although lawmakers were unable to immediately resolve differences over how to scale back the Medicare catastrophic care program.

The debt bill was approved by the House on a 269-99 vote after being passed by voice vote in the Senate. President Bush was expected to sign the bill today, allowing the Treasury Department to schedule a Thursday auction of securities.

The effort to approve the must-pass legislation foundered temporarily because of an 11th-hour objection from Sen. John Heinz (R-Pa.), who demanded that the bill include his proposal to remove Social Security from calculations of the budget deficit.

Heinz removed his roadblock to the debt-limit bill when he was promised a separate vote on his proposal, which some lawmakers fear would open the burgeoning Social Security trust fund to raids from groups seeking to add new or expanded programs with the $3 trillion in extra funds that are expected to accumulate over the next 30 years.

Without an increase in the debt limit to more than $3.1 trillion, the federal government could run out of cash on Thursday, potentially forcing the Federal Reserve to order banks not to honor checks issued by the Treasury. Officials warned that a default could plunge credit markets into chaos and tarnish the government’s standing with international lenders who finance the U.S. deficit.

“It is important to our economy and our country that we not risk the adverse consequences of default by the government,” said Senate Majority Leader George J. Mitchell (D-Me.) in pleading with colleagues for a quick settlement of the problem.

Because increases in the debt-ceiling are necessary periodically to keep the government operating, lawmakers frequently attempt to attach their pet projects to such bills in an effort to ensure they become law.

With its authority to borrow temporarily expired, the Treasury Department on Tuesday suspended sales of savings bonds and special state and local bonds and postponed auctions of $40 billion in securities.

An amendment to the bill would repeal a provision of the 1986 tax revision law, bitterly fought by business, that was designed to prevent companies from discriminating against lower-paid workers in providing fringe benefits such as health insurance.

An agreement worked out by congressional leaders also called for lawmakers to move quickly on a new bill aimed at resolving the controversial issue of catastrophic care for the elderly.

Negotiators from the Senate and House would be ordered to work out a compromise between the House position, which favors total repeal, and the Senate stance, which eliminates unlimited coverage for doctors’ bills and prescription drugs but retains benefits for extended hospital care. Under both bills, the surtax of up to $800 imposed on the most affluent 40% of the elderly would be eliminated.

Meanwhile, Bush prodded lawmakers to pass a separate deficit-reduction bill that is needed to remove $16.1 billion in across-the-board cuts imposed last month.

An acceptable bill, Bush told reporters at a news conference, would narrow the deficit gap by at least $14 billion, considerably more than either house has yet approved. Moreover, Bush said, “if it’s all loaded up with special projects, I won’t sign it.”

The immediate problem facing Congress, however, was the debt bill, which would raise the government’s borrowing limit from $2.8 trillion to $3.1 trillion for the remainder of the fiscal year that ends Sept. 30.

Treasury Secretary Nicholas F. Brady told congressional leaders in a series of meetings and phone calls on Tuesday that the government could not tolerate further delay on the legislation.

The government has bumped up against its current credit limit and is unable to repay owners of about $13.8 billion worth of Treasury bills that fall due Thursday unless the higher debt ceiling is approved by then.

Brady told the lawmakers that action on the debt bill is needed by early today “at the latest.”