U.S. lawmakers geared up for a tough budget battle Saturday after Republicans agreed to a three-month increase to the U.S. debt ceiling but made further extensions of the government's borrowing authority conditional on steep spending cuts.  

The Republican-led House of Representatives will hold a vote next week on the temporary measure, Majority Leader Eric Cantor announced at the end of his party's two-day work retreat outside Washington.

The move could help defuse a fiscal time bomb that Congress and the White House face in late February and early March with the nation hitting its debt ceiling, looming automatic federal spending cuts and debate over the budget.

The three-month extension of U.S. borrowing authority would buy time for the Senate to pass a non-binding budget, Cantor said.

 The House has approved budgets every year of Barack Obama's presidency, but the Senate has not passed one for four years.  

Should they fail to approve a budget by April 15, the legislation would withhold lawmakers' paychecks.  

"Members of Congress will not be paid by the American people for failing to do their job. No budget, no pay," Cantor said. "It's time to come together and get to work."    
White House spokesman Jay Carney said the administration was "encouraged" by the development.

Obama has repeatedly stressed he will not negotiate on raising the debt ceiling and has demanded that Congress act so the government can meet its obligations.   

Some Republicans have signaled they would be willing to let the government shut down unless a debt limit increase was met with an equal reduction in federal spending.

In the two months after Obama's re-election, Republicans and Democrats were locked in a bruising battle over the so-called fiscal cliff, the combination of across-the-board tax hikes and mandated spending cuts that would have kicked in if Congress had not acted by year's end.

A deal was reached to allow taxes to rise only on the very wealthy, but Congress delayed a negotiation on the cuts, known as the sequester, until early March.   

Friday's move is seen by some officials as a concession and a sign of a more pragmatic approach to debt talks by House Republicans amid pressure over the prospect of sending the government into default.   

U.S. stocks edged mostly higher on news of the Republican plan, with the Dow Jones Industrial Average up 0.39 percent to 13,649.70, and the broad-based S&P 500 adding 0.34 percent to close at 1,485.97.   

Democratic Senate leader Harry Reid's office suggested he would swiftly bring the Republican measure to a vote.

"If the House can pass a clean debt ceiling increase to avoid default and allow the United States to meet its existing obligations, we will be happy to consider it," Reid's spokesman Adam Jentleson said in a statement.

Congressman Paul Ryan, the powerful House Budget Committee chairman and Republican Mitt Romney's losing vice presidential nominee, backed the proposal but insisted the Senate pass a budget that gives priority to how taxpayer dollars are spent.  

Any deal to temporarily raise the debt ceiling "rests on the recognition that our challenge is twofold: We have to pay our bills today, and we have to make sure we can pay our bills tomorrow," Ryan said.

House Speaker John Boehner, the top Republican in Congress, favored the proposal -- and made it clear the debt limit would remain a bargaining chip despite Obama's insistence to the contrary.   

"Before there is any long-term debt limit increase, a budget should be passed that cuts spending," Boehner said.   

Delaying the debt debate could allow lawmakers to focus first on the $110 billion in mandated cuts set to hit the military and domestic programs this year, as well as the temporary funding that is keeping the government running and which expires at the end of March. (AFP)