By John Shaw

WASHINGTON (MNI) - Democratic and Republican leaders in the Senate are intensifying discussions about how they should handle the coming vote on increasing the statutory debt ceiling.

Given that there is a Democrat in the White House and Democratic majorities in Congress, Senate Majority Leader Harry Reid faces the difficult challenge of developing a successful strategy to pass the debt ceiling increase.

Senate Minority Leader Mitch McConnell is in the far more enviable position of being able to use the debt limit vote to make political and policy arguments--not pass the hike.

Reid has not tipped his hand about when he will schedule the debt limit vote or under what circumstances.

Some lawmakers have said that one option is to place the debt ceiling hike on the 2010 fiscal year defense spending bill. Lawmakers are typically reluctant to vote against the defense spending bill.

As to the timing of the vote, lawmakers and staffers have said they expect the vote in December. House Majority Leader Steny Hoyer said that congressional Democratic leaders would like to adjourn for the year by Dec. 18.

This would mean the debt ceiling vote would occur before then.

The debt ceiling is $12.1 trillion. According to Treasury on Wednesday the total debt subject to the limit is now $11.973 trillion.

Senate Majority Whip Dick Durbin said this week that the debt ceiling must be increased by the end of the year, but offered no specific date.

Several weeks ago, a group of nine moderate Senate Democrats said they want to link the debt hike bill with a measure to create a special entitlement reform panel to slash future deficits.

In a letter to Reid, the senators said that even if Congress passes a $925 billion increase in the debt ceiling this fall, an additional increase will be needed next year.

"We believe Congress needs to adopt a special process to deal with our nation's long-term fiscal imbalances. We do not believe that action on these important issues will occur under the regular order in Congress," the letter said.

The group of Democratic senators noted that there are various proposals in Congress to create a special panel to develop a comprehensive entitlement reform plan to cut the deficit in future years.

They do not identify which approach is preferable, but say that a "special process" is required to craft a comprehensive package that Congress will vote on.

At a briefing this week, Sen. Judd Gregg, the ranking Republican on the Senate Budget Committee, said the Senate should vote "now" on a bill to increase the debt ceiling.

Gregg said Republicans would like to offer several amendments to the debt hike bill. These amendments, he said, would freeze discretionary spending, cut some of the spending from the recent stimulus bill, allocate any unused TARP funds for deficit reduction and create a special entitlement reform panel.

Gregg said that he is concerned the need for the debt ceiling increase will occur in "the middle" of the Senate's debate on health care reform. That debate is expected to begin Saturday and extend throughout December.

Congress increased the debt limit from $11.3 trillion to $12.1 trillion in February. It was attached to the $787 billion fiscal stimulus package.

The House voted to increase the debt ceiling to $13 trillion this spring when it passed its fiscal year 2010 budget resolution. Senate rules require a separate vote.

Lawmakers have had to increase the debt ceiling seven times since 2001.

** Market News International Washington Bureau: (202) 371-2121 **

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