(Recasts with possible debt limit plan, adds quotes)
By Richard Cowan
WASHINGTON, Oct 20 (Reuters) - Republican leaders in the U.S. House of Representatives on Tuesday planned to advance a debt limit increase plan that also would impose strict new controls on federal spending that Democrats have long opposed, a senior Republican aide said.
House Speaker John Boehner was planning to sketch out the proposal to rank-and-file Republicans during an evening closed-door meeting, with the goal of possibly moving such a bill onto the House floor on Friday, according to the aide, who asked not to be identified.
Boehner is scheduled to retire from Congress on Oct. 30 and passage of a debt limit increase before a Nov. 3 deadline, when the Treasury Department expects to run out of borrowing authority, could be one of his last acts as speaker.
The meeting of House Republicans was steeped in drama as House Ways and Means Chairman Paul Ryan also was expected to indicate whether he might run for speaker to replace Boehner.
Earlier on Tuesday, House Majority Leader Kevin McCarthy, the No. 2 Republican in the chamber, told reporters that he did not think there would be enough votes in the House to pass a straight-forward debt limit increase, without controversial add-ons, that President Barack Obama and his fellow Democrats in Congress want.
If House Republicans go ahead with the plan being offered by Boehner, they would be embracing key points of a budget proposal crafted by a large group of conservative Republicans earlier this year. The head of the group, Representative Bill Flores, recently said such a proposal could focus in part on reining in "mandatory programs," which usually refers to the Social Security retirement program and federal healthcare programs for the elderly.
Democrats have vowed to protect those programs. They have the muscle to block such a debt limit bill in the Senate.
If the conservative Republicans' debt limit plan fails on the first round, it is not clear whether House and Senate Republican leaders, who control both chambers of Congress, would then advance a "clean" debt limit increase without the controversial add-ons. Such a measure might have a difficult time passing Congress, adding to jitters in financial markets over a possible devastating default.
Earlier on Tuesday, Treasury Secretary Jack Lew and Fed Governor Jerome Powell met with Senate Finance Committee members to discuss a third pressing issue, the need for action on raising federal borrowing authority before a Nov. 3 deadline.
House and Senate Republican and Democratic leadership staff worked over the 10-day recess trying to find a winning formula for funding federal agencies beyond Dec. 11, when current money expires.
Unless progress comes soon, lawmakers' goal of writing a two-year budget deal could evaporate with the focus shifting to just paying for agency programs through Sept. 30, 2016, when the presidential campaigns will be in full throttle.
One veteran House Republican aide said there had been no progress in those staff-level discussions over the recess.
Quick passage of a debt limit bill with strong Democratic support, besides calming jittery financial markets, would save whoever the next speaker is from an early, divisive Republican Party fight.
Reporting by Richard Cowan, additional reporting by David Lawder; Editing by Bernard Orr and Diane Craft