The current debt limit is $16.4 trillion. The legislation does not set a specific limit; rather it would automatically increase the limit by the amount required to fund U.S. government obligations through May 18.
But that date is not a hard deadline, because the Treasury would retain the limited ability to exercise so-called extraordinary measures and juggle certain accounts to buy limited additional time before a default on U.S. obligations. Such steps could buy several additional weeks beyond May 18.
The measure also contains a "no budget, no pay" provision that withholds pay for lawmakers if the chamber in which they serve fails to pass a congressional budget resolution by April 15. That's a provision designed to press the Senate to pass a budget.
On Sunday, Sen. Chuck Schumer, D-N.Y., said the Senate would do just that and would use it to call for follow-up legislation that would increase revenues.
Under Congress' arcane budget procedures, a congressional budget resolution is a nonbinding measure that tries to set parameters for future legislation setting agency budgets and curbing federal benefit programs like Medicare.
Democrats have generally reacted coolly to the three-month extension, which would take the debt limit issue off the table for several months but leave other choke points in place, including sharp, across-the-board spending cuts that would start to strike the Pentagon and domestic programs alike on March 1 and the possibility of a partial government shutdown with the expiration of a temporary budget measure on March 27.
But failing to meet those deadlines would have far less serious consequences than defaulting on U.S. obligations like payments to bondholders.
"We should not be doing this three months at a time. We should resolve these issues, and we should not be playing games with the debt ceiling," said Rep. Chris Van Hollen, D-Md.
Republicans hope the need to deal with issues like the across-the-board cuts will cause Democrats and Obama to agree to spending cuts. Obama vowed he would not bargain over the debt limit. If the debt cap is not raised, the government would default on its obligations by as early as Feb. 15, Treasury says.