House Democrats discard larger debt limit House Democratic leaders, bowing to their party's deficit hawks, will move the year's final must-pass piece of legislation without a long-term increase to the national debt and without a large boost in infrastructure funding that was aimed at creating jobs. Majority Leader Steny H. Hoyer (D-Md.) said Monday evening that last week's proposal to increase the debt limit by more than $1.8 trillion had been discarded in favor of a more politically acceptable plan to give the Treasury Department a two-month extension on its current limit of $12.1 trillion, which is expected to be hit by New Year's Eve. The plan calls for raising the cap by $300 billion, to $12.4 trillion, according to a source familiar with the decision. "We're working towards a short-term debt extension," Hoyer told reporters as he emerged from an hour-plus meeting in the office of House Speaker Nancy Pelosi (D-Calif.). Conservative House Democrats had been demanding, in exchange for their votes to support a large debt-limit increase, a new pay-as-you-go law that would bar Congress from increasing spending or cutting taxes unless the cost is offset by spending cuts or revenue increases elsewhere. Fiscal conservatives in the Senate, meanwhile, led by Budget Committee Chairman Kent Conrad (D-N.D.), had been seeking the creation of a bipartisan commission with authority to force spending cuts or tax increases through Congress. It was unclear how those concerns would be addressed. Senate aides said talks of a deficit-reduction commission were still going on, particularly with the White House, which could offer to create such a panel by executive order. House sources said Pelosi was still open to a larger increase in the debt limit if the matter could be worked out in the Senate. Aside from the Senate's health-care debate, the final legislative wrangling of the year is over the annual funding bill for the Defense Department, which is slated to receive $626 billion for fiscal 2010, and what measures to attach to that bill. The debt limit increase had become one of the most controversial add-ons, after the annual deficit topped $1.4 trillion for 2009 and after months of criticism from Republicans of Democrats as the party of big government spending. Rep. Louise M. Slaughter (D-N.Y.), chairman of the House Rules Committee, said she expects her panel to consider soon the defense spending measure, along with some pieces that have garnered broad agreement among Democrats on both sides of the Capitol. Sources familiar with the talks suggested that this package would include the defense bill, a one-year extension of the estate tax at current levels, a two-month extension of the debt limit and an extension of unemployment benefits. The House could vote by Wednesday. Meanwhile, eager to show movement on addressing the bleak employment picture, House Democrats will move a separate legislative package later this week that will include tens of billions of dollars in infrastructure spending and other items designed to create more jobs. But the bill is not expected to even be considered in the Senate. Senate Democrats have indicated they will take up jobs legislation in January after they finish considering health-care reform. With federal funding for the Pentagon set to expire Friday night, the House will probably pass a short-term resolution that keeps funds flowing at current levels so the Senate can stay focused on health care, possibly finishing over the weekend, and then take up the defense spending bill early next week. The Senate, with its super-majority rules, has proved the highest hurdle in the legislative endgame. Hoyer said his leadership team's motivation is based almost entirely on one objective: "what we can get through the Senate." Staff writer Lori Montgomery contributed to this report.