Senate Turns Half of Iraq Aid Into Loans

[Hawk]

Senate Turns Half of Iraq Aid Into Loans

Oct 17, 4:32 AM (ET)

By JIM ABRAMS

WASHINGTON (AP) - The Senate disregarded an intense lobbying campaign by the White House and decided that Iraq eventually should have to repay half the $20.3 billion President Bush wants to rebuild the country.
The House, however, narrowly rejected a move to specify that half the reconstruction money be in the form of loans, complicating negotiations between the two chambers on the $87 billion package to finance American military and aid efforts in Iraq and Afghanistan.
Both the Senate and House were aiming to finish work on the bills Friday, and, despite strong Democratic criticism of the president's postwar policies in Iraq, both measures were expected to pass by wide margins.
The president and his top aides, including Vice President Dick Cheney and Secretary of State Colin Powell, pressed lawmakers to make all reconstruction money grants rather than loans. They argued that loans would worsen Iraq's foreign debt and undermine efforts to get other nations to forgive their outstanding loans to Iraq.
"I've never seen the secretary of state as engaged as he was on this issue," said Sen. John McCain, R-Ariz., who supported the administration stance.
"There was just some very sharp elbows thrown by administration officials" on the loan issue, said Rep. Mike Pence, R-Ind., who unsuccessfully tried to move a loan amendment in the House.
But the administration was confronted by lawmakers who said constituents were disturbed by the idea that the United States, while racking up record federal deficits, was giving billions in aid to a nation sitting on the second largest oil reserves in the world.
"It was very difficult to stop this train because it made so much sense," said Sen. Olympia Snowe, R-Maine, one of eight Republicans who voted for the loan amendment, which passed 51-47 Thursday.
Senate Democratic leader Tom Daschle said the vote sent a strong message to the Bush administration that "it must do more to ensure that America's troops and taxpayers don't have to go on shouldering this costly burden virtually alone."
In the House, Democrats David Obey of Wisconsin and Tom Lantos of California sought to convert half the $18.6 billion in the House bill for reconstruction, but lost, 226-200.
Senate Majority Leader Bill Frist, R-Tenn., promised to work hard to remove the loan provision when House and Senate negotiators meet, probably next week, to decide on the final version they will send to the president.
The goal is to get the bill on the president's desk before next week's conference of donor nations in Madrid, Spain.
But Frist acknowledged that "back home, people were asking for loans. ... It was very divided, very close, and that probably reflects feelings around the country."
There was little controversy over the bulk of the emergency spending package, $66 billion to sustain U.S. military operations in Iraq and Afghanistan. Debate centered on the money to restore economic and political stability in Iraq, which in the House bill included $793 million for health care programs, $2.8 billion for potable drinking water, $217 million for border security, $5.65 billion for electricity generation and $2.1 billion to rebuild Iraq's oil infrastructure.
Supporters argued that the quick creation of a stable, prosperous Iraq was in America's national interest. "Reconstruction money is defense spending. It is war spending and it is homeland security spending," House Majority Leader Tom DeLay, R-Texas, said.
Under the Senate loan amendment, the $10 billion in loans would be transformed into a grant if other countries agreed to forgive at least 90 percent of the debt they were owed by Iraq. That debt is usually estimated at between $90 billion and $127 billion.
The loan proposal was the most significant change lawmakers have made in the mammoth spending package that the president proposed on Sept. 7.
Cheney called senators during the day hoping to block the loan plan, congressional aides said. And two Republican senators - Arlen Specter of Pennsylvania and Kay Bailey Hutchison of Texas - who initially had said they supported loans switched Thursday and said they had been persuaded to oppose them.
The White House budget office released a statement saying the administration strongly opposed loans. But the letter omitted any mention of a veto threat, which the office sometimes includes to send a strong message of opposition.
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The House bill is H.R. 3289. The Senate bill is S. 1689.