House Kills Bill Needed to Keep U.S. Operating : $370-Billion Spending Measure Rejected Over Defense Fund Hike; Some Agencies Out of Money

The Democratic-controlled House, angered by President Reagan’s continued pressure for higher defense spending at a time when Congress is trying to trim the federal deficit, early today rejected a $370-billion omnibus spending bill needed to keep the government operating through the current fiscal year.

Even opponents of the spending bill were surprised when the House defeated the measure by a vote of 239 to 170 in a post-midnight session. There had been no dissenting voices earlier in the day when the measure was approved enthusiastically by a House-Senate conference committee.

No Federal Shutdown

After the vote, the House adjourned for the night without providing any funding for the government, even though many federal agencies technically ran out of money at 6 p.m. EST. Despite the interruption in funding, the Administration made no immediate effort to shut down federal offices or furlough workers.

Although the conference committee measure had been hailed as a victory for arms control enthusiasts because it would halt all testing of anti-satellite weapons, liberal Democrats argued that they were being forced to pay too high a price for the victory. Specifically, they objected to a $298.7-billion appropriation for defense--a 1.8% increase over last year.

“It’s the most expensive piece of arms control that we have ever seen,” said Rep. Barney Frank (D-Mass.). “We paid about $10 billion for it.”

The House voted earlier this year to hold defense spending to last year’s levels, but the Senate provided an increase for inflation, and House-Senate negotiators decided to split the difference in the final bill.

Some Republican conservatives also voted against the bill to express opposition to a provision that would make it easier for members of Congress to increase their own pay in early 1987.

Democrats and Republicans alike predicted that the process of funding the government would become even more confused next year under a budget-balancing measure enacted late last week and known by the names of its authors, Republican Sens. Phil Gramm of Texas and Warren B. Rudman of New Hampshire.

“If you think this is bad, you wait for the chaos that’s going to develop here under Gramm-Rudman,” said Rep. Silvio O. Conte (R-Mass.).

Other provisions of the rejected bill would have lifted a 16-year ban on chemical weapons production, abolished the Synthetic Fuels Corp., raised by $7,540 the amount that a senator may earn annually in honoraria for speeches and provided $300 million for two new wide-bodied presidential jets, as well as paving the way for a possible congressional pay raise.

In threatening a veto, Reagan had telephoned Senate Appropriations Committee Chairman Mark O. Hatfield (R-Ore.) from Air Force One Monday and demanded a long list of changes in the bill. Reagan and other Administration officials were particularly angry about the ban on testing of anti-satellite weapons.

‘Life-or-Death Veto’

Pentagon spokesman Robert B. Sims said that the ban, which could be lifted only if the Soviet Union resumed testing of its anti-satellite weapons, “gives the Soviets life-or-death veto power over a vital U.S. defense program.” The Soviets have not tested their system since 1982.

“It undercuts U.S. diplomacy in the arms control arena and severely limits our ability to respond to threats against us and our allies from hostile space systems,” Sims added.

But congressional leaders had decided to ignore the veto threat.

“We’re going to gamble--say, ‘Heck with it, sign it or veto it,’ ” Hatfield had declared after the conference panel approved the measure, adding that the President might be persuaded to sign it because of the 1.5% increase in defense spending.

The apparent lack of preparations for a government shutdown was perhaps the best indication that Reagan had intended to sign the bill. Administration officials had instructed all federal employees to report for work today, even though funding for some agencies had expired.

Employee Furloughs

Federal employees have been furloughed twice previously under similar circumstances during Reagan’s presidency.

The omnibus spending bill would have provided money for all previously unfunded agencies--including the Defense, Agriculture, Justice, Treasury, Commerce and Transportation departments--through the current fiscal year, which ends Sept. 30.

The House-Senate conference committee had defeated a motion by Sen. William Proxmire (D-Wis.) that would have deleted a provision in the spending bill that allowed an increase in the limit for Senate honoraria. Proxmire accused the committee members of trying to enact the measure secretly without debate.

Members of both chambers currently are restricted from accepting honoraria in excess of $22,500 a year, or 30% of the annual congressional salary. The bill would have allowed the limit to rise to 40% in the Senate, but the raise would not apply to members of the House, whose own rules prescribe a 30% limit.

Rep. Vic Fazio (D-Sacramento), chairman of the subcommittee that drafted the provision, said that senators had threatened to press for new restrictions on the outside activities of House members unless the honoraria increase was allowed. The Senate’s ultimate goal is to abolish the limit, he said.

To force House approval of the new honoraria limit, the Senate had approved an amendment to the spending bill by Sen. Joseph R. Biden Jr. (D-Del.) that would have prohibited all members of Congress from earning any compensation for professional services performed for any firm, partnership or association. Currently, the Senate has such restrictions; the House has none.

Amendment Killed

The Senate negotiators then offered to kill the Biden amendment in exchange for the higher honoraria limit, and the House negotiators agreed, to avoid a fight over the issue of outside compensation, which was potentially embarrassing to the House.

According to Fazio, House members opposed the Biden amendment because it would impose the restrictions on them midway through the current legislative session. In addition, he argued, House members should not be forced to sever business contacts when they come to Washington because, unlike senators, whose terms are six years, they are elected for only two years.

In addition to the honoraria, the committee had adopted language that would make it easier for Congress to enact a pay raise for itself next year. The bill stated that an expected raise proposal by the Federal Pay Commission would take effect automatically in early 1987 unless both the House and Senate voted to reject it.

Hatfield had said that, although the bill was $3 billion below Reagan’s overall spending request, it exceeded the Administration’s proposed levels for domestic programs and fell short of the Pentagon’s proposal for defense spending. Reagan was particularly opposed to a $400-million appropriation for the development of “clean coal” technology, approved by House-Senate negotiators Monday.

‘Star Wars’ Funding

At the same time, Hatfield noted, the President was pleased with many parts of the bill, including the funding of binary nerve gas production, beginning Oct. 1, and the appropriation of $2.75 billion for research on the President’s so-called “Star Wars” space-based missile defense system.

In addition, Administration officials expressed satisfaction that the committee defeated an amendment by Sen. John Glenn (D-Ohio) that would have required the United States to negotiate new restrictions on the U.S.-Chinese nuclear cooperation pact signed by the President during his visit to Peking in April, 1984.