Bush Seeks Latin Aid From Pentagon Budget : Congress: He asks for $800 million in cuts to help Nicaragua and Panama. And he wants it in two weeks.

President Bush on Tuesday proposed cutting the defense budget by $800 million to finance aid to Nicaragua and Panama, and he gave Congress two weeks to negotiate a deal with his aides on which programs to reduce.

Nicaragua would receive $300 million of the funds, Bush said. The Administration earlier this year asked for about $500 million in cash aid for Panama.

Bush also signed an executive order lifting the trade embargo imposed on Nicaragua by the Reagan Administration and said he will provide an immediate $21 million in food and other humanitarian aid to that country. He also plans to request $200 million for Nicaragua next year, he said in a press conference.

The aid “is urgent to advance the prospect for democracy” in both countries, Bush said. “Damage to both economies has been great. We must help.”

The package quickly put congressional Democrats in a bind, drawing pained comments from Capitol Hill leaders such as Rep. John P. Murtha (D-Pa.), chairman of the House panel that appropriates defense funds.

“This is going to be a real painful exercise,” Murtha said. “It’s going to be very, very difficult.”

“We want to work with them and do it as soon as possible,” said House Speaker Thomas S. Foley (D-Wash.). But, he added, “I don’t really accept the artificial deadlines.”

The reaction from Congress underlines the complications of cutting the defense budget and using the resulting “peace dividend” to fund new programs.

Democrats have called for cuts in defense, and many have spoken in favor of aid to the new governments in Panama and Nicaragua. However, the list of defense projects that the Administration would like to cut includes many that are special favorites of powerful members of Congress, both Democrats and Republicans.

And many members of Congress who would like to cut the defense budget would prefer to see the savings spent at home, rather than on foreign aid programs, which have never been popular with voters.

If Congress and Administration negotiators cannot reach agreement by March 27, the President said, he will ask for authority to make the cuts unilaterally.

That statement presented the Democratic leaders on Capitol Hill with an implied threat that if they do not move quickly, Bush will accuse them of letting pork-barrel considerations override the need to help emerging democracies in Latin America.

“These nations need our help to heal deep wounds inflicted by years of strife and oppression, years of loss and deprivation,” Bush said. “We must act and act soon.”

He added that “there is a sense of urgency” in the aid requests from Latin America.

Panamanian officials have been complaining that U.S. aid has been slow to arrive, and President Guillermo Endara publicly fasted to protest the delay. The White House in January asked for about $1.1 billion in aid for Panama, but more than $500 million of that was in the form of trade preferences and other incentives. The request for $500 million in cash is still under review in Congress, with lawmakers complaining that the Administration has been slow in answering questions about the program.

“As recently as just a few hours ago, we could not get the Administration to answer the two basic questions on Panama: Where is the money coming from, and where is it going?” Sen. Patrick J. Leahy (D-Vt.) said Tuesday.

“I don’t think anyone is going to vote for it until they know what it’s going to be spent on,” added Leahy, who chairs the Senate panel handling foreign aid appropriations.

The Administration wants very much to have the aid package for Nicaragua passed by Congress and ready to go by the time President-elect Violeta Barrios de Chamorro takes office April 25. The prospect of U.S. aid was a major part of Chamorro’s U.S.-supported campaign against the Sandinistas.

The Nicaraguan aid package would include money to help stabilize its currency, fund economic development, pay for emergency fuel, medical and agricultural supplies and clear up some of the debt the country owes to the World Bank and other international financial institutions. U.S. law restricts American aid to countries that owe money to such bodies.

Bush also wants to provide about $45 million to help resettle Contra soldiers and refugees. Bush said he is still “concerned” by the reluctance of the Contras to surrender their weapons and return to Nicaragua from their camps in Honduras. But, he added, he is “less concerned than I was about the peaceful transfer of power” in Nicaragua after hearing from Vice President Dan Quayle on his meetings with President Daniel Ortega.

Ortega met with Quayle on Monday in Santiago, where both were attending inaugural ceremonies for Chilean President Patricio Aylwin. Ortega promised that the transition to Chamorro’s government will be peaceful and that the Sandinistas will not try to prevent her from appointing new defense and interior ministers.

There is considerable support in Congress for aiding both Nicaragua and Panama. But finding the money to pay for the new aid is far more complicated. The Administration last month submitted a list of about $2 billion in defense projects that it would like to see removed from the budget Congress approved late last year. On Tuesday, the Pentagon provided a list of $300 million more in “newly identified sources of savings” that could also be used to fund the aid package.

Both lists, however, target many spending programs supported by key lawmakers--construction programs on military bases, for example, or weapons programs that provide large numbers of jobs. In addition, lawmakers say the Administration in some cases has tried to offer some of its proposed “savings” for more than one program--a form of double counting that has created considerable confusion.

Times staff writer Don Shannon also contributed to this story.

PEACE OVERTURE--Salvador rebels agree to cease attacks on civilian targets. A9

BUSH PROPOSES ‘FUND FOR DEMOCRACY’

President Bush has proposed an $800-million Fund for Democracy that would disburse $300 million in aid to Nicaragua that he requested Tuesday and $500 million in aid for Panama that he requested in January. The aid would be distributed as follows: Nicaragua ($300 million *)

$75 million to help support currency.

$60 million for development projects, including building schools, repairing roads and helping fund independent courts and police forces.

$60 million for emergency aid to the economy, including seeds, fertilizer, farm equipment, oil and medical supplies.

$45 million to help resettle Contra fighters and refugees.

$50 million to help eliminate $234 million in debts Nicaragua owes to international financial institutions.

$10 million for emergency employment aid.

$1 million for technical assistance in economic management.

Panama ($500 million)

$45 million in loans to businessmen to rebuild inventories looted immediately after the U.S. invasion.

$130 million to help eliminate debts Panama owes international financial institutions.

$185 million to help Panama dismantle state-run monopolies that Noriega established, which U.S. officials say are hampering economic recovery.

$140 million to help repair or rebuild roads and bridges that languished during the Noriega years or were blown up during the U.S. invasion.

* Because of rounded-off figures, Nicaragua aid breakdown totals $301 million.