House Rejects Effort to Shift Pentagon Funds : Legislation: The Democratic leadership suffers key blow. Bill pushed by Foley would have earmarked billions for domestic programs.

In a humiliating setback for the Democratic leadership, the House on Tuesday killed legislation that would have allowed billions of dollars in defense savings to be spent on domestic programs.

By a vote of 238 to 187, the election-year measure championed by Speaker Thomas S. Foley (D-Wash.) and his top lieutenants was defeated by 76 defecting Democrats and a solid phalanx of 162 Republicans.

Democratic leaders had hoped to shift Pentagon funds to expand social programs, such as education and health care, but opponents portrayed the measure as big spending legislation that would slash military programs and raise the $400-billion deficit.

“Many Democrats are very nervous about being labeled by Republicans as anti-defense or pro-spending this year,” one congressional source said.

The outcome also reflected the power of conservative Democrats, led by Rep. Charles W. Stenholm (D-Tex.), to block the plans of more liberal members of their party to shift funds from weapons programs to meet urgent domestic needs. In addition, some Democrats with military installations or defense industries in their districts voted against the bill.

Rep. Leon E. Panetta (D-Carmel Valley), chairman of the House Budget Committee who was a strong supporter of the bill, said the American people wanted to change budget priorities but the House majority was unwilling to take the risk.

“This is an institution that’s under siege,” Panetta said. “Members are running for cover and they don’t want to take on these choices. We’re paying a hell of a penalty when people take out institutional guilt on these programs.”

Since the Senate also failed to overcome a Republican-led filibuster against a similar measure, the effort to revise the 1990 budget agreement to permit a transfer of defense savings into social programs appears to be dead for this year. The legislation was opposed by President Bush, who had said that he would veto it.

The House, however, did approve another major piece of legislation that would continue foreign aid spending at current levels for the final six months of this fiscal year. The measure was passed, 275 to 131, even though overseas spending is usually politically unpopular in a time of recession.

The bill, which would maintain foreign aid spending at a rate of $14.2 billion annually, was sent to the Senate, which put off action until today.

At the insistence of the Bush Administration, the legislation does not include any funds for the loan guarantees that Israel has requested for the resettlement of Soviet Jews. The President had demanded a freeze on the construction of Israeli settlements on the West Bank as a condition for approving the guarantees--a condition that Israel has refused to accept.

It does include half of Israel’s $3-billion annual economic and military aid as well as $270 million for United Nations peacekeeping operations, including a new U.N. effort to restore peace to Cambodia.

Defeat on the long-delayed bill to tear down budget “firewalls” that prevented a shift in Pentagon savings to domestic programs was the second recent major setback for the House leadership.

An attempt to override Bush’s veto of a Democratic bill to reduce taxes for middle-income families and raise taxes on the wealthy failed to win even a majority in the House last Wednesday, losing 215 to 211.

While Foley has said that the legislative operations of the House are not being affected by the House bank scandal and investigation of the House post office, some rank-and-file Democrats said that there is a sour mood among the 267-member Democratic majority.

Even with a 100-vote advantage over Republicans, the leadership appears increasingly unable to advance its high-priority measures in a fractious House.

In the debate over the defeated bill, Rep. John Conyers Jr. (D-Mich.), its floor manager, argued: “Let’s stimulate the economy.” And House Majority Leader Richard A. Gephardt (D-Mo.) urged Congress to reject Cold War attitudes and embrace a new world order where domestic needs had greater priority.

But Republican foes, joined by Stenholm and others, said that the first priority should be the reduction of the $400-billion budget deficit.

“When you find yourself in a hole, the first rule is to stop digging,” Stenholm declared.

“The budget deficit is a cancer eating away at our economy,” added Rep. Byron L. Dorgan (D-N. D.), who usually supports the Democratic leadership but balked at this legislation.