House Seeks Use of Foreign Aid for U.S. Needs : Budget: The diversion of $400 million to a transportation bill could add 150,000 jobs. A veto is threatened.

In a move that sets up another potential election-year veto battle with President Bush, the House modified the 1990 budget agreement Thursday by diverting $400 million of unspent foreign aid to job-creating domestic highway and transit projects.

The 213-190 vote reflected rising concern over unemployment. The extra $400 million for federal highway and transit projects would translate into 150,000 more jobs during the coming year, according to Rep. David R. Obey (D-Wis.), chief sponsor of the amendment.

White House officials said the President was prepared to veto the entire $35-billion transportation appropriations bill, of which the $400 million was a part, if the provision shifting the foreign aid funds wins Senate approval.

Under the legislation, the cap on foreign aid spending set in the 1990 budget agreement would be lowered by $400 million and the corresponding ceiling on domestic outlays would be increased by the same amount for the year starting Oct. 1.

The 1990 budget accord, however, divided outlays into three accounts--defense, international and domestic--and provided that savings in any one of them could not be shifted to raise outlays in another category. The House upheld that approach in a vote last March, refusing to divert defense savings to domestic programs.

In a statement issued before Thursday’s vote, the Office of Management and Budget decried this first attempt to divert funds. It said the diversion would “abandon the mutually agreed-upon discipline of the Budget Enforcement Act” and might slow recovery from the recession.

Republican leaders denounced the move as a bad-faith violation of budget discipline and political chicanery to get around self-imposed limits on spending.

“A deal is a deal,” said Rep. Robert H. Michel, the House minority leader said during the bitter debate. “The (Democratic) majority is asking us to break our word.”

But Democratic advocates said it was time to shift spending from foreign assistance to meet domestic priorities, such as repairing substandard bridges or highways and improving mass transit systems.

“It’s about time we say to people overseas: ‘Pay some of your own damn bills’ and let’s use that money for our people at home,” said Rep. Robert A. Roe (D-N.J.), chairman of the House Public Works Committee.

The debate indicated that the rise in unemployment to 7.8% in June, together with recent announcements of major layoffs by several prominent companies, had changed congressional thinking about whether to preserve rigid budget ceilings.

Rep. Dan Glickman (D-Kan.) said he had voted to keep the “fire walls” between the three accounts, but conditions had changed since then. “I think the budget agreement is good but it should not be locked in stone,” he said.

Several Republicans who backed the Obey proposal agreed. “I see this as a jobs bill,” said Rep. Helen Delich Bentley (R-Md.). Ranking GOP members on the public works panel also supported the switch.

Earlier, the House voted 268 to 143 for a Michel amendment that would require budget savings be allocated only to deficit reduction. Under the parliamentary procedure used by the House, however, the subsequent approval of Obey’s amendment canceled Michel’s provision.

Undaunted, Michel offered the same amendment again and it was approved, 268 to 115, but Obey insisted that it would have no effect on the shift of $400 million to transportation programs.

The overall transportation bill, approved overwhelmingly 306 to 74, would earmark $17.1 billion for federal highway program, $9 billion for the Federal Aviation Administration and $3.8 billion for the Federal Transit Administration.