Iraq Loan Plan a Setback for Bush

In an embarrassing rebuff to President Bush, the Senate on Thursday approved a measure that could force Iraq to repay half the $20 billion the administration is seeking for reconstruction of the war-torn country.

The Senate vote was 51 to 47 despite a fierce lobbying effort by Bush and his senior lieutenants, who saw the amendment to the overall Iraqi funding bill as a direct challenge to Bush’s desire to provide the money with no strings attached and not burden Iraq with more debt.

Pleading unsuccessfully for his colleagues to back the president, Senate Majority Leader Bill Frist (R-Tenn.) said the amendment “has the very real potential of complicating and, yes, even undermining what we all want to do: to successfully stabilize Iraq.”

The measure would split the $20 billion into two installments: The first $10 billion would be available immediately as a cash grant. The second $10 billion would be treated as a loan initially but would be converted into a grant if nations that lent money to President Saddam Hussein’s regime -- such as France, Germany and Russia -- would forgive most of the debt.

GOP leaders managed to block a similar amendment in the House on Thursday night as both chambers debated legislation that would provide most of the $87 billion Bush has requested for operations in Iraq and Afghanistan, including the reconstruction money.

But in the Senate, eight Republicans deserted the president and joined 43 Democrats to pass the loan amendment. Bush allies said they hoped the measure would be dropped from the final legislation when House and Senate negotiators meet early next week to iron out differences between their versions.

“We’re disappointed at the outcome, but we haven’t given up on getting the right result at the end of the process,” Sen. Mitch McConnell (R-Ky.) said.

Still, the Senate vote was a rare rebuff to Bush on a major foreign policy issue. Bush has put his prestige on the line by personally lobbying wayward Republicans in an unusually intense and determined campaign to keep his aid proposal intact.

Senate Minority Leader Tom Daschle (D-S.D.) said the vote sent a bipartisan message that the Bush administration needed to change its approach to Iraq: “It must do more to ensure that America’s troops and taxpayers don’t have to go on shouldering this costly burden virtually alone,” he said.

California’s Democratic senators, Dianne Feinstein and Barbara Boxer, voted for the loan measure. The eight Republicans voting for it were Sam Brownback of Kansas, Ben Nighthorse Campbell of Colorado, Saxby Chambliss of Georgia, Susan Collins of Maine, John Ensign of Nevada, Lindsey O. Graham of South Carolina, Lisa Murkowski of Alaska and Olympia J. Snowe of Maine. Four Democrats voted against the amendment: Joseph R. Biden Jr. of Delaware, Maria Cantwell of Washington, Daniel K. Inouye of Hawaii and Zell Miller of Georgia.

The Senate’s action Thursday was the latest sign of eroding public and political support for Bush’s Iraq policy. After enjoying stratospheric approval ratings earlier this year for his handling of the war, Bush now is laboring to keep public opinion behind his postwar policy. Polls have shown strong opposition to Bush’s budget request, and even Republican stalwarts have been wary of spending so much money on Iraq’s infrastructure at a time when the federal budget deficit has swollen to nearly $500 billion for the current fiscal year and their constituents are feeling an economic and fiscal squeeze at home.

“It is very hard for me to go home to explain why you have to give $20 billion to a country sitting on $1 trillion worth of oil,” said Graham of South Carolina.

Still, it is a foregone conclusion that the overall funding bill will be approved today in both the House and the Senate because the $67 billion it requests for military operations in Iraq and Afghanistan enjoys broad bipartisan support.

As debate opened in the House, Republicans cast the bill as the latest installment in Bush’s war on terrorism. “With this vote, every member of this House will tell the world how seriously they take this war on terror,” House Majority Leader Tom DeLay (R-Texas) said.

The funding issue, like last year’s vote to go to war in Iraq, split Democrats. Many are supporting the president’s request despite reservations about Bush’s policy. But others joined with House Minority Leader Nancy Pelosi (D-San Francisco), who called the bill a “bailout for [Bush’s] failed policy.”

Democrats in Congress who are seeking their party’s presidential nomination are divided: Supporting the $87-billion package are Sen. Joe Lieberman of Connecticut and Rep. Richard A. Gephardt of Missouri; opposing it are Sen. John Edwards of North Carolina, Sen. John F. Kerry of Massachusetts and Rep. Dennis J. Kucinich of Ohio.

But there were also divisions among Republicans on the question of how the money should be provided.

Bush and his allies have argued against making Iraq repay any of the aid because the country is saddled with at least $95 billion in debts incurred under Hussein. They contend that if the U.S. does not give its aid as a grant, it will be harder to persuade other nations to forgive Iraq’s old debts or to contribute grants to Iraq’s reconstruction. The U.S. will be seeking such support at a conference of potential donors in Spain next week, and the administration has urged Congress to approve the $87 billion before then.

But to many in the Senate, the loan amendment was attractive because it addressed two aims: reducing the cost to U.S. taxpayers and pressuring the administration to seek more international support for Iraq.

The administration’s heavy lobbying effort won some converts.In the House, the Republican who initially led the charge for making the aid a loan backed down. “We need to come together as a nation, as a people, as a Congress,” said Rep. Zach Wamp of Tennessee. “This is a tough pill for U.S. taxpayers to swallow, but it’s a necessary pill.”

To give Republicans a chance to express their concerns, GOP leaders allowed conservative Rep. Mike Pence (R-Ind.) to offer an amendment making half the $20 billion a loan -- and then killed the amendment on a technicality without bringing it to a vote. Democrats then offered a similar amendment, which was defeated, 226 to 200.

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Times staff writer Sonni Efron contributed to this report.