Bush advisers threaten veto if money for Iraq is as loans

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The Bush administration yesterday said the president should veto the Iraq spending bill unless senators drop their provision that would make half the reconstruction money a loan, rather than a grant, to Iraq.

Including loans will slow efforts to stabilize the region and it "impairs our ability to encourage other nations to provide badly needed assistance without saddling Iraq with additional debt," Josh Bolton, director of the Office of Management and Budget, wrote congressional leaders.

Mr. Bolton said the president's advisers would "recommend that he veto the bill" -- the typical language for conveying a veto threat -- if it included loans. He also said using loans "raises questions about our commitment to building a democratic and self-governing Iraq."

The president has requested $87 billion to resupply the U.S. military, continue the global war on terror and help rebuild Iraq. Both the House and Senate last week approved versions of the bill, but the Senate voted to make half of the reconstruction money a loan. Now House and Senate negotiators are hammering out differences -- chiefly the loan proposal.

With Republican leaders in both chambers opposed to loans and their hand now strengthened by the president's threat, the president is virtually guaranteed to receive a bill from Congress to his liking.

"It effectively seals the deal that the president will prevail in the House-Senate conference," said Stuart Roy, spokesman for House Majority Leader Tom DeLay, Texas Republican.

Sen. John Ensign, Nevada Republican and loan supporter, said the letter's language still leaves the president "wiggle room" and promised to keep fighting for the loans.

"We knew the odds were against us going into conference, but we're still going to push it," he said.

He and other backers object to the fact that other nations such as France and Germany stand to be repaid on their loans from the Saddam Hussein era. The provision allows the loan to be forgiven if other nations also forgive Iraqi debt.