Iraq Money Tied Up in Senate Squabbling

Work continues on the ground in Iraq (search) as coalition troops try to get the country's infrastructure up and running, but Congress is mired in debate about whether to give Iraq $20 billion for reconstruction efforts and how it should be handed out.

Lawmakers seem confident that a deal can be struck that would allow the money to reach the Middle Eastern nation. A Senate bill was being debated Wednesday. Senate Republicans hope to vote on it before the chamber lets out for a weeklong October recess, which starts at the end of the week.

The House has not yet written its version of the bill, but House Democrats who went to Iraq in a bipartisan congressional delegation last weekend said Tuesday that they would support passage of the reconstruction loans without imposing strict conditions.

That could help guarantee that House GOP leaders pass their version by mid-October, setting up negotiations with the Senate, which is discussing whether the cash should be given in the form of a loan or a gift.

On Wednesday, House Majority Whip Roy Blunt, R-Mo., said he believes the House would approve President Bush's request as a grant, not a loan.

The $20.3 billion for rebuilding Iraq's economy, government and public works is part of a larger $87 billion package to pay for military operations in Iraq and Afghanistan.

Of the nearly $66 billion in the bill to be spent on military operations, $51 billion will go to supporting troops in Iraq, $11 billion will go to troop activities in Afghanistan (search) and the rest will be used for Pentagon efforts against terrorists elsewhere.

Defense Secretary Donald Rumsfeld acknowledged Tuesday that the reconstruction funds won't finish up the whole job.

"The $20 billion does not cover Iraq's needs, which are far greater. The hope is in coming years the rest will come from Iraqis as well," he said.

Senate Democrats have argued that the money for Iraq should come in the form of a loan that the nation would eventually have to repay. Sen. Byron Dorgan, D-N.D., failed by one vote to get an amendment passed in the Senate Appropriations Committee on Tuesday that would make the reconstruction funds a secured loan. The entire bill passed the committee 29-0.

Dorgan said that he may bring the proposal up again when the supplemental bill goes to the floor for a full vote.

"The full Senate is going to vote on the proposition that Iraqi oil should support the reconstruction of Iraq, not the American taxpayers," he said.

Administration officials strongly oppose turning the cash into a loan, and say it would hamper growth of Iraq's economy and fuel Arab arguments that the United States is chiefly interested in Iraqi oil.

State Department officials say lending the money to Iraq would only add to their dire economic problems.

"The total of debts that Iraq owes, plus reparation debts, both brought on by Hussein, Saddam Hussein, there's a pretty crushing debt burden on the people of Iraq and one, I don't think we would want to add to it," said Deputy Secretary of State Richard Armitage.

The interim president of the Iraqi Governing Council claimed a grant rather than a loan would send a powerful message.

"This money if given as a grant would be a very big boost to the relationship between the United States and Iraqi people, and indeed the entire Arab and Muslim world," said Ahmed Chalabi.

Emerging from a meeting with Chalabi and other IGC members, Sen. John Warner, R-Va., urged Congress to give the money in the form of a grant to avoid the impression that the U.S.-led ouster of Saddam Hussein was done to get a hold of Iraq's oil, believed to be the second-largest reserve in the world.

But critics in the Senate argue that priorities in the United States are being neglected and should not be overlooked in order to rebuild another nation.

"As we put more money into Iraq, we take it out of our schools, our hospitals and our Social Security trust fund," said Sen. Richard Durbin, D-Ill.

"Either it's going to be the United States or Iraq. Well, we're borrowing the money today to give to Iraq so they don't have to borrow the money. Now, you find an American that thinks that makes sense," said Senate Minority Leader Tom Daschle, D-S.D., who added that he was told that the Bush administration never consulted with the IGC about what an appropriate sum would be for reconstruction.

Sen. Robert Byrd, D-W.Va., ranking member of the Senate Appropriations Committee, said no money should be handed over to the administration to distribute in Iraq until it comes up with a clear explanation of how it plans to spend the cash.

"Anyone who looks at the details of the president's request can plainly see that the administration is still not giving us the whole picture about their reconstruction plans," Byrd said.

Byrd also criticized the Bush administration for not seeking more international backing before launching war in Iraq and embarking on its recovery.

"The president squandered the good will of our allies after Sept. 11, and now he is asking Congress to shovel money into the hole he has dug for himself in the international community," Byrd said.

Daschle added that "transparency" must also be provided on how the money is spent, particularly since the funding request includes what he said are $33,000 apiece for 80 pickup trucks, $82 million to start an Iraqi coast guard, $2 million for museums and memorials and $9 million for a state-of-the-art Iraqi postal service.

Some Senate Republicans have said the United States should not be too quick to give away the money, suggesting that plenty more debate will occur before the money is approved.

"Part of [the money] should be considered repayable when oil comes out of the ground," said Senate Appropriations Committee Chairman Ted Stevens, R-Alaska.

"It does make sense when Iraq is back on its feet and is a free and prosperous nation that the American taxpayer receive some money back," said Susan Collins, R-Maine, who added that France, Germany, Saudi Arabia and Russia, Saddam Hussein's primary creditors, should forgive $200 billion in loans to Iraq.

Collins told Fox News that interest is increasing in the Republican caucus to make $10 billion to $15 billion a loan to be repaid only after Iraq's economy is up and running.

Blunt said Wednesday the House chamber could be willing to structure some of the aid as a loan that Bush would forgive -- if other countries forgive the debt they were owed by Saddam Hussein's government.

"That's one very viable discussion that's going on," Blunt told reporters.

Dorgan said that giving cash to Iraq so it can repay debts it owes to Saudi Arabia and Kuwait would be a "perversity."

Republicans are not split about keeping the money in the same bill that also includes the $66 billion for military operations, and rejected on a party-line 15-14 vote an amendment to split the funding, arguing that the sooner it is provided, the safer American soldiers will be and the sooner they can get home.

"Our troops become larger and larger targets as more and more dissidents come out into the streets as a result of living conditions," Stevens said.

Fox News' Mike Emanuel and Julie Asher and The Associated Press contributed to this report.