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Republicans, Democrats unite to make part of Iraq aid a loan

WASHINGTON—Defying President Bush's desire to aid Iraq with outright grants, a group of moderate and conservative Senate Republicans struck a deal with Democrats on Wednesday that would make $10 billion in Iraqi aid into a loan.

The money would be part of an $87 billion spending package that includes $67 billion for U.S. military operations in Iraq and Afghanistan and a total of $20 billion for Iraq's reconstruction.

The deal came together despite lobbying from the president and top members of his administration. Bush had lectured Senate loan advocates Tuesday at a White House meeting, and Vice President Dick Cheney and Secretary of State Colin Powell made the administration's case Wednesday at the Capitol during a private lunch with Republican senators. Neither session appeared to change any minds.

Lending rather than granting some of the money appeals to many lawmakers as a means to ease the package's sticker shock.

The deal would split the $20 billion for Iraq's reconstruction in half. Half would be a grant, available immediately. The other half would be given as a loan next year, which would be forgiven if other foreign countries that are holding Iraqi IOUs waived repayment of their loans.

"We're just trying to strengthen the president's hand," said Sen. John Ensign, R-Nev., one of eight to 10 Republicans who are prepared to support the proposal.

Supporters said they were confident they would have the votes to pass the deal on the Senate floor. But Bush and Republican congressional leaders still would have several shots at killing the loan plan.

Intense White House lobbying could sway some senators in the final moments. What's more, Bush appears to have dampened Republican support for loans in the House of Representatives. If the House's version of the $87 billion spending bill doesn't contain loan terms and the Senate's version does, both would have to be reconciled in a House-Senate conference committee. House and Senate Republican leaders probably wouldn't appoint loan backers to the conference.

Some loan supporters remained uneasy about the idea of forgiving the debt, which would force American taxpayers to pay for Iraq's reconstruction.

"Clearly, there is capability in Iraq ultimately to be able to finance some of the economic contributions to rebuild their country," said Sen. Olympia Snowe, R-Maine.

Final passage of the $87 billion measure by the House and Senate could come Friday, days before a meeting in Madrid, Spain, of potential Iraq-donor countries. The administration has said that any proposal to give Iraq loans instead of grants would hurt its ability to get other countries to donate no-strings money to Iraq.

The debate has created an odd coalition of Republican moderates, such as Snowe, who periodically have been at odds with the administration, and conservatives, such as Sens. Sam Brownback of Kansas and Lindsey Graham of South Carolina, who rarely challenge Bush.

"I continue to believe strongly that they should be loans," Brownback said. "He (Bush) believes strongly the other way. But I think we ought to have the Iraqis have some skin in the game with some loans. I don't know if they're going to be able to repay it. But if it's all a grant we know it won't get repaid."


(c) 2003, Knight Ridder/Tribune Information Services.