Bush plans to veto defense policy bill

Bush plans to veto defense policy bill

President Bush plans to veto a sweeping defense policy bill on grounds that it would derail Iraq's efforts to rebuild its country, the White House said Friday.

Bush's action, which apparently caught congressional leaders off guard, centers on one provision in the legislation dealing with Iraqi assets. The legislation would permit plaintiffs' lawyers immediately to freeze Iraqi funds and would expose Iraq to "massive liability in lawsuits concerning the misdeeds of the Saddam Hussein regime," said White House spokesman Scott Stanzel.

"The new democratic government of Iraq, during this crucial period of reconstruction, cannot afford to have its funds entangled in such lawsuits in the United States," Stanzel said in a statement.

House and Senate Democrats said Friday that the first time they'd heard of any White House concerns with the legislation was after Congress sent the bill to Bush for his signature.

"The administration should have raised its objections earlier, when this issue could have been addressed without a veto," Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Harry Reid, D-Nev., said in a joint statement. "The American people will have every right to be disappointed if the president vetoes this legislation, needlessly delaying implementation of the troops' pay raise, the Wounded Warriors Act and other critical measures."

Sovereign nations are normally immune from lawsuits in U.S. courts. An exception is made for state sponsors of terrorism and Iraq was designated such a nation in 1990. After the 2003 invasion of Iraq, however, Congress passed a law and Bush issued a decree stating that Iraq was exempt from such lawsuits.

After that exemption was passed, the administration challenged and successfully overturned a $959 million court ruling for members of the U.S. military who said they were tortured as prisoners of war during the first Persian Gulf War.

The Justice Department also sought to defeat a lawsuit brought by U.S. citizens held hostage during Iraq's 1990 invasion of Kuwait. That case has been taken over by lawyers for the new Iraqi government and is ongoing in a Washington federal court.

The provision that is causing problems would have allowed the victims of the executed Iraqi dictator Saddam to seek compensation in court, Democrats said. The Iraqi government has warned that former U.S. prisoners of war from the first Gulf War might cite this legislation in an attempt to get money from the Iraqi government's reported $25 billion in assets now held in U.S. banks, they say.

Unless Bush vetoes the legislation, the Iraqis have threatened to withdraw all of their money from the U.S. financial system to protect it from the lawsuits, Democrats said.

The White House contends the legislation subject to the Bush veto would imperil Iraqi assets held in the United States, including reconstruction and central bank funds.

"Once in place, the restrictions on Iraq's funds that could result from the bill could take months to lift," Stanzel said. In turn, he said, those restrictions must not be allowed to become law "even for a short period of time."

Shot back Reid and Pelosi: "We understand that the president is bowing to the demands of the Iraqi government, which is threatening to withdraw billions of dollars invested in U.S. banks if this bill is signed."

The White House says the bill authorizes 0.5 percent of the 3.5 percent pay raise that the nation's troops are expected to receive, and that part will be wiped away by the veto.

Stanzel said the administration will work with Congress to get the additional pay raise approved and retroactive to Jan. 1 under a reworked bill. He said the bulk of the raise for the troops _ 3 percent _ is slated to go into effect anyway.

Overall, the bill authorizes $696 billion in military spending, including $189 billion for the wars in Iraq and Afghanistan, for the 2008 budget year. It aims to provide more help to troops returning from war and set conditions on contractors and pricey weapons programs.

The measure reflects the best Democrats could do this year on their national security agenda while holding such a slim majority. Powerless to overcome GOP objections in the Senate, the bill does not order troops home from Iraq, as Democrats would have liked.

While it does not directly send money to the Pentagon, the bill is considered a crucial policy measure because it guides companion spending legislation and dictates the acquisition and management of weapons programs.