Defense bill breathes new life into canceled programs

House and Senate negotiators on the fiscal 2010 Defense Appropriations bill have rejected some of President Obama's biggest military spending cuts, agreeing to a $636.3 billion measure that continues an unwanted second engine program for the F-35 Joint Strike Fighter and buys 10 unrequested C-17 cargo planes, an appropriations aide said on Monday.

The bill also includes $130 million for the troubled VH-71 presidential helicopter program, most of which would pay to continue some work on the aircraft at Lockheed Martin Corp.'s facility in Owego, N.Y., despite the Obama administration's decision to cancel the contract.

The spending was added in defiance of a White House that sought to slash defense expenditures it deemed wasteful or unnecessary to pay for priorities within the Defense Department and elsewhere in government.

Appropriators reached an agreement on the Defense bill on Friday, with a week to spare before the continuing resolution expires on Friday. But Democrats said Monday that Congress would likely pass another short-term funding extension as negotiations continued over what other items to attach to the Defense bill.

House Majority Leader Steny Hoyer, D-Md., said another CR is "a possibility, but not a long one." House Democratic leaders are considering a Saturday session to finish the package.

Senate Appropriations Chairman Daniel Inouye, D-Hawaii, said another CR could be needed "maybe until Christmas Eve," adding that he wanted to "have [the appropriations bill] on the president's desk before Christmas."

Inouye said he expects Democrats to come up with an agreement "in about 48 hours."

To resolve defense spending issues, appropriators agreed to include $465 million for the program to devise an alternate F-35 engine despite repeated administration threats to veto the bill if officials determine that keeping the engine development alive jeopardizes the overall F-35 program.

But the final bill provides funding to buy all 30 F-35s requested by the Pentagon, a move that could ease White House concerns. To pay for the General Electric-Rolls Royce alternate engine, the House bill had included money to buy only 28 F-35s. The Senate bill bought all 30 F-35s and allowed funding only for the aircraft's primary Pratt & Whitney engine.

Meanwhile, the administration had requested $85 million for the VH-71 program, whose cost overruns and schedule delays had made it symbolic for problems plaguing the Pentagon acquisition system. But all of that funding would have paid for termination fees owed the contractor.

In its Statement of Administration Policy, the White House threatened to veto the spending bill if it "includes funds that continue the existing VH-71 program, or would prejudge the plan to recompete the presidential helicopter program."

But it is unlikely that the $130 million in VH-71 funding would trigger a veto, particularly if it is part of a sweeping legislative package the administration largely favors.

In addition to the add-ons, the Defense bill includes $6.3 billion to buy more than 6,600 mine-resistant all-terrain vehicles for Afghanistan.

Appropriators also agreed to $2.2 billion for the Army's restructured modernization effort in the wake of the administration's cancellation of its Future Combat Systems program, the aide said. That amount is $330 million below the request, because lawmakers believed the Army asked for too much in termination liability fees.

For unmanned aerial vehicles, the bill includes $554 million for high-altitude Global Hawks and $489 million for Reaper hunter-killer UAVs, the requested amounts. Appropriators approved just $80 million for the Predator drone, $170 million below the request, the aide said.

Meanwhile, the bill includes about $15 billion to buy seven ships: a DDG-51 Arleigh-Burke class destroyer, a Virginia-class submarine, two Littoral Combat Ships, an Intra-theater Connector Ship, and two T-AKE auxiliary dry cargo carriers.

On nondefense issues, Democratic leaders are considering including an increase of up to $1.9 trillion in the $12.1 trillion debt limit, a six-month extension of unemployment insurance and COBRA benefits, and possibly funding infrastructure projects to help create jobs, among other possibilities.

Democrats are also trying to find a compromise between Blue Dog Coalition members who said they will not support the package unless it includes pay/go legislation to require offsets for new mandatory spending and tax cuts and Senate Democrats who have pledged not to vote for a debt-limit increase unless they can have a vote on creating a commission that would make recommendations to reduce the deficit.

One of those Democrats, Senate Budget Chairman Kent Conrad, D-N.D., opposes the House pay/go bill because it exempts four policy items, including the estate tax.

The House also might consider a short-term debt extension. "We're working toward a short-term debt extension," Hoyer said on Monday night. The extension likely would not go beyond February, he said, calling that the longest time frame "the Senate can get votes for."

The short-term debt-limit scenario could push back the need to make a decision on whether to include the House pay/go bill.

Conrad declined to say if he would support a short-term debt limit extension so as not to jeopardize negotiations.

On the commission issue, one Democratic aide said Conrad was offered the creation of a commission by executive order. He did not say if he would support it, but it would not have the force of law that he has said he wants for the panel.

A Senate Democratic leadership aide said on Monday that "we will await action by the House and hope to pass the [bill] before the 18th. We will need 60 votes to do so."

House Rules Chairwoman Louise Slaughter, D-N.Y., said late Monday she expects the Defense bill to go to Rules on Tuesday and to the floor on Wednesday.

House and Senate Democratic leaders were also grappling with how to handle an estate tax extension. According to Slaughter, there was some question whether it should be part of the Defense bill, given concerns about loading up the package.

Nevertheless, the Defense bill is the most likely vehicle. "Looks like it," said Senate Finance Chairman Max Baucus, D-Mont., although he quickly added: "Or maybe somewhere else." He said the extension could be for one or two years. An extension lasting only a few months has been discussed, according to lawmakers and aides. "We're working on it," Rep. Chris Van Hollen, D-Md., said Monday.

Slaughter added that "Jobs [legislation] might be separate. We are not going to leave here without one."

Billy House and Dan Friedman contributed to this story.