WASHINGTON - House leaders have kept a promise they made earlier this year to scrounge up a $2.5 billion "peace dividend" for the highway and mass transit programs by siphoning off unused funds from the foreign military aid budget.

In a little-publicized action taken before the Democratic convention, the House approved an amendment sponsored by Majority Leader Richard Gephardt, D-Mo., diverting funds earmarked for foreign arms purchases to the fiscal 1993 transportation appropriations bill.

The measure now goes to the Senate where its future is uncertain.

The amendment raises the ceiling on new commitments to highway projects to $16.69 billion from $14.44 billion and adds $257 million of new authority for 21 transit projects that had been cut earlier by the House Appropriations Committee. Actual spending would increase by only $400 million next year, however, as work on the projects will only get started.

Sponsors pushed the amendment as an economic revitalization and jobs-creating measure, arguing it could add as many as 150,000 highway construction jobs nationwide.

"This year the United States will spend $60 billion on highways, and Japan will spend $72 billion, a country the size of Montana with half our population," Rep. Gephardt said. "Is it any wonder that they are beating us in the world marketplace?"

Rep. Gephardt and other House leaders had promised to try once again to provide a "peace dividend" for the transportation infrastructure programs after the failure of their attempt this spring to divert $6.7 billion from planned defense spending into such programs.

The earlier attempt ran aground on opposition from President Bush and Republicans, who contended that the shift amounted to a wholesale violation of the 1990 budget agreement with its spending "firewalls" between the defense, international, and domestic categories.

Republican opponents to any peace dividend had been joined by conservative Democrats, who said that any savings from defense or foreign aid should not be spent, but instead devoted to reducing the near-$400 billion deficit.

But their opposition was noticeably absent when the House passed the trimmed-down peace dividend amendment on July 9, and the move also received little fanfare from the press. The amendment passed by 213 to 190, despite strong protests from Republicans.

The White House warned in a statement that by Breaking the budget agreement, the amendment "could trouble the financial markets, cause interest rates to rise, and thus prove counterproductive" by slowing the recovery.

"If the President were presented a bill that includes a provision that violates the firewalls and thus increases the deficit, his senior advisers would recommend a veto," the statement said.

House Minority Leader Robert Michel, R-Ill., denounced the amendment on the House floor. "This puts the lie, quite frankly, to all this talk about hard and fast budgets agreements," he said.

"The majority, whose wild, exultant cheers filled this chamber when they killed the balanced budget amendment last month, confirms this very day the reason why such an amendment is necessary" to the U.S. constitution, he said. But the amendment's supporters argued that the world has changed dramatically since the budget agreement was negotiated, and the small modification is justified. Besides, the House has already devoted about $12 billion of defense savings next year to deficit reduction, they said.

"Do we want to keep al these decisions inviolate, or can we deal with the recession that is in front of us?" Rep. Gephardt asked.

Rep. David Obey, D-Wis., noted that the House has made "a lot of promises" in addition to the budget deal, including its endorsement by 6 to 1 of a highway authorization bill last year that set spending levels billions of dollars higher than those provided for the programs in the appropriations bill.

"We can have this theological debate" about keeping the budget agreement, he said. "But the fact is this amendment simply tries to buttress direct deficit reduction with a little jump-start to the economy. And in the process, it keeps our promise to the states" to provide more highway funds, he said.

Before adopting the amendment, the House rejected a rider offered by Rep. Norman Mineta, D-Calif., that would have temporarily waived the highway program's 20% matching grant requirement for states and cities in fiscal distress. That amendment also was designed to give a quick infusion to the economy in areas where projects have been delayed by a budgetary crunch.

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