Oct. 1 (Bloomberg) -- The U.S. Senate rejected a Democratic effort to split President George W. Bush's request for money to rebuild Iraq from funding for military operations, a vote that may ease the way for passage of the administration's proposal.

By a 59-38 margin, the Republican-controlled Senate voted down an amendment by Democratic Senator Robert Byrd of West Virginia that would have forced lawmakers to take a separate vote on most of the $20.3 billion Bush wants to pay for repairs to Iraq's infrastructure and setting up a new government. The money is part of a $87 billion request for U.S. activities in Iraq and Afghanistan in the coming year.

Republicans said separating the requests might delay or doom passage of the rebuilding funds. Democrats said it would enable closer examination of a plan to pay for improvements in a nation with the world's second largest oil reserves.

``We have not yet won the peace, and we do not have time to spare,'' said Senator John McCain, an Arizona Republican. ``If we do not improve services in coming months, it may be too late.''

Byrd said Bush's request likely is only a down payment on a lengthy occupation that threatens to push the U.S. budget deficit above $500 billion in the 2004 fiscal year.

``Rubber-stamping this bill is not a way to support our troops, except in the most simplistic way,'' Byrd said.

The amendment would have separated $15.2 billion of the reconstruction funds -- those not related to improving Iraq's security -- from the rest of the legislation.

Separate Debate

The rest of the money, which would pay for rebuilding Iraq's electric power system, making drinkable water more widely available, and rebuilding roads and Iraq's oil fields, would be a separate measure subject to debate and a vote.

While defeat of Byrd's amendment helps Bush's proposal, the White House faces growing bipartisan opposition to making the reconstruction money an outright grant to Iraq.

Senator Kay Bailey Hutchison said at least 10 of her fellow Republicans are prepared to support an amendment she introduced that would grant Iraq $10 billion now for security and immediate infrastructure needs. The measure also would provide as much as $10 billion in loans, either through Iraq's provisional government or the World Bank.

Democratic leaders said they support making the money a loan to be repaid once Iraq's oil fields return to full production.

The White House argues that Iraq's existing debt burden of about $200 billion already is too high. Republicans control the Senate with 51 of 100 votes, so the defection of several senators could force Bush to compromise.

`Scrub the Bill'

In the House, Bush's reconstruction proposal is running into opposition of a different kind. Representative Jim Kolbe, Arizona Republican and chairman of the appropriations subcommittee that will consider the plan, vowed to look for ways to reduce it.

``We will `scrub' the bill hard, look under every rock for places we can save money and reduce its cost,'' Kolbe said. ``Taxpayers deserve no less. When the bill comes to the floor, I expect it to be defensible as a cost to the American taxpayer for a vital national security requirement.''

Although money to fund the U.S. military has broad support, the White House faces more negotiations on the spending request.

Senate Appropriations Committee Chairman Ted Stevens said talks with the administration are under way. White House spokesman Scott McClellan said the White House is ``listening'' to lawmakers, though Bush still wants the U.S. to pay for reconstruction outright.

``We are exploring mechanisms that would require a portion of the money to be repaid,'' Stevens said.

Flexibility

Republican leaders in the House said they might be open to final legislation that makes the funding a loan as long as the president is given flexibility to forgive the debt later.

Representative Roy Blunt of Missouri, the No. 3 House Republican, said such a plan may pressure other countries to forgive Iraq's debt at a Madrid donors' conference this month.

Senate Republican leaders said they are resisting making the money a loan. To give themselves more time to quash the idea, they will focus Senate debate this week on $67 billion in military funding, which has broad appeal, and let the House act first, said Senate Republican Conference Chairman Rick Santorum, of Pennsylvania.

The loan concept ``is not the wise course,'' Santorum said.

Santorum's comments came after he met with Ahmad Chalabi, an Iraqi who went into exile under Saddam Hussein's regime who now is a member of the country's U.S.-picked Governing Council. Chalabi has been meeting with congressional leaders to lobby for aid.

Debt Burden

``We need assistance from the United States in the form of grants immediately,'' Chalabi said. ``Every Iraqi man and woman and child now has more than $5,000 of debt hanging around his neck due to Saddam's tyranny and oppression.''

Senate Democrats are promising to keep challenging the administration's plan to highlight what they say is a contrast between the Iraq funding plan and U.S. domestic needs.

One of the planned amendments would repeal for one year Bush's income tax cuts for the wealthiest 1 percent of Americans to offset the $87 billion, and another would require more international support before reconstruction funds are granted.

``It is not too late to reverse course and bring real cooperation to the rebuilding of Iraq,'' Senate Minority Leader Tom Daschle said.

Last Updated: October 1, 2003 18:25 EDT