By Jen DiMascio

Congressional leaders are weighing options for overcoming President Bush’s decision to veto the annual bill to authorize funding for Pentagon operations that lawmakers overwhelmingly passed last month.

The bill could be modified to address the administration’s concerns–and a pay raise issue caused by the veto–or congressional leadership could try to override the veto, said congressional aides. The original bill passed by a 370 to 49 vote in the House and a 90 to 3 vote in the Senate.

Either way, the last-minute snafu is unlikely to affect the substance of the 601-page bill that directs scores of policy changes across the military, according to a Senate aide.

Bush announced his intent to veto the bill Dec. 28, saying in a memo that a provision in the bill could jeopardize billions of dollars intended for Iraq reconstruction by opening the Iraqi government up to lawsuits seeking damages for crimes committed under Saddam Hussein’s government.

Sen. Frank Lautenberg (D-N.J.), Sen. Arlen Specter (R-Pa.) and 20 other senators sponsored the language in question as an amendment that sought “to provide justice for victims of state-sponsored terrorism.” The Senate unanimously agreed to add the provision to the bill in late September.

The administration’s objections to the provision came much later and did not include discussion of a veto until after the bill was sent to the president.

A senior administration official told reporters during a Dec. 28 press briefing that the Justice Department sent a letter to lawmakers in November that addressed potential problems with the provision.

“In at least one sentence, the problems specific to Iraq were raised. To be sure, though, the acuteness and intensity of those problems have come in to clearer focus within the past week or 10 days or so,” the official said.

At that time, the Iraqi government raised “serious concerns” through Ambassador Ryan Crocker, the official said.

Members of Congress were irked by the timing of the president’s announcement, saying the issue could have been resolved without a veto.

“It is unfortunate that the Administration failed to identify the concerns upon which this veto is based until after the bill had passed both houses on Congress and was sent to the President for signature. I am deeply disappointed that our troops and veterans may have to pay for their mistake and for the confusion and uncertainty caused by their snafu,” said Sen. Carl Levin (D-Mich.), the chairman of the Senate Armed Services Committee (SASC).

Senate Majority Leader Harry Reid (D-Nev.) and House Speaker Nancy Pelosi (D-Calif.) said that the president was swayed by threats from the Iraqis of withdrawing billions of dollars from U.S. banks if the bill is signed.

During last week’s press briefing, administration officials denied that was the case, but they acknowledged that there have been discussions of Iraqis pulling their assets out of the United States to address any potential financial crisis. Iraqis have between $20 billion and $30 billion invested in the United States, the senior administration official said, which has “real impacts for all U.S. businesses doing business with Iraq.”

The House, which returns from its holiday recess Jan. 15, could try to override the veto with a two-thirds majority, or it could alter the current language and pass the bill again.

One option for addressing the concerns of the Iraqi government would be to provide a waiver or exemption for Iraq and to make a 3.5 percent pay raise for the military, which would be reduced by the veto, retroactive to the start of the year.

Democrats could have quickly fixed the problem even during the recess a week ago by calling a pro-forma session in the House, said Kevin Smith, a spokesman for House Minority Leader John Boehner (R-Ohio). The Senate has been regularly holding pro-forma sessions to block the president from making recess appointments during the holiday break.

Whether enough Republicans would change their votes to block an override of the bill is an open question.

Sen. Susan Collins (R-Maine), a member of the SASC and a cosponsor of the amendment, called on the president in a statement–asking him to reconsider the veto threat.

But, according to Smith, many Republicans would have concerns about the issues raised by the administration–especially when there is a quick and easy way to fix the problem with the White House.