Bush, Democrats closer to deal on spying bill

WASHINGTON, Aug 1 (Reuters) Democratic lawmakers said today they were closer to a deal with U.S. President George W Bush to expand the government's anti-terror powers to eavesdrop on telephone calls and e-mail from abroad.

With the US Congress scheduled to leave for an August recess by this weekend, the divisive domestic spying program was one area of some agreement between Bush and Democratic and Republican congressional leaders at a White House breakfast.

But there was little sign of progress in resolving an escalating fight between the White House and Democrats over the budget.

''I believe that the president was very firm in where he was on the subject, but I'm not one to take no for an answer,'' House of Representatives Speaker Nancy Pelosi, a California Democrat, said of the stand-off over spending.

Bush has set a 933 billion dollars limit on federal spending for the fiscal year starting October 1 and issued a slew of veto threats on bills that would fund programs from farm supports to children's healthcare, saying many of them spend too much.

Lawmakers, however, did respond to the White House request for quick action to revamp a law that requires warrants for the monitoring of communications with people inside the United States. The issue has been complicated by a dispute over Attorney General Alberto Gonzales' truthfulness in testimony about US spy programs.

Democrats have been reluctant to give Bush broad changes to the existing law on domestic spying, citing concerns about potential civil liberties violations. Bush wants more leeway to conduct surveillance to prevent terrorist attacks.

In the face of Bush's new demand that Democrats send him legislation before the recess, scheduled for Friday, Pelosi and Senate Democratic Leader Harry Reid of Nevada said they thought a compromise might be possible on narrowly tailored legislation.

''What we committed to was to work closely with the administration to come to agreement,'' said Pelosi, adding she expected the House to pass legislation this week.

Reid said he could not promise the Senate would pass a version of the bill this week.

''We would like to do that. We hope we can do that and I'll try to do that but there's no guarantees,'' Reid said.

Shortly after the September 11 attacks, Bush authorized a program of warrantless surveillance. Critics charge that program violated the 1978 Foreign Intelligence Surveillance Act that requires court approval.

Bush said he could act without warrants under wartime powers, though he has since abandoned the program while he seeks to change the FISA law.

REUTERS RS KP2252