Bush, Democrats seek deal on spying bill

WASHINGTON, Aug 2 (Reuters) Democratic lawmakers said they were moving closer to a deal with President George W Bush to expand the government's powers to eavesdrop on telephone calls and e-mail from abroad.

With the US Congress set to leave for an August recess this weekend, both sides said action was needed to change the Bush administration's controversial domestic spying program. But it remained unclear if it would happen this week.

''What we committed to was to work closely with the administration to come to agreement,'' said House of Representatives Speaker Nancy Pelosi yesterday, adding she expected the House to pass legislation in coming days.

Said White House spokesman Tony Snow: ''We certainly hope and trust that the measure will be in fact concluded by the time Congress goes on recess.'' Senate Democratic Leader Harry Reid said he would try to get his chamber to act this week but ''there's no guarantees.'' There was little sign of progress in resolving another major matter -- an escalating fight between the White House and Democrats over federal spending.

''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,'' Pelosi said after a breakfast meeting with Bush at the White House.

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

The effort to modernize the 1978 Foreign Intelligence Surveillance Act (FISA), which requires warrants for the monitoring of communications with people inside the United States, has been complicated by a dispute over Attorney General Alberto Gonzales' truthfulness to Congress about the spy program.

While Democrats have demanded a perjury probe, the White House has said he leveled with lawmakers.

Director of National Intelligence Mike McConnell has proposed the administration be allowed to conduct surveillance without warrants on foreigners who are overseas regardless if their telephone or e-mail communications have a U.S. citizen on the other end of the line. Democrats object.

Senate Intelligence Committee Chairman Jay Rockefeller, a West Virginia Democrat, said he was working with the administration and fellow lawmakers to draft a temporary fix with hopes of implementing a long-term solution after Congress returns in September.

Shortly after the Sept. 11 attacks, Bush authorized a program of warrantless surveillance. Critics charge that program violated the FISA.

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

Bush also pressed lawmakers at the breakfast to confirm his nominee as White House budget director, Jim Nussle.

The Senate Budget Committee is to vote on Thursday on Nussle's nomination, after the Senate governmental affairs panel has already voted to confirm him. But it was not clear if the full Senate would vote on Nussle before the recess.

REUTERS SAM BST0532