Democrats and the White House are at odds over what needs to be done to fix the fiscal 2008 defense authorization bill and whether the president’s purported pocket veto in December is valid.

House leaders must decide soon how to replace the vetoed bill without launching a prolonged battle over it. All sides hope for a compromise fix that will allow a revised bill to be enacted quickly.

A spokesman for House Speaker Nancy Pelosi, D-Calif., said that she hopes to have a new defense bill passed and signed into law by the end of January. But negotiators will need a bit of time after Congress reconvenes to vet a fix that addresses the administration’s concerns.

The most likely scenario, according to several congressional aides, is that Democratic leaders will bring a new bill directly to the House floor that would closely resemble the vetoed defense bill, but with a fix that is currently being negotiated.

First, the House may vote to override Bush’s veto in order to preserve the legislative branch’s longstanding assertion that a president cannot pocket-veto a bill between sessions of a Congress, but only after final adjournment of a two-year Congress.

While lawmakers weigh their options, a small part of a scheduled 2008 pay raise for the active-duty military personnel remains on hold, along with increased support for wounded veterans returning from Iraq and Afghanistan. Both depend on getting a defense authorization bill signed into law.

The White House’s concerns stem from provisions in the bill that would allow plaintiffs in the United States to sue foreign governments designated as state sponsors of terrorism by the State Department, freezing some U.S. assets of those nations during the course of the litigation.

The Iraqi government protested to the administration in late December, fearing that litigation from Americans held prisoner in the 1990-1991 Persian Gulf War, when Saddam Hussein was in power, could freeze Iraqi assets in the United States.

Democrats favor a technical fix that would shield the Iraqi assets in the United States and limit the liens that could be placed against them. The White House wants an expanded waiver that could be broader than Congress might want.

Both sides agree that a revised bill should make retroactive to Jan. 1 a .5 percent military pay increase on top of the 3 percent increase that took effect automatically on that date.

The authorization bill sets policy for Defense Department programs and determines pay and benefit levels for military personnel. The $696.4 billion bill authorized $189.5 billion for war operations in Iraq and Afghanistan during the fiscal year that began Oct. 1, although Congress has appropriated less than half of that amount thus far.

The veto will not affect most Pentagon programs because the fiscal 2008 Defense appropriations bill was enacted separately on Nov. 13 (PL 110-116).

Before Congress can clear a new authorization bill, Democratic leaders must decide how far to push their objections to the president’s claim to have killed the old one through a pocket veto.

Pelosi’s spokesman said that a veto override vote on the House floor in January was under consideration. “We’re not ready to take that off the table,” the spokesman said, while adding, “We want to get this done as quickly as possible.”

The White House contends that Bush could pocket veto the bill because the House had adjourned for the year, making it impossible to return the bill to the chamber that originated it.

Congressional Democrats dispute that claim. The Senate has been holding pro forma sessions every few days, and both the House and Senate empowered their clerks to receive communications from the White House when Congress is out of session.

The issue has been clouded further by the fact that the White House returned the measure to the House in a procedure that is similar to a regular veto.

In his Dec. 28 statement, Bush said he was returning the bill to the House “to avoid unnecessary litigation” and to “leave no doubt that the bill is being vetoed.”

House Republican leaders have refused to state their position on the pocket-veto controversy, but they plan to urge their members to vote against a veto override. A two-thirds vote of both chambers is needed to override a veto, and unified GOP opposition would block an override..

Kevin Smith, spokesman for House Minority Leader John A. Boehner, R-Ohio, accused Democrats of political motives.

Smith said that the administration proposed a legislative fix during the recess that would have alleviated the president’s concerns and allowed the measure to go forward swiftly, but Democrats refused.

“This problem should have been fixed two weeks ago and could have been rather easily had Speaker Pelosi and Senator Reid not put partisan politics before the needs of our troops,” said Smith..

While leaders of the Armed Services committees are taking the lead in the substantive negotiations, a new defense bill likely would go straight to the House and Senate floors to minimize opportunities for members to amend the measure.

Although the White House had raised a number of concerns about the final version of HR 1585, the president did not seek changes to any section except the one affecting lawsuits against Iraq.

Many lawmakers and aides have complained that the administration failed to lodge a veto warning over that provision until after the bill cleared Congress, asking why the Iraqi government should have such influence over U.S. legislation.

One senior administration official has repeatedly referred to a Nov. 13 letter from the office of Attorney General Michael Mukasey to Senate Armed Services Committee Chairman Carl Levin, D-Mich., as evidence that the committees had been notified that the provision was a problem.

The letter stated that the provision could allow resuscitation of a lawsuit brought by former prisoners of Saddam Hussein that asserts claims of around $1 billion.

“Reinstatement of this case . . .  could disrupt current foreign policy economic recovery initiatives in that region,” the letter stated.

But committee staffers said this reference was only one of more than a dozen concerns raised in the letter.

Also, the fact that the administration never identified the provision as veto bait prior to final congressional action underlines that the Iraqi government’s pressure played a crucial role, aides said.

“They raised concerns. They did not tell us these concerns were significant or would lead to a veto,” one committee aide said.

Another senior committee aide said Iraqi legal advisers would probably have to sign off on the fix as well, before the administration will sign off on it. That sets an unwise precedent for future interactions between the two governments, he added.

“The Iraqis now are stopping our single biggest bill? Who’s the dog and who’s the tail in this relationship?” an aide said.