So about
not racking up the deficit even higher and spending more on the war...

There are two ways to look at this: either this is the most brilliant idea someone can have, or it is possibly one of the worst. On one hand, you have legislation to fund the war going through, but bought with smaller packages of benefits for all sorts of groups. On the other hand, you have a bill put through Congress not because of the war, but because of smaller packages of benefits for all sorts of groups.
The legislation should be about the Iraq War, or not at all. The one thing I hate about political parties here in the States is clearly penetrating into legislation as well; you vote for one principle or idea, but strongly oppose another, you're screwed, because it's a package deal. Frankly, it's stupid for a politician to do this to get legislation passed.
On the plus side, at least Congress isn't getting anything done. And smaller, ineffecient government is awesome.