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Tracking U.S. Dollars to Iraq

Prepared by: Lionel Beehner
November 8, 2006

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The cost of combat operations in Iraq has soared above $300 billion (PDF), even as hundreds of millions of dollars still go unaccounted for. This is partly due to poor postwar planning and the handing out of uncompetitive bids to private contractors. But it is also due to the opaque budgetary process by which U.S. military and reconstruction operations in Iraq (and Afghanistan) are funded. Instead of being included in the regular annual defense budget, many of these costs are included in supplemental requests, which receive little scrutiny from Congress, as this new Backgrounder explains.

Recent attempts at congressional oversight have actually become “a painful example of how little oversight there actually is,” writes Winslow Wheeler of the Center for Defense Information. Steven M. Kosiak of the Center for Strategic and Budgetary Assessments agrees. “We are long past the point (PDF) where special supplemental appropriations, which are intended to cover the cost of unanticipated emergencies, should be used as the primary means of funding these operations,” he writes. Some experts expect with Democrats in control of at least one house of Congress, there will be increased oversight over military spending, and perhaps a shift away from relying on supplemental requests to finance combat operations in Iraq.

Meanwhile, multiple audits conducted by U.S. and other agencies point to waste and malfeasance involving funds slated for reconstruction. The most recent, conducted by a UN oversight agency, found that the Halliburton subsidiary KBR had charged the Iraqi government $25,000 per truck per month for 1,800 fuel trucks that, it turns out, sat largely unused (PDF) along the Iraqi border. The Special Inspector General for Iraq Reconstruction (SIGIR), in its quarterly audits since January 2004, has uncovered widespread corruption, incompetence, and red tape. Shoddy construction also remains a problem (a recent SIGIR report discovered human waste leaking from the ceilings of barracks used by Iraqi soldiers). Foreign Policy examines the major contracts awarded to various U.S. firms in Iraq.

To be sure, reconstruction is taking place under difficult security conditions in Iraq, but there is mounting concern about the scale of the problems. All told, U.S. taxpayers have spent some $38 billion to rebuild Iraq—though much of the country’s infrastructure remains at prewar levels and many Iraqis still lack adequate water, electricity, and heating oil. Meanwhile, Congress has sought to close SIGIR (Denver Post), which was originally established as a temporary outfit, by the end of next year (a SIGIR press spokesperson tells CFR.org its operations will be folded into the Departments of State and Defense). MSNBC calls the move a “’shoot the messenger’ coup de grace.”

So was the war worth it? It depends, says Douglas Holtz-Eakin, a former director of the Congressional Budget Office who directs CFR’s Center for Geoeconomic Studies. “War will be worth it only if the United States is ultimately safer than with a ruthless dictator still controlling Iraq,” he writes in the Financial Times, “but costs will remain an issue until such benefits become clear.” Journalist Ed Harriman, writing in the London Review of Books, reckons the war was not worth it because “the Coalition has created and fostered the least accountable and least transparent regime in the Middle East.” When all is said and done, some economists, most notably Linda Bilmes of Harvard University and Joseph E. Stiglitz of Columbia University, estimate the final war bill could top $2 trillion (PDF), based on long-term healthcare costs for wounded vets, a sagging economy due to escalating oil prices, and higher recruitment costs to replenish a damaged military.

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