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U.S. taxpayers may end up paying a lot more to rebuild Iraq

BAGHDAD, Iraq—A shortage of money is hampering the U.S.-led effort to rebuild Iraq, and American taxpayers may end up footing a much larger bill than they expect, according to members of Congress and top U.S. officials in Baghdad.

As they plan for next year's budget, American officials in Iraq are worried that they won't have enough money to restore enough basic services to get the country's economy growing again. That may be true even if Congress grants President Bush's request, expected in the next few weeks, for another $2 billion to $3 billion on top of the $3.5 billion U.S. taxpayers already are spending this year.

Those figures are only for reconstruction, and don't include the $1 billion a week Washington is spending on the military occupation.

Next year's reconstruction budget "has inadequate funds for security, electrical, water, sewage, irrigation, housing, education, health, agriculture," says an internal document of the Coalition Provision Authority in Baghdad, obtained by Knight Ridder.

The dismal financial picture—and mounting American casualties—are among the factors leading the Bush administration to consider an expanded United Nations role in Iraq, even if that means giving other countries a greater say in Iraq's future.

The lack of security, steady electricity and clean water universally are considered the biggest impediments to progress in Iraq. While senior military officials say that adding more U.S. troops won't make the streets safer, few dispute that spending more on security—on police training and equipment, for example, or on guards for oil and water pipelines—would help. More money also would mean the electrical and water systems would be repaired faster.

Coalition officials are spending money on all those things, but not as much as they'd like, they acknowledge. And terrorism and crime have scared off private investors, even in the potentially lucrative oil sector, which appears to be one aim of anti-American forces in Iraq.

"If I had more money, these are the things I would spend it on," said a senior coalition finance official in Baghdad, pointing to a list of electrical, water and sewage projects. "If you don't have electricity, then how can small businesses stand up, because they can't guarantee a product?" The official asked not to be identified.

Contrary to what Deputy Defense Secretary Paul Wolfowitz told a Senate committee at the start of the war, the reconstruction of Iraq won't be financed almost completely by Iraqi oil revenue.

Because of looting and continued sabotage, Iraq isn't exporting nearly as much oil as had been expected this year, contributing to the deficit in the current $8 billion spending plan. Administration officials projected oil revenue to be $3.45 billion this year, but it'll be closer to $2.2 billion, budget documents show.

To make it through the current year, officials are using a patchwork of funds that include United Nations aid, assets seized from Swiss bank accounts, and the hundreds of millions of dollars in cash that soldiers found in Baath Party safe houses.

"We are going to run a very substantial cash deficit this year, a cash deficit of somewhere in the neighborhood of $3.5 billion," Iraq's U.S. administrator, L. Paul Bremer, said at a recent news conference.

"We will finance that . . . by drawing down on several of the capital accounts we have. But it does leave us with a substantial problem in the next year—as we have to make these major infrastructure investments—about where we're going to get the capital."

Bremer said the amount of money needed to repair Iraq's electrical grid, water system and other infrastructure needs was "staggering."

"The U.N. estimates that in the next four years, we should spend $16 billion on water alone—just trying to fix the water," he said. "My engineering experts estimate that we need to spend some $13 billion in the next four to five years on power, (and) the first $2 billion or so has to go to fix the current demand. And you can go through all of the sectors of public services and other areas and come up with very large numbers."

The total tab, Bremer has estimated, could reach $100 billion. Other experts predict it will be many times that.

It appears that a significant chunk of that money will come from American taxpayers, who will have spent as much as $6.5 billion on rebuilding Iraq by the end of next year if Congress approves a second request from President Bush. Congressional and White House officials have said such a request is in the works.

According to several polls, a majority of Americans already think the government is spending too much in Iraq. Yet some leading members of Congress say the United States isn't spending enough, at least on the rebuilding side.

"We got our priorities wrong," Rep. Jim Kolbe, R-Ariz., the chairman of the House Appropriations subcommittee on foreign operations, said last week on CNN after returning from a trip to Iraq. "We need to be putting a lot more into the reconstruction to get the services back. The impression I come away with is that we have a very narrow window that's left to us in Iraq. And if we don't move within that time, there will be an unbelievable amount of violence and reaction against the United States forces."

Retired Army Gen. Wesley Clark, who is mulling a run for president as a Democrat, recently called for a congressional appropriation of $50 billion for Iraq reconstruction.

Few others, though, think the United States is prepared to spend that kind of money. Bremer is counting on major commitments from international donors, who will meet at a conference in Madrid in October.

But even if the conference produces big pledges, officials in Baghdad don't expect to see that money for at least a year. And some countries have expressed reluctance about financing a reconstruction effort that the United States mainly controls, which is one reason the White House is considering a new U.N. role.

Although oil output has been disappointing, coalition officials in Baghdad are counting on oil sales to fund the bulk of next year's budget. They expect about $12.2 billion in oil revenue next year, and will craft a spending plan slightly above that amount, budget records show.

Some civilian officials at the Pentagon even contemplated trying to reopen a small oil pipeline from the northern Iraqi city of Kirkuk to the port of Haifa in Israel. But one senior official, speaking on condition of anonymity, said reopening the pipeline, which was closed when Israel became an independent nation in 1948, "would turn all the Iraqis who don't already hate us against us, too."

Iraq's U.S.-appointed Governing Council is beginning to hammer out its spending priorities. But its budget will cover only about half of Iraq's basic reconstruction needs, according to a coalition document titled "Iraq's Budget Challenge."

"This country can actually make it," said the coalition finance official. "But what they need right now is they've got to have money for it to work. Right away."


(Ken Dilanian reports for The Philadelphia Inquirer.)


(c) 2003, Knight Ridder/Tribune Information Services.