FY2004 Supplemental Appropriations for Iraq, Afghanistan, and the Global War on Terrorism: Military Operations & Reconstruction Assistance

Congressional research reportNov 13, 2003

Ask Donna

What actually matters in this document.

Text

Order Code RL32090

CRS Report for Congress

Received through the CRS Web

FY2004 Supplemental Appropriations for Iraq,

Afghanistan, and the Global War on Terrorism:

Military Operations & Reconstruction Assistance

Updated November 13, 2003

name redacted, name redacted,

name redacted, and name redacted

Foreign Affairs, Defense, and Trade Division

Congressional Research Service ˜ The Library of Congress

FY2004 Supplemental Appropriations for Iraq,

Afghanistan, and the Global War on Terrorism:

Military Operations and Reconstruction Assistance

Summary

In a nationwide address on September 7, 2003, the President announced that he

would request an additional $87 billion for ongoing military operations and for

reconstruction assistance in Iraq, Afghanistan, and elsewhere. On September 17, the

White House submitted a formal request for FY2004 supplemental appropriations of

that amount to Congress. Administration officials said they would like to see

congressional action completed some time before October 24, when an international

donors conference was scheduled to meet in Madrid to seek pledges of economic

assistance for Iraq.

On October 29, House and Senate appropriators announced a conference

agreement, on H.R. 3289, a bill providing supplemental appropriations for military

operations and for reconstruction assistance in Iraq and Afghanistan. The House

approved the conference agreement by a vote of 298-121 on October 31, and the

Senate approved the measure by voice vote on November 3. The President signed

the bill into law, P.L. 108-106, on November 6.

The key issue in Congress was whether to provide reconstruction assistance to

Iraq entirely as grants or partly as loans. The conference committee rejected a Senate

proposal to provide about half of the Iraq reconstruction assistance as loans. On

other issues, conferees eliminated a Senate provision adding 10,000 troops to the

Army for peacekeeping duties; agreed to a modified version of a Senate provision to

provide health insurance through the DOD TRICARE program for non-activated

military reservists not eligible for employer-provided health insurance; cut the

Administration request for reconstruction assistance to Iraq by $1.655 billion as in

the House bill rather than by $1.855 million as in the Senate bill; agreed to provide

$400 million more for Afghanistan than the Administration requested, as in the

House bill; agreed to provided $245 million for assessed costs of U.N. peacekeeping

in Liberia, as in the House bill; agreed to provide an additional $100 million for

Liberia and $10 million for Sudan for humanitarian assistance; eliminated a House

provision to require that Iraq reconstruction be coordinated by a Senate-confirmed

official; and did not include $1.3 billion for veterans health benefits that was in the

Senate bill (which may be provided instead in the pending VA-HUD-independent

agencies appropriations bill). The conference agreement also provides $500 million

for the Federal Emergency Management Agency (FEMA) for disaster relief for

Hurricane Isabel and the California wildfires.

In earlier floor action, Congress rejected proposals to roll back tax cuts to pay

for the bill; to shift funds from Iraq reconstruction to domestic programs; to make

release of funds conditional on specific requirements; and to transfer control of Iraq

reconstruction from the Defense Department to the State Department.

Contents

Most Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Basic Elements of the Administration Request . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Long-Term Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Impact on the Federal Budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Earlier Administration Statements about Costs . . . . . . . . . . . . . . . . . . . . . . . 7

Reliability of Current Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Future Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Issues in Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Proposals to Assert Congressional Oversight . . . . . . . . . . . . . . . . . . . . . . . 11

Taxes and Domestic Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Additional Funding for Various Programs . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Health Insurance for Military Reservists . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Competitive Contracting and Corporate Profits in Iraq . . . . . . . . . . . . . . . . 12

Loans Rather than Grants for Iraq Reconstruction . . . . . . . . . . . . . . . . . . . . 13

Congressional Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Senate Appropriations Committee Markup . . . . . . . . . . . . . . . . . . . . . . . . . 14

Senate Floor Debate and Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Amendments Considered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Amendments Adopted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Amendments Rejected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

House Appropriations Committee Markup . . . . . . . . . . . . . . . . . . . . . . . . . 22

House Floor Debate and Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

House Motion to Instruct Conferees . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Key Issues in Conference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Military and Intelligence Operations: Overview and Issues . . . . . . . . . . . . . . . . 30

Basis of the Cost Projections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Funding Flexibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Authority to Train and Equip Foreign Military Forces . . . . . . . . . . . . . . . . 35

Military Personnel Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

Iraq/Afghanistan Reconstruction and Other Global War on Terrorism

Foreign Policy Initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

Iraq Reconstruction and Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

Supplemental Request . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Afghanistan Reconstruction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

Afghanistan Supplemental . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

Other Global War on Terrorism Foreign Policy Initiatives . . . . . . . . . . . . . 52

Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

For Additional Reading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

CRS Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

Administration Request . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

Cost Analyses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

Other Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

List of Tables

Table 1. Basic Elements of the Administration Request for Additional

Funding for Iraq, Afghanistan, and Other Activities . . . . . . . . . . . . . . . . . . . 4

Table 2. Defense Funding for Iraq, Afghanistan, and Other Global War on

Terrorism Activities: FY2001-FY2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Table 3. Congressional Action on FY2004 Supplemental Appropriations

for the Department of Defense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Table 4. Iraq, Afghanistan, Other Foreign Policy Funding . . . . . . . . . . . . . . . . . 37

Table 5. Iraq Supplemental: Sector Allocation . . . . . . . . . . . . . . . . . . . . . . . . . 40

Table 6. Afghanistan Supplemental: Sector Allocation . . . . . . . . . . . . . . . . . . . . 48

Table 7. U.S. Assistance to Afghanistan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

Table A1. Costs of Major U.S. Wars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

Table A2. Costs of Major Reconstruction Efforts . . . . . . . . . . . . . . . . . . . . . . . 59

FY2004 Supplemental Appropriations for

Iraq, Afghanistan, and the Global War on

Terrorism: Military Operations and

Reconstruction Assistance

Most Recent Developments

On October 29, House and Senate appropriators announced a conference

agreement, H.Rept. 108-337, on H.R. 3289, a bill providing supplemental

appropriations for military operations and for reconstruction assistance in Iraq and

Afghanistan. The House approved the bill by a vote of 298-121 on October 31, and

the Senate approved it by voice vote on November 3. The President signed the bill

into law, P.L. 108-106, on November 6. The conference agreement rejected a Senate

proposal to provide about half of the Iraq reconstruction assistance as loans.

For a review of conference action on key issues, see the section entitled “Key

Issues in Conference,” below.

Overview

In a nationwide address on September 7, 2003, the President announced that he

would request an additional $87 billion for reconstruction assistance to Iraq and

Afghanistan and for ongoing military operations there and elsewhere.1 On September

17, the White House submitted a formal request for the funds to Congress. On

September 21, the Defense Department provided backup material to congressional

committees.2 On September 23, the Coalition Provisional Authority that is

administering Iraq provided information on the details of its request for

reconstruction aid.

Congressional consideration of the request was completed on November 3,

when the Senate approved a conference agreement on H.R. 3289 providing

President George W. Bush, “President Addresses the Nation,” The Cabinet Room, Sept.

7, 2003, see [http://www.whitehouse.gov/news/releases/2003/09/20030907-1.html].

Office of Management and Budget, “FY2004 Supplemental: Iraq and Afghanistan Ongoing

Operations/Reconstruction,” Sept. 17, 2003, available electronically at

[http://www.whitehouse.gov/omb/budget/amendments/supplemental_9_17_03.pdf].

Department of Defense, “FY2004 Supplemental Request for Operation Iraqi Freedom (OIF),

Operation Enduring Freedom (OEF), and Operation Noble Eagle (ONE),” Sept. 21, 2003.

Available at [http://www.dod.mil/comptroller/defbudget/FY_2004_Supplemental.pdf].

CRS-2

supplemental appropriations of $87.5 billion for FY2004. Earlier, congressional

committees held a number of hearings on issues raised by the Administration request.

Readers in congressional offices may click on the highlighted hearings listed below

(in the .html version of this report) to link to hearing transcripts.

Iraq Supplemental Hearings

September 9:

Senate Armed Services Committee — Witnesses: Paul Wolfowitz, General Richard

Myers, Dov Zakheim, Marc Grossman

September 16:

Senate Banking Committee — Witnesses: Alan Larson, John Taylor, Phillip Merrill

September 22:

Senate Appropriations Committee — Witness: L. Paul Bremer

September 24:

House Foreign Operations Appropriations Subcommittee — Witnesses: L. Paul Bremer,

General John Abizaid

Senate Appropriations Committee — Witnesses: Donald Rumsfeld, General Richard

Myers, General John Abizaid, Dov Zackheim

Senate Foreign Relations Committee — Witness: L. Paul Bremer

House Armed Services Committee — Witnesses: Paul Wolfowitz, L. Paul Bremer,

General John Abizaid, and General John Keane

House International Relations Committee — Witness: L. Paul Bremer

September 25:

Senate Armed Services Committee — Witnesses: L. Paul Bremer, General John Abizaid

September 30:

House Defense Appropriations Subcommittee — Witnesses: Donald Rumsfeld, General

Richard Myers, Dov Zakheim

House Foreign Operations Appropriations Subcommittee — Witnesses: Richard L.

Armitage, Andrew S. Natsios

October 2, 2003:

House Military Construction Appropriations Subcommittee — Witnesses: Ray Dubois,

Larry Lanzillotta, Major General Larry Lust, Major General Dean Fox

House Armed Services Committee — Witnesses: Admiral E. P. Giambastiani,

Brigadier General Robert Cone.

During congressional debate, a wide range of legislative proposals addressing

costs, burdensharing, and other issues were considered, including measures to

require the Administration to provide reports on Iraq policy, giving

details of plans to establish security and restore basic services;

! roll back reductions in the top income tax rate from 2005 through

2010 enough to offset costs;

! encourage greater allied contributions of troops and reconstruction

aid;

! transfer control of Iraq reconstruction from the Defense Department

to the State Department; and

! require fair and open competition on contracts in Iraq.

The major issue in Congress was whether to provide Iraq reconstruction funds as

grants, as the Administration proposed, or as loans.

CRS-3

The following discussion (1) briefly reviews the basic elements of the request;

(2) discusses the debate about long-term costs; (3) discusses congressional action on

key legislative proposals; (4) provides an overview of funding for ongoing military

operations in Iraq, Afghanistan, and elsewhere; and (5) provides an overview of

funding for reconstruction and security in Iraq, for reconstruction in Afghanistan, and

for other foreign policy initiatives.

Basic Elements of the Administration Request

Of the $87 billion that the Administration requested, $65.6 billion was for

defense, and $21.4 billion for foreign policy programs. Of the $65.6 billion for

defense, $51.5 billion was for ongoing military operations in Iraq, $10.5 billion for

U.S. forces in Afghanistan, and the remaining $3.6 billion for homeland defense and

support to allies.3 Of the $21.4 billion for foreign policy programs, $20.3 billion was

for security and reconstruction in Iraq, about $800 million for Afghanistan, and about

$200 million for other Global War on Terrorism foreign policy initiatives. Table 1

provides an overview of the request.

DOD has not broken down previous spending by operation, however, so it is not possible

to make a direct comparison between the current request to earlier funding.

CRS-4

Table 1. Basic Elements of the Administration Request for

Additional Funding for Iraq, Afghanistan, and Other Activities

(amounts in billions of dollars)

Defense

Operation Iraqi Freedom (Iraq)

Operation Enduring Freedom (Afghanistan)

Operation Noble Eagle (Homeland Defense)

Coalition Support

Foreign Policy

Iraq Reconstruction

Iraq Security

Other Iraqa

Afghanistan Reconstruction

Other Global War on Terrorism

Total

$65.6

$51.5

$10.5

$2.2

$1.4

$21.4

$15.2

$5.1

$0.1

$0.8

$0.3

$87.0

Sources: Congressional Briefing material provided by the Office of Management and Budget, the

Department of Defense, the Department of State, and the Office of the Coalition Provisional Authority,

September 8, 2003; Office of Management and Budget, Supplemental Appropriations Request,

September 17, 2003; Department of Defense, FY2004 Supplemental Request, September 21, 2003.

Note:

a. Includes $61 million for U.S. diplomatic facilities and security and $50 million for multinational

division peacekeeping costs.

Administration officials said that the request was designed to cover only

pressing requirements through the next year to fifteen months — the defense money

through FY2004, which ends on September 30, 2004, and the Iraq reconstruction

money through December 2004. The request for military operations assumed that

current troop levels and the current pace of operations in Iraq, Afghanistan, and

elsewhere would continue unchanged through the fiscal year. The request did not

address ongoing military costs after FY2004. Presumably, if the number of troops

deployed in Iraq were to change, costs would change as well.

The $20 billion requested for reconstruction and security in Iraq finances only

a part of what Administration officials estimate will be needed in the long run.

Current estimates, from a variety of sources, including the U.S. government, put the

figure in the $50-75 billion range. A needs assessment released by the World Bank

and the U.N. Development Program (UNDP) puts the cost of reconstruction in 14 key

sectors at $36 billion over four years, not including $19.4 billion estimated by the

U.S.-led Coalition Provisional Authority (CPA) for security, oil, and other critical

sectors not covered by the Bank assessments.4 Total Bank/CPA projected

“UN/World Bank Present Iraq Reconstruction Needs to Core Group.” World Bank/United

Nations press release no. 2004/100/S, Oct. 2, 2003. For the full text of the report online, see

(continued...)

CRS-5

reconstruction costs through 2007 amount to $55 billion, $17.5 billion in 2004 alone.

The White House says that the Iraqi oil revenues and “recovered assets,” along with

additional international support, are expected to contribute to meet remaining needs.

Officials have also said, however, that Iraqi oil revenues are expected to total about

$12 billion in the next year, and that government operations will cost about as much,5

leaving no Iraq oil money for reconstruction efforts in the near term.

Long-Term Costs

The request for $87 billion for defense and reconstruction assistance comes on

top of more than $110 billion provided for those purposes since the September 11,

2001, terrorist attacks. Congress has provided $100 billion in defense funding, over

and above regular defense appropriations, for military operations in Afghanistan, for

other global counter-terrorism military and intelligence operations, for homeland

defense, and, most recently — in last April’s Emergency Wartime Supplemental

appropriations bill — for the war in Iraq. Table 2 provides a summary of defense

funding by appropriations bill.

Table 2. Defense Funding for Iraq, Afghanistan, and Other

Global War on Terrorism Activities: FY2001-FY2003

(amounts in billions of dollars)

Name of Law

Date of

Enactment

Public Law

Number

Defense

Funding

FY2001 Emergency Terrorism

Response Supplemental

Appropriations Act;

FY2002 DOD Appropriations Act

9/18/01;

1/10/02

P.L. 107-38;

P.L. 107-117

$17.4

FY2002 Emergency Supplemental

8/2/02

P.L. 107-206

$13.4

FY2003 Consolidated Appropriations

2/20/03

P.L. 108-8

$10.0

FY2003 Emergency Wartime

Supplemental

4/16/03

P.L. 108-11

$62.6

FY2004 DOD Appropriations Act*

9/30/03

P.L. 108-87

— $3.5

—

$100.0

Total

*Notes: Total may not add due to rounding. The FY2004 Defense Appropriations Act rescinded $3.5

billion of funds provided in the FY2003 Emergency Wartime Supplemental.

(...continued)

the World Bank website at

[http://lnweb18.worldbank.org/mna/mena.nsf/Attachments/Iraq+Joint+Needs+Assessme

nt/$File/Joint+Needs+Assessment.pdf].

Congressional briefing by executive branch officials, Sept. 8, 2003.

CRS-6

Since September 11, Congress has appropriated about $12 billion for Iraqi and

Afghan reconstruction and for foreign aid to the “front-line” states in the global war

on terrorism. Of that, Congress has provided $1.4 billion in reconstruction assistance

to Afghanistan, with another $600 million pending in regular FY2004 appropriations

bills. For Iraq, the April FY2003 Emergency Wartime Supplemental provided $2.5

billion in foreign operations funding for relief and reconstruction. Additional

funding for Iraq reconstruction totals $1.6 billion, of which $1.1 billion is from

Department of Defense funds (part of the $62.6 billion shown above in Table 2 from

the FY2003 Emergency Wartime Supplemental), and the remainder from the regular

U.S. Agency for International Development (USAID) budget (see below for a further

discussion).

A large part of the debate in Congress about the Administration’s $87 billion

request focused on cost issues, including

the impact of the new funding on the overall federal budget;

whether the Administration was adequately forthcoming in its

previous statements about costs;

! how accurate and complete the current cost projections are; and

! how great costs will be in future years.

The following sections review each of these issues in turn.

Impact on the Federal Budget

The Office of Management and Budget (OMB) mid-session review of the

budget, released in July, estimated that the federal budget deficit would total $455

billion in FY2003 and $475 billion in FY2004, assuming congressional enactment

of the Administration program for FY2004.6 White House officials said that the

requested additional appropriations of $87 billion for FY2004 would push the deficit

to about $525 billion for that year.7 The Congressional Budget Office (CBO)

updated budget baseline projected deficits of $401 billion in FY2003 and $480

billion in FY2004.8 It is important to note that the CBO baseline for FY2003

included outlays from the April 2003 wartime supplemental, and CBO projections

for future years assumed growth with inflation in overall discretionary spending. So,

in effect, the CBO estimate of the FY2004 deficit already assumed additional

supplemental appropriations for military activities in Iraq and elsewhere roughly

equal to the amount provided in FY2003. (Reconstruction assistance for Iraq and

Office of Management and Budget, “Mid-Session Review of the Budget: Fiscal Year

2004,” July 15, 2003.

So OMB projects that of the $87 billion in new budget authority, about $50 billion would

actually be spent as outlays in FY2004, with the remainder as outlays in future years.

Congressional Budget Office, “The Budget and Economic Outlook: An Update,” Aug.

2003.

CRS-7

Afghanistan, however, was more than three times as high in the FY2004 request as

in FY2003.)9

Administration officials argued that the economy can readily absorb additional

federal borrowing entailed by the requested supplemental, particularly since the

economy is still recovering from recession. Using OMB economic projections, a

deficit of $525 billion in FY2004 would total equal 4.4% of gross domestic

product — less than the 5%-6% of GDP that the government borrowed in the mid1980s. Congressional critics argued that funding for domestic programs, though not

tax cuts, has been constrained; that borrowing 20%-25% of the overall federal budget

is fiscally irresponsible; and that continuing deficits will endanger the economy in the

long term.

Others, including some Members of Congress, contended that, given Iraq’s

future oil revenue potential, reconstruction costs should be financed as loans rather

than grants. In this way, they say, future loan repayments would be a source of

revenue for the United States.

Earlier Administration Statements about Costs

In the months leading up to the war with Iraq, Administration officials were

generally unwilling to provide long-term estimates either of the costs of a war or of

subsequent post-war needs, saying that no final decision had been made to go to war

and that costs could not be projected with sufficient accuracy. What little officials

did say, however, became a matter of contention in Congress. In a September 9

Senate Armed Services Committee hearing, Senator Levin recalled that former White

House economic advisor Larry Lindsey had said a year earlier that a conflict with Iraq

could cost $100-200 billion.10 Other Administration officials, however, notably thenBudget Director Mitch Daniels, immediately dismissed Lindsey’s figures as illfounded, and the press widely reported Administration estimates that costs would be

in the range of $50 billion.11 That figure proved reasonable for the war itself and for

subsequent stability operations for the remainder of FY2003, but did not take account

of later post-war costs.

By March of this year, shortly before the White House submitted its FY2003

supplemental request, some legislators were complaining that the Administration was

withholding cost projections so as not to weaken support for pending tax cut

legislation. At one point, during the tax debate, the Senate approved an amendment

to set aside $100 billion of the of the tax cut as a hedge against unplanned war costs.

Before the war began, several independent estimates of war costs and of post-war

expenses were prepared, including assessments by the Congressional Budget Office,

CBO estimates that first year outlays from the Senate Appropriations Committee reported

version of the supplemental, S. 1689, will total $37 billion.

For Lindsey’s original comments, see Bob Davis, “Bush Economic Aide Says Cost Of

Iraq War May Top $100 Billion,” Wall Street Journal, Sept. 16, 2002, p. 1.

See, for example, Elizabeth Bumiller, “Budget Director Lowers Estimate Of Cost Of A

War,” New York Times, Dec. 31, 2002 Pg. 1.

CRS-8

the House Budget Committee Democratic Staff, Yale economist William Nordhaus,

the Center for Strategic and International Studies, and the Council on Foreign

Relations. Several of these independent estimates projected considerably higher

costs than the Administration was providing, mainly because the independent

projections took account of post-war peacekeeping and reconstruction costs and, in

some cases, costs of borrowing funds because the war added to the deficit. For a list

of major cost studies, see “For Additional Reading,” below.

Estimates of reconstruction costs became a particular focus of attention in view

of the Administration’s request for $20 billion for Iraq. In a widely quoted statement

last March, when asked about long-term reconstruction costs in Iraq, Deputy

Secretary of Defense Paul Wolfowitz said that

the oil revenues of that country could bring between 50 and 100 billion dollars

over the course of the next two or three years. Now, there are a lot of claims on

that money, but ... we’re not dealing with Afghanistan that’s a permanent ward

of the international community. We are dealing with a country that can really

finance its own reconstruction and relatively soon.12

More recently, Secretary of Defense Rumsfeld acknowledged that the U.S.

government underestimated Iraq reconstruction costs, saying,

The infrastructure of that country was not terribly damaged by the war at all. It

was damaged by 30 years of Saddam Hussein, with a Stalinist-like economy,

denying the people of that country the money and the funds and the resources

and the investments that they could have had.... Now ... did we underestimate

something? Yes. I don’t think people really fully understood how devastating that

regime was to the infrastructure of the country; how fragile the electric system

is, how poorly the water’s being managed, and how — the extent to which the

people are being denied.13

Reliability of Current Estimates

Leaving aside the politically contentious issue of past cost estimates, many

questions remain about the accuracy of the most recent military and reconstruction

cost projections. On the military side, officials have said that they do not believe

there will be any need for more U.S. troops in Iraq, first, because the security

situation in the country is generally good except in areas, like the “Sunni triangle,”

where diehard opposition is concentrated; second, because rapid progress is being

made in organizing Iraqi security forces which, the Administration expects, will take

up most of the burden;14 and, third, because of expected contributions of forces from

Deputy Secretary of Defense Paul Wolfowitz, before the House Defense Appropriations

Subcommittee, Mar. 27, 2003.

Secretary of Defense Donald Rumsfeld before the National Press Club, Sept. 10, 2003.

For a discussion of the status of efforts to reconstitute Iraq’s military forces, see Walter

Slocombe, Coalition Provisional Authority Special Advisor on Security and Defense,

Department of Defense News Briefing on the Status of the New Iraqi Army and Police

Force, Sept. 16, 2003. Available electronically at:

(continued...)

CRS-9

other nations. Cost projections justifying the supplemental request assume that

current force levels and the current pace of operations will be maintained for the next

year. Whether that is sufficient, however, depends first of all on whether the security

situation is improving, as Administration officials insist, or getting worse, as others

argue.

There have also been some questions about specific elements of the Defense

Department’s supplemental funding request. In a hearing of the Senate

Appropriations Committee on September 24, Senator Harkin questioned whether

several requested projects were war-related emergencies that require immediate

funding, including $293 million for various military construction projects, $329

million for R&D projects, and $345 million for base camp housing. Others have

raised the opposite question: whether the DOD request understates costs by leaving

for the future projects which will later need funding. One particular issue is that the

request includes relatively little money for “reconstituting” or — in the new DOD

vernacular “resetting” — Army forces. The Army estimates that several billion

dollars will be required to refill stocks of prepositioned materiel and repair equipment

to pre-war standards, but the request does not finance these measures.

In addition, as a recent Congressional Budget Office assessment concluded, it

is questionable whether the current force level can be maintained without further

extending reserve tours and, perhaps, mobilizing even more reserves, either of which

might undermine reserve personnel retention.15 Several Members of Congress have

proposed increasing the size of the Army to ease pressures on the force, though CBO

cautions that this would take up to five years to implement and would subsequently

cost $9-10 billion per year.

On the reconstruction side, officials acknowledge that they originally

underestimated significantly the weakness of Iraq’s infrastructure and overestimated

potential short-term Iraqi oil revenues. Even now, however, different officials

project somewhat different upper estimates of likely reconstruction costs. Moreover,

how much multilateral donors will contribute to cover the current reconstruction

financing gap ($50 to 75 billion, minus the $20 billion supplemental and perhaps $5

to $6 billion per year from Iraqi oil revenues beginning in 2005) is highly unclear.

Undersecretary of State Larson told the Senate Banking Committee on September 16

that, while the Administration believed that bilateral donors and international

financial institutions should “make a maximum effort to pay their share,” he was not

in a position to provide a specific figure until better estimates of reconstruction costs

are available. With the Madrid donor conference scheduled for October 23-24, U.N.

officials estimate that about $2 billion for Iraq will be pledged for 2004.16 On top of

(...continued)

[http://www.defenselink.mil/transcripts/2003/tr20030917-0683.html].

Congressional Budget Office, “An Analysis of the U.S. Military’s Ability to Sustain an

Occupation of Iraq,” Letter to the Honorable Robert Byrd, Sept. 3, 2003. Available

electronically at: [http://www.cbo.gov/showdoc.cfm?index=4515&sequence=0].

“Donors Seen Pledging $2 billion to Iraq in Madrid,” Reuters, Oct. 14, 2003.

CRS-10

this amount, the World Bank plans to recommend to its governing board $1 billion

in concessional and market rate loans to Iraq through June 30, 2005.17

Future Costs

Of all the uncertainties about costs of U.S. operations in Iraq (and Afghanistan),

perhaps the greatest is how long the United States will have to maintain a substantial

military presence. Secretary of Defense Rumsfeld has said that he does not anticipate

that large numbers of U.S. military forces will be required in the long term. Some

legislators, however, including some supporters of Iraqi regime change, have said

that the United States should expect to be involved for five years or more. Recently

Lt. Gen. Carlos Sanchez, who commands U.S. and allied forces in Iraq, said “it’s

going to be a few years” before the United States can withdraw from Iraq.18 How

long U.S. forces will stay is the main factor affecting long-term estimates of costs.

Most recently, the House Budget Committee Democratic Staff has prepared an

updated report that projects “that the long-term cost of the war in Iraq and the

post-war reconstruction effort will be more than $178 billion and under plausible

assumptions could exceed $400 billion.”19 By comparison, the Vietnam war, from

1964 through 1973, cost about $584 billion in FY2003 prices.

Issues in Congress

A number of issues were a focus of legislative attention, including both issues

directly related to the supplemental request and some not directly related. Legislative

measures that were proposed or acted on include

proposals to assert congressional oversight;

measures on taxes and domestic priorities;

proposals to provide additional funding for various programs;

a measure to provide health insurance for military reservists;

competitive contracting and limitations on profits of corporations

with contracts in Iraq; and

! proposals to provide loans rather than grants for Iraq reconstruction.

“World Bank Considers Lending $4 Billion to Iraq,” Financial Times, Oct. 15, 2003.

James O’Shea, “Force Reduction In Iraq ‘Years’ Off,” Chicago Tribune, Oct. 5, 2003,

p. 1.

Hon. John Spratt, “News Release: Spratt Statement on Potential Cost of Operations in

Iraq,” Sept. 23, 2003. Available electronically at

[http://www.house.gov/budget_democrats/news/iraq_cost_update.htm].

The full study is, House Budget Committee Democratic Staff, “The Cost of War and

Reconstruction in Iraq: An Update,” Sept. 23, 2003. Available electronically at

[http://www.house.gov/budget_democrats/analyses/iraq_cost_update.pdf].

CRS-11

Proposals to Assert Congressional Oversight

From the beginning of the congressional debate, a key issue was how Congress

should exercise oversight over U.S. policy, particularly in Iraq. On September 9, just

a day-and-a-half after the President’s speech, Senator Feinstein and ten other

Democratic Senators introduced a freestanding bill, S. 1594, designed to be attached

to the supplemental, that would require an extensive report on the economic and

security situation in Iraq. The report would be required to include information on

attacks on U.S. and coalition military and civilian personnel, a detailed plan to

establish security and restore basic services, current and projected costs, efforts to

secure increased international participation, a timetable for restoring selfgovernment, and projected U.S. and international military personnel requirements.

The reporting requirements in the Feinstein proposal were echoed in several

other proposals that were under consideration in Congress. In floor action, the Senate

has adopted a number of amendments to impose various reporting requirements on

the Administration. And in its markup of its version of the supplemental

appropriations bill, the House Appropriations Committee approved an amendment

by Representative Hoyer to establish extensive reporting requirements. (See below

under “Congressional Action” for more details.)

Taxes and Domestic Priorities

Taxes and the budget were another key focus of congressional debate. In a

speech at the National Press Club on September 9, Senator Biden announced that he

would offer a measure to offset costs of the supplemental by delaying implementation

of tax cuts for the top 1% of taxpayers for one year, which, he said, would free up

about $85 billion. The Administration vigorously opposed any offsetting reduction

in tax cuts.20 On October 1, Senator Biden, along with Senators Kerry, Chafee,

Corzine, Feinstein, and Lautenberg, proposed an amendment to limit the planned

reduction in the top marginal income tax rate from 2005 through 2010 sufficiently

to increase revenues by $87 billion. The Senate rejected the amendment on

October 2. In the House, during Appropriations Committee markup on October 9,

Representative Obey proposed a substitute bill that, among other things, offset costs

by reversing tax cuts. (See below under “Congressional Action” for more details.)

Funding for domestic programs was also an issue. Many legislators criticized

the Administration for opposing some domestic spending while asking for larger

amounts for similar programs in Iraq, including border security, schools, and prison

construction. In the House, Representatives Emanuel, DeFazio and others introduced

an amendment requiring parity between money for domestic needs and the amount

devoted to Iraq reconstruction. On October 14, the Senate rejected an amendment

by Senator Stabenow to reduce Iraq reconstruction funding by $5 billion and transfer

For the Biden proposal and the White House response, see Bud Newman, “Bush Calls

‘Absurd’ Democratic Proposal To Skip Tax Cuts to Pay for Iraq, Afghanistan,” BNA Daily

Report for Executives, Sept. 11, 2003, p. G-11. For the Emmanuel proposal, see “As

Appropriators, Rank And File Digest Funding Request,” National Journal Congress Daily,

Sept. 10, 2003.

CRS-12

the money to domestic priorities. (See below under “Congressional Action” for more

details.)

Additional Funding for Various Programs

Several measures to provide funds for various domestic and international

programs were matters of continuing debate in Congress, and some were offered as

amendments to the supplemental. Some Members advocated additional funding for

homeland security, while Senator Mikulski discussed adding $100 million for

AmeriCorps. An amendment by Senator Durbin, tabled by the Senate on a vote of

56-43, would have added $880 million for international HIV/AIDS, bringing the total

U.S. commitment in FY2004, as included in other pending bills, to $3 billion. The

House measure added $345 million for Liberia peacekeeping and reconstruction and

for Sudan, in line with an earlier Dear Colleague letter from Representative Payne

and others. The Senate-passed measure included $200 million for Liberia, while the

enacted bill provides $200 million, plus $245 million for a contribution to U.N.

peacekeeping operations in Liberia. A key issue was whether to add $1.4 billion to

the bill for veterans health benefits.

Health Insurance for Military Reservists

The Senate approved an amendment to the FY2004 defense authorization bill

that would offer health insurance to non-active duty reservists (of which there are

about 800,000) and their families through the DOD TRICARE program. Non-active

duty reservists would be allowed access to TRICARE by paying premiums

substantially below the average cost of private health insurance. CBO estimated that

the provision would cost about $500 million in FY2004 and over $2 billion a year by

FY2008 as more reservists signed on. The Administration threatened to veto the

authorization if it included this provision. Supporters said that they might offer the

measure as an amendment to the supplemental if it were not enacted in the

authorization. On October 2, the Senate approved an amendment to its version of the

supplemental bill providing health insurance to non-activated reservists, though only

to those who are unemployed or ineligible for employer provided insurance. (See

below under “Congressional Action” for a discussion of Senate action on this issue.

Also see the discussion of “Military Personnel Benefits” below.)

Competitive Contracting and Corporate Profits in Iraq

A particularly sensitive political issue was whether companies like Halliburton,

which have been awarded non-competitive contracts for support of U.S. forces and

for reconstruction activities in Iraq, may be earning excessive profits. Some

legislators mentioned measures to address the issue – Representative Maloney, for

example, introduced the Clean Contracting in Iraq Act of 2003 (H.R. 3275). In its

markup, the Senate Appropriations Committee approved an amendment by Senator

Leahy to stiffen penalties for fraud and profiteering on contracts for Iraq. The House

version of the bill included a measure to limit non-competitive procedures for

reconstruction contracts, and during House floor debate, Members adopted

amendments by Representatives Kirk and Slaughter tightening reports and

information regarding non-competitive contracts. A third amendment by

CRS-13

Representative Sherman required oil infrastructure procurement to follow normal

competitive bidding procedures. A combination of these proposals was included in

the enacted legislation (see “Congressional Action” below).

Loans Rather than Grants for Iraq Reconstruction

Several Members drafted amendments to require portions of the $20.3 billion

Iraq reconstruction request to be guaranteed by Iraqi oil or extended as loans rather

than grants. The Administration’s proposal called for all assistance to be provided

on a grant basis.

Although most of these efforts failed or were not offered, a Senate-passed

amendment by Senators Bayh, Ben Nelson, and others drew strong objections from

the White House. On October 16, the Senate adopted (51-47) language that would

convert $10 billion of Iraq reconstruction funding to loans. The U.S. would treat

these loans as grants, however, if foreign creditors cancel 90% of Iraq’s debt. This

was one of the key issues during congressional conference deliberations, although it

was dropped from the enacted bill.

Other unsuccessful attempts to shift grants to loans included amendments by

Senator Dorgan, tabled during both Committee markup (15-14) and floor

consideration (57-39), creating an Iraq Reconstruction Finance Authority that would

obtain financing for infrastructure rehabilitation by collateralizing the revenue from

future sales of Iraq oil. The full Senate also tabled a similar amendment by Senator

Landrieu during floor debate (52-47). Representative Wamp offered, but withdrew

under White House pressure, a proposal during House Committee markup that would

have made half of the reconstruction available only after an elected government was

in place and only on a loan basis. A similar amendment by Representative Pence was

ruled out of order during House floor consideration.

Senator Hutchison and others introduced, but did not offer, an amendment

(S.Amdt. 1798) directing $10 billion of the proposed $20.3 billion supplemental to

an Iraq Reconstruction Trust Fund, to be created within the World Bank, that would

issue loans and loan guarantees to implement economic development projects in Iraq.

Any U.S. contribution to the Fund would require a matching pledge from other

bilateral donors. After six months, if the Trust Fund had not been established, the

$10 billion would transfer to the CPA and be used for reconstruction loans to the Iraq

Governing Council.

There were, however, legal questions as to who could assume responsibility in

the near term for accepting sovereign loans and concerns raised by the

Administration, of increasing Iraq’s already large and currently unserviceable debt.

(For more discussion, see below under sections on Congressional Action and Iraq

Reconstruction Issues.)

CRS-14

Congressional Action

The Senate Appropriations Committee marked up its version of a bill, S. 1689,

on September 30, and the Senate began floor debate on October 1. On October 9, the

House Appropriations Committee marked up its version of a supplemental

appropriations bill, H.R. 3289, providing funds for ongoing military operations and

for reconstruction assistance in Iraq and Afghanistan. Floor action began on

October 15. Both the House and the Senate approved their versions of the bill on

October 17. On October 29, House and Senate appropriators announced a conference

agreement, on H.R. 3289. The House approved the conference agreement by a vote

of 298-121 on October 31, and the Senate approved the measure by voice vote on

November 3. The President signed the bill into law, P.L. 108-106, on November 6.

Senate Appropriations Committee Markup

As proposed by Committee Chairman Ted Stevens and as agreed to by the

committee, the reported bill provided the amounts requested both for defense and for

foreign operations, though with some shifts of funds among various activities.

For defense, the bill provided $65.560 billion, equal to the amount requested.

The committee bill made some minor changes in requested equipment funding and,

most notably, rejected an Administration proposal to revise military personnel

benefits. In action on some key issues, the Senate committee bill

Extended through FY2004 an increase in Imminent Danger Pay and

in Family Separation Allowances that Congress provided in the

April 2003 Wartime Emergency Supplemental. The Administration

proposed eliminating these increased benefits after December 31,

2003, and instead using an increase in amounts of Hazardous Duty

Pay to provide the same amounts to troops deployed in conflict areas

(see below for a further discussion).

Provided an additional $962 million for Army operations and

maintenance and procurement funding for materiel and activities

such as body armor for soldiers in Iraq and Afghanistan, battlefield

ordinance cleanup, transportation of damaged combat equipment to

depots, communications equipment, and replenishment of Army

prepositioned stocks used in combat. These increases were offset by

reductions in Air Force, Navy, and Defense-Wide accounts.

Provided the Defense Department with the authority to transfer up

to $2.5 billion among defense accounts without advance

congressional approval rather than $5 billion as requested by the

Administration. The bill also, however, provided authority for DOD

to transfer an additional $5 billion subject to approval by the House

and Senate Appropriations Committees. Senator Byrd proposed

measures to limit the funding flexibility the bill provided.

CRS-15

Allowed DOD to transfer $150 million into unplanned military

construction projects rather than the $500 million requested.

Provided $200 million to provide training and equipment to the new

Iraqi Army and the Afghan National Army. The Administration had

requested the funds for forces in Iraq, Afghanistan, and “other

nearby regional nations.”

Provided $1.0 billion for “coalition support” to reimburse Pakistan,

Jordan, and other cooperating nations for logistical and other support

to U.S. operations. This is $400 million less than the Administration

requested.

Although there was some debate about the defense request, most of the debate

during the Senate markup concerned reconstruction funds. The committee rejected

an amendment by Senator Byrd to eliminate most of the reconstruction funds —

except for amounts for security — leaving reconstruction to be considered later in a

separate measure. The committee also rejected an amendment by Senator Byrd to

limit the transfer authority for defense programs that the bill provides.

For Iraq and Afghanistan reconstruction and other global war on terrorism, S.

1689, as reported, provided $21.445 billion, as requested, supported the full request

for Afghanistan, and made small changes in other areas.

Regarding Iraq reconstruction, the Senate Appropriations Committee supported

the total funding request of $20.3 billion and provided the President with the

flexibility to allocate resources to any federal account. This would allow the

Coalition Provisional Authority, headed by Ambassador Bremer who reports to the

Secretary of Defense, to continue its coordination role and control over

reconstruction funding. The Senate-reported measure, however, deleted the $60.5

million requested for U.S. diplomatic facilities in Iraq, noting that these funds were

previously provided in the FY2003 emergency supplemental measure (P.L. 108-11).

The Administration, however, had planned to use these supplemental resources for

what it considered as more urgent needs for an interim USAID mission in Kabul and

training for the Afghan transitional government. Instead, S. 1689 provided a separate

$60.5 million appropriation for USAID’s Capital Investment Fund to meet the

requirements in Afghanistan, making the FY2003 supplemental funds available for

U.S. facilities in Baghdad.

Other additions and changes made by the Senate panel were to

earmark $100 million of the $20.3 billion total for democracybuilding activities in Iraq;

! require full and open competitive contracting procedures (waivable);

! apply current and future USAID standards related to meeting the

needs of disabled persons to activities in Iraq and Afghanistan;

! ensure that a new Iraqi constitution preserves full rights to religious

freedom;

! prohibit any funds from being used to repay debts incurred by the

former government of Saddam Hussein; and

CRS-16

impose fines and criminal charges against persons engaged in war

profiteering and fraud relating to military action, relief, and

reconstruction in Iraq.

Also during Senate Committee markup, the panel tabled (15-14) two amendments

by Senator Dorgan related to reducing U.S. costs of rebuilding Iraq. The first would

have created an Iraq Reconstruction Finance Authority that would use future Iraq oil

revenues to secure financing for reconstruction projects. Senator Dorgan argued that

the Iraq Governing Council had sufficient authority to create such a facility and to

raise money that could reduce the size of proposed U.S. expenditures. Senator

Dorgan subsequently reintroduced the amendment for Senate floor debate, at which

time the Senate tabled the proposal 57-39. The second Dorgan amendment

considered during Committee markup would have converted the reconstruction

package from grants to loans. Opponents of the Dorgan amendments maintained that

adding to Iraq’s already sizable debt obligations would enormously complicate the

difficult task of stabilizing the economy. Also tabled during markup (15-14) was a

proposal by Senator Harkin that would have reduced reconstruction funds to $10

billion and delayed submission of additional requests until the President had reported

on contributions made by other donors and submitted a detailed reconstruction plan.

For other matters concerning the global war on terrorism, S. 1689, as reported,

approved the President’s request for a $100 million emergency fund for complex

foreign crises. The Senate Appropriations Committee expressed support for using

the contingency fund for peace and humanitarian efforts, such as those required in

Liberia. The bill further authorized the use of $200 million for Pakistan debt relief

pending in the regular FY2004 Foreign Operations bill and extends through FY2004

the waiver of foreign aid restrictions that applied to Pakistan prior to September 11,

2001. Beyond agreeing to $50 million proposed for Emergencies in the Diplomatic

and Consular Services for rewards for Osama bin Laden and Saddam Hussein, S.

1689 adds $41 million for two other specific purposes:

reimbursement to New York City for additional costs of protecting

foreign missions and officials since September 11 ($32 million); and

! costs of the 2003 Free Trade Area of the Americas Ministerial

meeting ($8.5 million).

The Senate measure further included $40 million, as requested, for USAID operating

expenses in Afghanistan and Iraq, plus an additional $60.5 million for construction

and upgrades of more secure overseas USAID facilities.

Senate Floor Debate and Amendments

The Senate began floor consideration of S. 1689 on October 1 and continued on

October 2, 3, and, after recess, on October 14, 15, 16, and 17.

Amendments Considered. The major debates on the Senate floor were over

an amendment by Senator Byrd to eliminate $15.2 billion of the

$20.3 billion requested for Iraq reconstruction in order to review the

CRS-17

proposal more closely and consider it at a later point (rejected by a

vote of 38-59 on October 1);

an amendment by Senator Biden that would have suspended a

portion of tax reductions in order to pay the costs of Iraq security

and reconstruction (tabled by a vote of 57-42 on October 2);

an amendment by Senators Daschle and Graham of South Carolina

(S.Amdt. 1816) to offer health insurance under the Defense

Department-run TRICARE program to reservists and their families

who are either unemployed or who are not eligible for employersponsored health insurance (adopted October 2);

various amendments to provide some or all of the Iraq reconstruction

funds as loans (the Senate adopted the Senators Bayh-Ben NelsonEnsign-Collins-Clinton-Dorgan-Snowe-Graham amendment to

provide $10 billion as loans by a vote of 51-47 on October 16);

a Reed-Hagel proposal to add 10,000 active duty personnel to the

Army (rejected a motion to table the amendment by 45 to 52 on

October 15 and adopted the amendment without objection on

October 16);

an amendment by Senators Dorgan and Wyden to cut $1.655 billion

from specific Iraq construction projects, as in the House committee

version of the bill, and to cut an additional $200 million for Iraqi oil

imports (agreed to on October 17);

a Durbin amendment (S.Amdt. 1879) to reduce Iraq reconstruction

funds by $879 million and provide the same amount for HIV/AIDS

prevention, treatment, and research (tabled by 56-43, October 17);

and

an amendment by Senators Chafee and Leahy to add $100 million to

funds available to assist Liberia (agreed to on October 17).

Reconstruction Transfers as Loans. Perhaps the most extensive

discussion during Senate deliberation came on the issue of whether Iraq

reconstruction funding should be financed strictly on a grant basis, as proposed by

the President, or whether some of the money should be loaned to Iraq. On October

17, over strong White House objections, the Senate adopted (51-47) an amendment

(S.Amdt. 1871) by Senators Bayh, Ben Nelson, and others to provide $10 billion as

loans. Should international creditors subsequently agree to cancel 90% of Iraq’s

debt, the President could convert the loans into grants.

Other proposals, however, were either defeated or not offered. Earlier in the

debate, there was substantial discussion of an amendment introduced by Senator

Hutchison and others (S.Amdt. 1798) requiring that the Secretary of the Treasury

negotiate with the World Bank and member nations of the Bank to create within

World Bank an Iraq Reconstruction Trust Fund. Under the terms of the Hutchison

CRS-18

amendment, the Fund would be governed by a Board of Trustees made up of a U.S.

official and five others representing the top country contributors to the Trust Fund.

The Board would use Trust Fund contributions to extend loans and loan guarantees

for projects advancing economic development in Iraq. Of the $20.3 billion

appropriated Iraq reconstruction, the amendment would have directed $10 billion to

the Trust Fund, although the U.S. contribution could not exceed the total amount

pledged by other nations. After 6 months, if the Trust Fund had not been established,

the $10 billion would be transferred to the Coalition Provisional Authority, which

would loan to, or guarantee loans made by, the Iraq Governing Council. Senator

Hutchison, however, did not bring up her amendment for a vote.

Another proposal by Senators Bayh and Nelson (S.Amdt. 1815) would have

required that prior to the obligation of non-security reconstruction funds, each

country that is owed debt incurred during the Saddam Hussein regime forgives such

debt. Otherwise, after 6 months, reconstruction appropriations would be transferred

to an account for use as a loan to the Iraq Governing Council. This amendment was

not debated, although, as noted above, the Senate adopted an alternative Bayh/Nelson

amendment on October 16 addressing the same theme.

Amendments Adopted. Overall, during the seven days of debate through

October 16, the Senate acted on more almost 50 amendments, adopting 47 and

rejecting 16. Those adopted included amendments

by Senators Collins and Wyden (S.Amdt. 1820) to require all

contracts over $1 million military purposes and reconstruction in

Iraq to use full and open competition procedures unless the

executive agency responsible for the contract justifies the reasons for

using a non-competitive process (October 2);

by Senators Murray and Durbin (S.Amdt. 1822) requiring that a

number of women’s issues be given priority in reconstruction

programs in Iraq and Afghanistan (October 2);

by Senators Voinovich and Lott (S.Amdt. 1808) requiring a report

within 6 months on efforts made by the United States to increase

contributions by other nations and organizations for Iraq

reconstruction, the status of pre-war Iraqi debt, and the prospect for

repayment of infrastructure costs by Iraq (October 2);

by Senators Daschle and Graham of South Carolina (S.Amdt. 1816)

to offer health insurance under the Defense Department-run

TRICARE program to reservists and their families who are either

unemployed or who are not eligible for employer-sponsored health

insurance (October 2) (see below, under “Military Personnel

Benefits,” for a description of the specific proposal); and

by Senators Reed and Kennedy (S.Amdt. 1812), to increase by

$191.1 million the amount provided up-armored High Mobility

Multipurpose Wheeled Vehicles offset by a cut in funds in the Iraq

Freedom Fund (October 2)

CRS-19

by Senator Ensign (S.Amdt. 1839) to prevent reconstruction funds

from being used to repay foreign debts (October 15);

by Senator Reid (S.Amdt. 1836) and by Senator Hollings (S.Amdt.

1870) to permit citizens held as POWs or as “human shields” in the

1991 Gulf War to pursue damages in court (October 15 and 16);

by Senator McConnell (S.Amdt. 1863) to permit the export of lethal

military equipment to reconstituted Iraqi military forces (October

16);

by Senator Nickles (S.Amdt. 1876) to express the sense of the

Senate that foreign countries should forgive Iraqi debt (October 16);

by Senator Nelson of Florida (S.Amdt. 1858) to provide $10 million

for a National Guard family assistance program (October 16);

by Senator Warner (S.Amdt. 1880 and S.Amdt. 1867) to provide

funds for defense facilities damaged by Hurricane Isabel (October

16);

by Senator Feingold (S.Amdt. 1852) to all military personnel to take

leave to attend to deployment related business (October 16);

by Senator Durbin (S.Amdt. 1837) to require the federal government

to make up any difference between what federal employees who are

members of the military reserves activated for service will earn when

activated and what they would normally earn in basic pay (approved

96-3, October 17);

by Senator Boxer (S.Amdt. 1843) to make retroactive the relief of

hospitalized members of the uniformed services from the obligation

to pay for food and subsistence while hospitalized (99-0, October

17);

by Senators Dorgan and Wyden (S.Amdt. 1887) to cut $1.655 billion

from specific Iraq construction projects, as in the House committee

version of the bill, and to cut an additional $200 million for Iraqi oil

imports (October 17);

by Senators Chafee and Leahy (S.Amdt. 1807) to add $100 million

to the $100 million available in the committee bill for assistance to

Liberia (October 17);

by Senator Harkin (S.Amdt. 1860) to provide up to $13 million for

conflict resolution, rule of law, and democracy activities (October

17);

CRS-20

by Senator Boxer (S.Amdt. 1845) to prioritize the equipping of

aircraft enrolled in the Civil Reserve Air Fleet when

counter-measures against the threat of shoulder-fired missiles are

deployed for homeland defense (October 17);

by Senators Bond and Mikulski (S.Amdt. 1825) to provide an

additional $1.3 billion for in medical care funds for the Department

of Veterans Affairs (October 17); and

at least 15 amendments to require various reports on Iraq

reconstruction and security and on other issues.

Amendments Rejected. The Senate also rejected amendments

by Senators Leahy and Daschle (S.Amdt. 1803) to place the

Coalition Provisional Authority under the direct authority and

foreign policy guidance of the Secretary of State (tabled 56-42,

October 2);

by Senator Dodd (S.Amdt. 1817) to provide an additional $322

million for safety equipment for United States forces in Iraq offset

by reducing the amount provided for reconstruction (tabled by 4937, October 2);

by Senator Bingaman (S.Amdt. 1830) to authorize the award of the

Iraqi Liberation Medal as a campaign medal for members of the

Armed Forces who serve in Southwest Asia in connection with

Operation Iraqi Freedom (rejected 47-48, October 14);

by Senator Stabenow (S.Amdt. 1823) to reduce Iraq reconstruction

funds by $5.03 billion and to provide an equal amount of additional

spending for domestic education, veterans, health, and transportation

programs (tabled by 59-35, October 14);

by Senator Dorgan (S.Amdt. 1826) to require that Iraqi oil revenues

be used to pay for reconstruction in Iraq (tabled by 57-39, October

14);

by Senators Byrd, Leahy, and Kennedy (S.Amdt. 1818) to allow only

$5 billion of non-security Iraq reconstruction funds to be used prior

to April 1, 2004; after April 1, the remaining funds would become

available if the President issues certain certifications and Congress

approves a subsequent appropriations law approving the additional

funds (tabled by 57-42, October 16);

by Senator Leahy (S.Amdt. 1868) to prohibit contracts with

corporations that owe deferred compensation to specific U.S.

government officials (tabled by 65-34, October 16);

CRS-21

by Senator Daschle (S.Amdt. 1854) to require that any future

funding for Iraq be matched by foreign contributions (tabled by 5544, October 17);

by Senator Landrieu (S.Amdt. 1859) to establish an Iraq

Reconstruction Finance Authority (tabled by 52-47, October 17);

by Senator Durbin (S.Amdt. 1879) to reduce Iraq reconstruction

funds by $879 million and provide the same amount for prevention,

treatment, and control of, and for research on HIV/AIDS (tabled by

56-43 nays, October 17);

by Senator Corzine (S.Amdt. 1882) to establish a National

Commission on the Development and Use of Intelligence Related to

Iraq. (tabled by 67-32, October 17);

by Senators Byrd and Durbin (S.Amdt. 1819) to shift $600 million

from the Iraq reconstruction to the Army to secure and destroy

weapons in Iraq (tabled by 51-47, October 17);

by Senator Byrd (S.Amdt. 1886) to prohibit involuntary deployment

overseas in support of Operation Iraqi Freedom of members of the

National Guard and Reserves who have been involuntarily deployed

for more than six months during the preceding six years (tabled by

82-15, October 17);

by Senator Byrd (S.Amdt. 1888) to eliminate the flexibility given to

the President to reallocate Iraq reconstruction funds without

approval by Congress (tabled by 49-46, October 17);

by Senator Brownback (S.Amdt. 1885) to reduce the amount

appropriated for reconstruction in Iraq by $600 million and to

increase the amount available to the Iraqi Civil Defense Corps by

$50 million, the amount available for Afghanistan by $400 million,

and the amount available for Liberia (tabled by 55-43, October 17);

and

by Senator Byrd (S.Amdt. 1884, to S.Amdt. 1819), to shift $1.655

billion from Iraq reconstruction funds to reconstruction assistance to

Afghanistan, destruction of conventional weapons in Iraq, disaster

relief in Liberia, and repair or Hurricane Isabel damage to military

and Coast Guard facilities (fell when Byrd-Durbin S.Amdt.1819 was

tabled, October 17).

Also Senators Reid and Lincoln withdrew an amendment (S.Amdt. 1835) to permit

concurrent receipt of military retired pay and veterans administration disability

benefits after a compromise on the issue in the conference on the FY2004 defense

authorization bill was announced. In addition, an amendment by Senator Schumer

regarding appointment of a special counsel was ruled out of order and not

reconsidered.

CRS-22

House Appropriations Committee Markup

The House marked up its version of a supplemental appropriations bill (H.R.

3289) on October 9. As approved by the House Appropriations Committee, the bill

provided $86.9 billion in total, $184 million below the request;

provided $18.65 billion for Iraq reconstruction, $1.65 billion below

the request;

! provided $1.2 billion for Afghanistan reconstruction, $400 million

above the request;

! moved $858 million from the defense part of the bill to the foreign

operations part to cover operating expenses of the Coalition

Provisional Authority in Iraq; and

! added $544 million to the defense part of the bill to cover Hurricane

Isabel damage at military facilities.

In the defense part of the bill, the committee bill also

added funds for force protection and unexploded ordnance clearing,

offset by cuts elsewhere;

allowed the Army to contract out for security guards at military

facilities in the United States to replace 7,000 to 10,000 reserve

personnel mobilized for those duties;

as in the Senate version of the bill, extended through FY2004

increases in Imminent Danger Pay and Family Separation

Allowances provided in the April 2003 Wartime Emergency

Supplemental and rejects the Administration proposal to instead use

Hardship Duty Pay to increase pay to deployed personnel;

provided the Defense Department with the authority to transfer up

to $3.0 billion among defense accounts without advance

congressional approval rather than $5 billion as requested by the

Administration (the Senate bill provides $2.5 billion for transfer

without advance congressional approval plus $5 billion subject to

prior approval by the defense appropriations subcommittees);

allowed DOD, as requested, to transfer up to $500 million into

unplanned military construction projects, rather than the $150

million allowed in the Senate bill;

provided $100 million to provide training and equipment to the new

Iraqi Army and the Afghan National Army, rather than the $200

million provided in the Senate bill — the Administration had

requested $200 million for forces in Iraq, Afghanistan, and “other

nearby regional nations;” and

provided $1.3 billion for “coalition support” to reimburse Pakistan,

Jordan, and other cooperating nations for logistical and other support

CRS-23

to U.S. operations, rather than the $1.4 billion requested or the $1.0

billion in the Senate bill.

In the Iraq/Afghanistan reconstruction part of the bill, the committee bill

provided all Iraq reconstruction in the form of a grant, as requested;

cut Iraq reconstruction by reducing by $300 million funds for

proposed prison modernization and construction, $153 million for

recommended solid waster management programs (including trash

trucks), $335 million for transportation and communication projects

(including zip codes), $100 million for 7 new housing communities,

$150 million for a new children’s hospital in Basra, and $200

million for an American-Iraqi Enterprise Fund (see Table 5, below,

for more details on sector and project adjustments);

provided full or near-full funding for security and law enforcement

($3.2 billion), electrical generation and distribution infrastructure

($5.56 billion), and oil infrastructure ($2.1 billion), and adds $100

million for modernizing medical facilities ($493 million total) and

$90 million for education programs;

increased funding for Afghan reconstruction from $799 million

proposed to $1.2 billion, adding resources for road construction,

private sector development, power generation, education, and

improved governance;

limited the use of non-competitive contracts for Iraq, but with a

presidential waiver;

continued the organizational structure for Iraq reconstruction of

Ambassador Bremer reporting to the President through the Secretary

of Defense; and

prohibited the use of funds to pay Iraq’s foreign debts.

The Committee bill further added several items unrelated to Iraq and Afghan

reconstruction issues concerning Pakistan, Liberia, and victims of September 11:

The Administration had requested authority (but not money) to use

$200 million in Economic Support Funds (ESF) pending in the

regular FY2004 Foreign Operations Appropriation (H.R. 2800 and

S. 1469) for Pakistan debt reduction. The House Committee granted

this authority, plus provides $200 million in ESF to fund debt

restructuring;

Responding to international calls for additional humanitarian relief

aid and finances for a U.N. peacekeeping force in Liberia, the House

measure added $100 million for disaster and famine support and

CRS-24

$245 million for a U.S. contribution to a U.N. peacekeeping

operation. The disaster relief money can also be used in Sudan; and

The House Committee included $15 million for the Department of

Justice September 11 Victims Compensation Program.

During the markup, the committee agreed to a manager’s amendment by

committee Chairman Bill Young that —

added $150 million for Hurricane Isabel storm damage at military

and Coast Guard facilities to the $413 million in the chairman’s

mark, for a total of $544 million; and

prohibited the use of any funds in the bill for defense or

reconstruction activities “coordinated by any officer of the United

States Government” not subject to confirmation by the Senate.

The latter provision was a response to the White House decision, announced on

October 6, to give White House National Security Advisor Condoleezza Rice

responsibility for coordinating Iraq reconstruction activities. The issue for Congress

was that officials not subject to Senate confirmation are not readily available to

provide congressional testimony. (See below for a further discussion of issues

regarding management of reconstruction funds.)

The committee also accepted a number of other amendments, including

proposals

by Representative Hoyer to require the President to submit a

quarterly report on reconstruction in Afghanistan and Iraq, the

security situation, troop requirements, and other matters;

! by Representative Wolf requiring the General Accounting Office to

review most reconstruction contracts;

! by Representative Lowey to shift $90 million of Iraq reconstruction

funds to education;

! by Representative Cunningham to ensure that impact aid to local

school districts is not reduced if both parents of a student are

deployed abroad;

! by Representative Kolbe to strengthen requirements in the bill

regarding competitive bidding on reconstruction contracts;

! by Representative Hinchey to prohibit funding for foreign military

units that are credibly suspected of violating human rights;

! by Representative Nethercutt to allocate 10% of reconstruction funds

administered by the U.S. Agency for International Development to

small and minority-owned businesses;

! by Representative Nethercutt to require the Secretary of Defense to

submit to Congress within 30 days an analysis of alternatives for

replacing the existing Air Force fleet of KC-135 tanker aircraft; and

! by Representative Bonnilla, regarding repatriation of illegal

immigrants (two amendments).

CRS-25

The Nethercutt amendment regarding tanker aircraft had to do with an Air Force

proposal to lease 100 Boeing 767 aircraft as tankers that is currently being held up.

The Senate removed an identical provision from its version of the bill in floor action

on October 2. Some regarded this measure as a place holder allowing the

appropriations committees to provide funds for the lease in a conference report on

the bill.

The committee rejected (by a recorded vote of 25-36) a substitute amendment

by Representative Obey that would

transfer $4.6 billion from Iraq reconstruction to defense to among

other things, increase the size of the Army by 20,000, increase

funding for force protection measures, expand health care for

military personnel, and increase family support services;

! require that half the remaining $14 billion in reconstruction aid (i.e.,

$7 billion) be provided as loans through the World Bank;

! require that other donors make a matching contribution of 50%; and

! reduce tax cuts to offset costs.

Representative Wamp brought up but then withdrew a widely discussed

amendment to provide half of the reconstruction money for Iraq as loans.

Representative Culberson brought up but also withdrew an alternative measure that

would require the President to ensure that the United States is ultimately reimbursed

for the reconstruction funds.

Other measures that the committee rejected included amendments

by Representative Goode to eliminate all Iraq reconstruction funds;

by Representative Jackson to add $100 million for assistance to

Liberia;

! by Representative Hinchey to require information on noncompetitive contracts for activities in Iraq entered into after

September 30, 2002; and

! by Representative Obey to add $14 billion to buy, rather than lease,

Boeing 767 tanker aircraft.

House Floor Debate and Amendments

The House began general debate on its bill on the floor on October 15 and then

took up amendments on October 16 and 17. The Rules Committee approved an open

rule, allowing unlimited amendments, but did not protect any amendments against

points of order. As a result, a number of amendments, including a substitute

amendment by Representative Obey like the one he offered in committee and a loans

versus grants amendment by Representative Pence, were ruled out of order as

constituting legislation on an appropriations bill. In debate on October 16, the only

amendment on loans made in order was a proposal by Representative Obey to

provide that all reconstruction grants should be converted to loans.

In floor action on October 16 and 17, the House adopted amendments

CRS-26

by Appropriations Committee Chairman C.W. “Bill” Young of

Florida to exempt servicemembers with combat-related injuries from

a requirement to for meals while hospitalized;

by Representative Maloney to make available $20 million for

women and girls in Afghanistan;

by Representative Kirk to tighten the congressional reporting

requirements related to non-competitive contracts (405-20)

by Representative Slaughter to require more information from the

executive branch related to contracts awarded through a noncompetitive process;

by Representative DeFazio that prohibits the funds provided by the

bill to be used for Iraq to participate in the Organization of

Petroleum Exporting Countries;

by Representative Millender-McDonald to transfer $50 million

funds from the Operation and Maintenance Defense-Wide to the

Family Advocacy Program;

by Representative Ramstad to shift $98 million within the bill to

provide funds for domestic travel for Army personnel receiving rest

and recuperation leave;

by Representative Hoeffel to add reporting requirements on

international military and economic cooperation and on guard and

reserve deployment plans;

by Representative Velazquez to prohibit funds from being used for

any contract in contravention of Section 8 (d)(6) of the Small

Business Act; and

by Representative Sherman to require that normal competitive

bidding procedures are followed in procurement under the funds

appropriated for Iraq’s oil infrastructure (by a recorded vote of 248179).

The House rejected amendments

by Representative Obey that would have converted reconstruction

grants to loans (200-226);

by Representative Obey to shift funds from Iraq reconstruction to

various military programs (209-216);

by Representative Goode to delete funding for Liberia;

CRS-27

by Representative Blumenauer to shift reconstruction funds from

Iraq to Afghanistan;

by Representative Waxman to reduce reconstruction aid for Iraq;

by Representative Markey to limit the Defense Department’s

authority to transfer funds (146-279);

by Representative Holt to bar funds for petroleum imports into Iraq

(169-256);

by Representative Tauscher to transfer $300 million from funding

weapons inspections to Army force protection measures;

by Representative Deutsch to prohibit any of the funds for

reconstruction in Iraq from being provided until September 30,

2004;

by Representative Kind to reduce funding for the Iraq Relief and

Reconstruction Fund by 50% (by a recorded vote of 156-267 with

one voting “present”);

by Representative Stupak to increase the basic rate of pay to all

military services to provide a $1,500 bonus to each person serving

in operations in Iraq or Afghanistan (by a recorded vote of 213-213);

by Representative Reyes to increase funding for programs and

scholarships to increase language proficiency and workforce

diversity in the intelligence community (by a recorded vote of 206221);

by Representative Jackson-Lee of Texas to shift $70 million to

Afghan women’s programs and $300 million from Iraq oil industry

reconstruction to human rights, education, refugees, and democracy

and governance (by a recorded vote of 156-271); and

by Representative Weiner to prohibit funds in the bill to be used for

assistance or reparations to Cuba, Libya, North Korea, Iran, Saudi

Arabia, or Syria (by a recorded vote of 193-233).

House Motion to Instruct Conferees. On October 21, the House approved

(by a vote of 277-139) a motion offered by Representative Obey to instruct House

conferees to accept four Senate provisions:

providing medical screening for military reservists before

mobilization (Section 317);

! extending transitional health care and benefits to military personnel

for 180 days from separation from the armed forces (Sec. 321);

CRS-28

providing that $10,000,000,000 of the amounts provided for the

reconstruction of Iraq be in the form of loans, subject to certain

conditions (Sec. 2319); and

! providing of $1,300,000,000 to the Veterans Health Administration

for medical care for veterans (Title IV).

Earlier in the day, Office of Management and Budget Director Joshua Bolten

sent a letter to the House and Senate Appropriations Committees warning that the

President’s advisors would recommend a veto if the conference agreement on the bill

included a requirement that Iraq reconstruction funds be provided as loans. The letter

also opposed the $1.3 billion in the Senate bill for veterans health and the Senate

provision that provides health insurance for some non-deployed military reservists

and their dependents through the DOD TRICARE program.

Key Issues in Conference

The major issue in House-Senate conference consideration of the bill was

whether to provide some of the Iraq reconstruction funds as loans. The Senate bill

included an amendment to provide $10 billion of the Iraq reconstruction funds as

loans. In a vote on October 29, the conference rejected by a vote of 13-16 a proposal

to provide half the $18 billion for Iraq reconstruction assistance as loans.

On other key issues, the conference agreement

provides $500 million for the Federal Emergency Management

Agency (FEMA) for disaster relief for Hurricane Isabel and the

California wildfires, which was not in either chamber’s bill;

eliminates a House provision requiring that Iraq reconstruction aid

be coordinated by an official subject to Senate confirmation – the

conference also rejected by a vote of 14-15 an alternative proposal

by Senator Byrd to require Senate confirmation of the director of the

Iraq Coalition Provisional Authority;

cuts the Administration request for the Iraq Relief and

Reconstruction account by $1.655 billion as in the House bill rather

than by $1.855 million as in the Senate bill. The conference,

however, further directs that $210 million of Iraq funding be

transferred for aid to Jordan, Liberia, and Sudan, leaving resources

for Iraq $1.865 billion less than requested;

agrees, as in the House bill, to provide about $1.2 billion for Afghan

reconstruction, $400 million more than the Administration requested

and the Senate provided;

provides $245 million for assessed costs of U.N. peacekeeping in

Liberia, as in the House bill, and earmarks a total of $200 million for

Liberian relief aid and $10 million for Sudan humanitarian

CRS-29

assistance rather than $200 million in the Senate bill and $100

million in the House measure;

provides $200 million in economic aid to Pakistan, as in the House

bill;

includes a modified version of a Senate measure to provide health

insurance through the DOD TRICARE program to non-active duty

reservists who do not have access to employer-provided health

insurance; the conference report presents this and other reserve

health care measures as a one-year trial through FY2004 and

requires that DOD report on its cost and implementation;

rejects a Senate provision to increase Army end-strength by 10,000

active duty personnel for assignment to peacekeeping types of

duties;

provides $313 million in defense operation and maintenance and in

procurement funds to repair Hurricane Isabel damage at military

facilities, $100 million less than in the House bill, and provides

another $130 million in military constructions funds for disaster

repair, as in the House bill;

provides $100 million in a general provision that was not in either

chamber’s bill for munitions security and destruction in Iraq;

moves $858 million from the defense part of the bill to the foreign

operations part to cover operating expenses of the Coalition

Provisional Authority in Iraq, as in the House bill;

provides $3 billion in general transfer authority to the Secretary of

Defense with a requirement that Congress be notified promptly but

not that Congress provide advance approval as in the House bill and

rejects the Senate provision that would provide $5 billion in such

transfer authority and an additional $2.5 billion subject to

congressional approval; and

rejects a Senate provision to provide $1.3 billion for veterans health

benefits, as in the Senate bill; Senator Stevens said that the funding

would be addressed in the pending VA-HUD-independent agencies

appropriations bill.

The conference also adopted compromise language to

impose a variety of reporting requirements; and

require competition on contracts in Iraq or to report on noncompetitive contracts.

CRS-30

Military and Intelligence Operations:

Overview and Issues

The Administration proposal devotes $66 billion of the $87 billion total to

military and intelligence operations in Iraq, Afghanistan and elsewhere. On

September 21, the Administration provided Congress with backup material justifying

the request. The Senate Appropriations Committee provided the full funding

requested for defense, though it added funds for Army operation and maintenance

and weapons procurement and made offsetting reductions in Air Force, Navy, and

Defense-Wide operation and maintenance. The House Appropriations Committee

cut about $289 million from the defense total. It added funds mainly for Army

weapons procurement and made offsetting cuts similar to those in the Senate bill.

Table 3 provides a breakdown by appropriations account of the request and

congressional committee action.

CRS-31

Table 3. Congressional Action on FY2004 Supplemental Appropriations for the Department of Defense

(thousands of dollars)

Military Personnel

Military Personnel, Army

Military Personnel, Navy

Military Personnel, Marine Corps

Military Personnel, Air Force

Total Military Personnel

Operation and Maintenance

O&M, Army

O&M, Navy

O&M, Marine Corps

O&M, Air Force

O&M, Defense-Wide

O&M, Marine Corps Reserve

O&M, Air Force Reserve

O&M, Air National Guard

Overseas Humanitarian, Disaster & Civic

Aid

Iraq Freedom Fund

Total Operation and Maintenance

Procurement

Missile Procurement, Army

Procurement of WTCV, Army

Other Procurement, Army

Aircraft Procurement, Navy

Other Procurement, Navy

Procurement, Marine Corps

Aircraft Procurement, Air Force

Missile Procurement, Air Force

Request

House

Change to

Request

Senate

Change to

Request

Conference

Change to

Request

12,858,870

816,100

753,190

3,384,700

17,812,860

12,188,870

816,100

753,190

3,384,700

17,142,860

-670,000

----670,000

12,858,870

816,100

753,190

3,384,700

17,812,860

------

12,858,870

816,100

753,190

3,384,700

17,812,860

------

24,190,464

2,106,258

1,198,981

5,948,368

4,618,452

16,000

53,000

214,000

35,500

24,257,664

1,934,058

1,198,981

5,598,368

4,485,452

16,000

53,000

214,000

35,500

+67,200

-172,200

--350,000

-133,000

-----

24,946,464

1,976,258

1,198,981

5,516,368

4,218,452

16,000

53,000

214,000

35,500

+756,000

-130,000

--432,000

-400,000

-----

23,997,064

1,956,258

1,198,981

5,416,368

4,355,452

16,000

53,000

214,000

35,500

-193,400

-150,000

--532,000

-263,000

-----

1,988,600

40,369,623

2,086,600

39,879,623

+98,000

-490,000

1,988,600

40,163,623

--206,000

1,988,600

39,231,223

--1,138,400

6,200

46,000

930,687

128,600

76,357

123,397

40,972

20,450

-101,600

1,250,287

158,600

76,357

123,397

53,972

20,450

-6,200

+55,600

+319,600

+30,000

--+13,000

6,200

104,000

1,078,687

128,600

76,357

123,397

40,972

20,450

-+58,000

+148,000

------

101,600

1,143,687

158,600

76,357

123,397

53,972

20,450

-6,200

+55,600

+213,000

+30,000

--+13,000

–

CRS-32

Other Procurement, Air Force

Procurement, Defense-Wide

Total Procurement

Research, Development, Test and Evaluation

RDT&E, Navy

RDT&E, Air Force

RDT&E, Defense-Wide

Total Research, Development, Test and

Evaluation

Revolving and Management Funds

Defense Working Capital Funds

National Defense Sealift Fund

Total Revolving and Management Funds

Other Department of Defense Programs

Defense Health Program

Drug Interdiction & Counter-Drug

Activities, Defense

Total Other Department of Defense

Programs

Related Agencies

Intelligence Community Management

Account

Coast Guard Operating Expenses

Total Related Agencies

General Provisions

Storm Damage

Munitions Destruction and Security

Total General Provisions

Military Construction and Family Housing

Military Construction, Army

Military Construction, Navy

Request

3,441,006

435,635

5,249,304

House

3,418,006

418,635

5,621,304

Change to

Request

-23,000

-17,000

+372,000

Senate

3,441,006

435,635

5,455,304

Change to

Request

--+206,000

Conference

3,438,006

418,635

5,534,704

Change to

Request

-3,000

-17,000

+285,400

34,000

39,070

265,817

338,887

34,000

39,070

195,817

268,887

---70,000

-70,000

34,000

39,070

265,817

338,887

-----

34,000

39,070

260,817

333,887

---5,000

-5,000

600,000

24,000

624,000

600,000

24,000

624,000

----

600,000

24,000

624,000

----

600,000

24,000

624,000

----

658,380

73,000

658,380

73,000

---

658,380

73,000

---

658,380

73,000

---

731,380

21,500

-21,500

23,183

44,683

-+23,183

-21,500

---

--21,500

----

413,300

-413,300

+413,300

-+413,300

----

313,000

100,000

413,300

+313,000

+100,000

+413,300

119,900

185,100

45,530

+65,200

+45,530

119,900

162,100

45,530

+42,200

+45,530

CRS-33

Military Construction, Air Force

Family Housing, Army

Family Housing, Navy and Marine Corps

Family Housing, Air Force

Total Military Construction and

Family Housing

Grand Total

Sources: H.Rept. 108-312; S.Rept. 108-160.

Request

292,550

---412,450

House

292,550

8,151

6,280

6,981

544,592

Change to

Request

-+8,151

+6,280

+6,981

+132,142

Senate

292,550

---412,450

Change to

Request

------

Conference

292,550

11,420

6,280

6,981

524,861

Change to

Request

-+11,420

+6,280

+6,981

+112,411

65,560,004

65,270,629

-289,375

65,560,004

65,010,165

-549,839

CRS-34

Several aspects of the request are worth noting, including

basis of the cost projections,

funding flexibility,

authority to train and equip foreign military forces, and

military personnel benefits.

Basis of the Cost Projections

According to DOD officials, the request is based, first, on the assumption that

current force levels and the current pace of operations will be maintained throughout

FY2004, although it assumes some change in the mix of active and reserve forces

deployed. DOD and OMB backup material on the request notes that the number of

Army combat divisions in Iraq will be reduced, but this will not substantially affect

the total number of personnel deployed in Southwest Asia and nearby areas in

support of Operation Iraqi Freedom and Operation Enduring Freedom (in

Afghanistan).

The requested is based, second, on the use of a model for estimating costs of

military operations know as the “Contingency Operations Support Tool” (COST).

The COST model was developed by the Institute for Defense Analyses (IDA) in the

late 1990s under a contract from the Department of Defense Comptroller following

problems the Defense Department had in accurately projecting costs of operations in

the mid-1990s. Using inputs of data about the duration of an operation, the number

and original location of units to be deployed, means of transportation both to deploy

and to sustain forces, and unique expenses, and relying on historical cost factors

based on earlier operations, the model can provide quite detailed breakdowns of

projected costs in advance of an operation.

Although these projections are not technically considered “budget quality” data

for purposes of making congressional requests, the estimates resulting from the

model appear to be the most reliable available advance projections of costs of an

operation, though actual expenses may differ as operations unfold. One question for

Congress may be why the Defense Department is using COST model data now, but

did not choose to provide COST model figures to Congress last spring in advance of

the war. An answer may be the Defense Department did not feel in a position to

provide an estimate of war costs until a final decision was made to go to war, and the

size and composition of the force remained in flux until very shortly before the war

began. DOD’s new cost estimates appear to be substantially higher, on a per troop

basis, than recent estimates by the Congressional Budget Office.

Funding Flexibility

An ongoing issue between the Administration and Congress — particularly the

appropriations committees — has been how much flexibility the Defense Department

needs to reallocate funds after they are appropriated. In the FY2003 Emergency

Wartime Supplemental, the Administration proposed that $59.9 billion of the $62.6

billion it requested for the Department of Defense be provided in a flexible transfer

account called the Iraq Freedom Fund. Congress agreed to provide $15.7 billion in

CRS-35

the fund, some of which was subject to additional ceilings on expenditures. In the

new request, the Defense Department asked for $2.0 billion to be appropriated into

the Iraq Freedom Fund, while the rest is requested in regular appropriations accounts.

The Iraq Freedom Fund amount is, in effect, a contingency fund, that DOD says it

will use either to support a multinational division or, if allied forces are not available,

to deploy two Army National Guard Enhanced Separate Brigades and one Marine

Expeditionary Force.21

The Defense Department also requested authority to transfer $5 billion between

appropriations accounts provided that “the Secretary shall notify the Congress

promptly of each transfer made pursuant to this authority.” According to DOD,

“promptly” means that the Secretary will inform Congress within five days after such

transfers. This money, therefore, would not be subject to normal limitations on

“transfers” — or, in DOD parlance “reprogramming” of funds — in which transfers

above certain thresholds require advance approval of congressional defense

committees. In addition, in another proposed general provision, the Defense

Department has requested that $500 million of the amounts appropriated be available

for a contingency construction account for military construction projects that are not

otherwise authorized by law.22 (See above for a discussion of Senate and House

Appropriations Committee action on these proposals.)

Authority to Train and Equip Foreign Military Forces

Though not a budget item, per se, one element of the request reintroduces an

issue that has been controversial in Congress in the past. The request includes a

proposal to provide the Defense Department with general authority to use up to $200

million of available funds for “training and equipping” military forces in Iraq,

Afghanistan and “other friendly nearby regional nations” to carry out counterterrorism operations and support U.S. military operations in Iraq and Afghanistan.

In earlier funding bills, Congress has agreed to Administration requests to provide

money, termed “coalition support,” to reimburse nations, such as Pakistan and

Jordan, that have provided material support for U.S. military operations, and to “lift

and sustain” foreign troops, such as the Polish forces now in Iraq, that are directly

participating in operations. The new request includes $1.4 billion for coalition

support, and additional amounts to lift and sustain multinational forces.

An Army National Guard brigade, like active duty brigades, normally has about 3,000

personnel. (Three combat brigades are typically in a division, which also includes

additional support units — full divisions range from about 10,000 to 15,000 personnel.) A

Marine Expeditionary Force (MEF) typically includes 30,000-50,000 personnel, including

ground combat units, air units, and support units. It seems unlikely that a full MEF would

be deployed for peacekeeping in Iraq. More likely, only ground elements of a Marine

Expeditionary Brigade (MEB), about 3,000 troops, would be deployed.

See Department of Defense, “FY2004 Supplemental Request for Operation Iraqi Freedom

(OIF), Operation Enduring Freedom (OEF), and Operation Noble Eagle (ONE),” Sept. 21,

2003. For the Iraq Freedom Fund request, see p. 46, and for the general transfer authority

and construction contingency fund request, see pp. 65-66.

CRS-36

Congress has, however, rejected repeated Administration requests for funds for

the Defense Department to train and equip foreign militaries, which would be, in

effect, a DOD-run military assistance program not approved through the usual

congressional budget procedures and not subject to human rights and other

provisions of standing law governing U.S. foreign aid. Most recently, the

Administration requested $200 million for that purpose in the regular FY2004

appropriations, but neither the House nor the Senate approved the request in any

version of the regular FY2004 defense authorization or appropriations bills. The new

request differs in that it is limited to support for nations in the region of Iraq and

Afghanistan. The Senate Appropriations Committee agreed to provide $200 million

to train and equip the new Iraqi Army and the Afghan National Army, and the House

Appropriations Committee provided $100 million (see above). Both committees also

required 15 days’ advance notification to Congress before obligating funds.

Military Personnel Benefits

In the April 2003 Emergency Wartime Supplemental (P.L. 108-11), Congress

increased Imminent Danger Pay (from $150 to $225 per month) and the Family

Separation Allowance (from $100 to $250 per month). These increases expired at

the end of FY2003 on September 30. The first continuing resolution for FY2004,

H.J.Res. 69, P.L. 108-84, extends the benefits through October 31, 2003. The House

and Senate have taken somewhat different approaches to extending these benefits

permanently in their versions of the FY2004 defense authorization bill (H.R. 1588).

In its supplemental proposal, the Defense Department requested that the increased

Imminent Danger Pay and Family Separation Allowance payments continue through

December 31, 2003. After that, DOD requested that it be permitted instead to

provide $225 per month in additional Hardship Duty Pay to personnel serving “in a

combat zone” in Operation Iraqi Freedom and Operation Enduring Freedom. DOD

argues that this would equalize pay between troops deployed in combat zones; troops

with dependents now receive more because of the Family Separation Allowance. It

may also mean, however, that troops not actually deployed “in a combat zone” would

receive less, so there may be some opposition from military advocacy groups and in

the Congress. Both the House and the Senate Appropriations Committees, however,

rejected the Administration request and instead extended increased Imminent Danger

Pay and Family Separation Allowances through FY2004.

Another significant issue in Senate action on the supplemental was whether to

provide health insurance for non-deployed military reservists. The Senate approved

an amendment to the FY2004 defense authorization bill that would allow nonactivated reservists to sign up for health insurance for themselves and their

dependents through the DOD-run TRICARE program. The Administration has

threatened to veto the authorization if it includes this provision. In floor action on

the supplemental, the Senate approved an amendment by Senators Daschle and

Graham of South Carolina to offer health insurance to reservists through TRICARE,

though with somewhat different provisions from those in the Senate version of the

FY2004 authorization. Specifically, the Daschle-Graham amendment is available

only to reservists who are receiving unemployment compensation or who are not

eligible for an employer-sponsored health insurance plan. The measure also requires

a co-payment of 28% of the value of the plan, on the model of the federal

government’s FEHBP insurance plan for civilian employees. So the Daschle-

CRS-37

Graham amendment is much more limited and more targeted than the Senate

provision in the FY2004 defense authorization bill.

Iraq/Afghanistan Reconstruction and Other Global

War on Terrorism Foreign Policy Initiatives

The Administration sought a total of $21.44 billion in its FY2004 supplemental

for reconstruction activities in Iraq and Afghanistan and for other foreign policy

programs related to the global war on terrorism. As shown in Table 4 $20.4 billion

would be allocated for Iraq. To put the amount of resources in some perspective,

Congress appropriated about $9.6 billion in FY2003 for similar activities, including

Iraq reconstruction and aid to the “front-line” states in the global war on terrorism,

and has been considering funding requests totaling roughly $4.9 billion in the

pending FY2004 Foreign Operations appropriation bill (H.R. 2800/S. 1426).

Table 4. Iraq, Afghanistan, Other Foreign Policy Funding

(billions of dollars)

Activity

Iraq

Reconstruction and security

CPA Operating Expenses

Request

Senate

House

$20.415

$18.499

$19.597

$19.512

$18.649

$20.304

$18.449

$0.858

Enacted

$18.439

$0.983

U.S. diplomatic facilities

$0.061

Peacekeeping for a multinational

division d

$0.050

Broadcasting to Iraq

$0.000

$0.040

Afghanistan e

$0.839

$0.900

$1.258

$1.265

Economic reconstruction

$0.422

$0.672

Train, equip, deploy police

$0.120

$0.170

Military aid for Afghan army

$0.222

$0.297

$0.287

Anti-terrorism training/Karzai

protection

$0.035

Kabul Embassy annex

$0.000

$0.044

USAID operating expenses — Iraq &

Afghanistan f

$0.040

USAID interim facility

–

$0.061

–

$0.017

$0.226

$0.091

$0.370

$0.536

Other Global War on Terrorism

Emergency Fund for Complex Crises

$0.100

D&CS - Personnel security in

Afghanistan & Iraq; Machine

Readable Visa shortfall h

$0.076

$0.036

$0.156

CRS-38

Activity

Request

Senate

House

Enacted

Diplomatic & Consular Programs

(rescission)

—

($0.036)

Emergencies in Diplomatic &

Consular Services - Terrorist

Rewards & Machine Readable Visa

shortfall f

$0.050

$0.091

$0.050

$0.116

Jordan economic aid

–

$0.100

$0.200

Pakistan economic aid

Other

$0.000

$0.100

$0.360

$0.480

Liberia & Sudan relief

$0.000

$0.200 g

$0.100

$0.220

Off-set for Liberia aid

—

($0.100)

—

U.N. Peacekeeping – Liberia

$0.000

$0.245

Sept. 11 Victims Compensation Prog.

$0.000

$0.015

TOTAL

$21.480

$19.590

$21.585

$21.793

a. Excludes $210 million transferred for aid to Jordan, Liberia, and Sudan, as noted below.

b. The Administration and Senate bill included CPA operating expense funding under title I (Defense),

in the account for Operations and Maintenance, Army.

c. The Administration proposed to use funds previously appropriated for Baghdad facilities in P.L.

108-11 for urgent USAID needs in Afghanistan and requested in this supplemental additional

resources for Iraq facilities to replace those diverted to Afghanistan. The Senate bill

appropriated funds for USAID in Afghanistan separately, thereby making funds provided in P.L.

108-11 available for U.S. diplomatic facilities in Baghdad, without the need for new

appropriations in this supplemental. The House bill and the conference agreement provided

$35.8 million for a new U.S. mission in Iraq in the D&CS account below, and rescinded $35.8

million provided in P.L. 108-11.

d. The House bill and the conference agreement specified that peacekeeping funds are available for

both Iraq and Afghanistan.

e. In addition to the amounts shown in this total for Afghanistan, the Administration is reprogramming

$390 million from other defense, State Department, and foreign aid accounts for Afghan

reconstruction.

f. The Administration had requested $40 million for USAID operating expenses in both Iraq and

Afghanistan. The Senate bill and the conference agreement provided $40 million for USAID

operating expenses in Afghanistan only.

g. Instead of funding the Emergency account, the House bill provided $100 million in disaster and

famine relief aid for Liberia and Sudan, below. The Senate bill provided $200 million in the

Emergency Crises Fund account, but designated all of it for Liberia and required that $100

million be drawn by transfer from any other account in the bill. The conference agreement

provided $210 million for Liberia and Sudan, funds drawn from the Iraq Relief and

Reconstruction account and from a new account for International Disaster and Famine

Assistance, as shown below.

h. Under the account for Diplomatic and Consular Services (D&CS), the Administration proposed

$11 million for additional security operations in Afghanistan and $29.5 million to cover a

projected shortfall in Machine Readable Visa (MRV) fees that had been expected to fund border

security initiatives. The Senate bill provided $35.8 million as a rescission and reappropriation

for security operations in Afghanistan and Iraq, and added funding under the separate account

of Emergencies in the Diplomatic and Consular Services to cover the MRV shortfall. The

Administration requested funds under this latter account only for rewards related to Osama bin

Laden and Saddam Hussein. The House bill provided $156.3 million in the D&CS account, of

which $109.5 million was for MRV fees and consular services, $11 million for security

measures in Afghanistan, and $35.8 million for a diplomatic mission in Iraq. The conference

agreement provided $115.5 million for Emergencies in the Diplomatic and Consular Services,

CRS-39

$50 million of which was for rewards and $65.5 million was for costs of protecting foreign

missions and officials in New York City, and security and protection for the 203 Free Trade in

the Americas Ministerial and the 2004 Summit of the Industrialized Nations.

i. The Administration requested authority to use $200 million in Economic Support Funds pending

in the regular FY2004 Foreign Operations Appropriation (H.R. 2800 and S. 1469) for debt

reduction for Pakistan. The Senate bill included this authority, while the House bill included

both the authority for debt reduction and the $200 million appropriation. The conference

agreement is the same as the House bill.

Iraq Reconstruction and Security

Supplemental Request. The $20.3 billion Administration request for

reconstruction and security in Iraq represented a significant increase from amounts

previously appropriated for reconstruction. Up to then, the United States had

committed $4.1 billion to reconstruction, including the $2.5 billion appropriated to

an Iraq Relief and Reconstruction Fund established by the April 2003 Emergency

Wartime Supplemental (P.L. 108-11.)23

These earlier funds had been used to support a broad range of humanitarian and

reconstruction efforts. The new request was intended to fund the most pressing,

immediate needs in Iraq, with the aim of having a noticeable impact on the two

greatest reconstruction concerns that have been raised since the occupation of Iraq

began security and infrastructure. More than $5 billion would be targeted at

improving the security capabilities of the Iraqi people and government, including

training and equipment for border, customs, police, and fire personnel, and to

develop a new Iraqi army and a Civil Defense Corps. Enhanced efforts to reform the

judicial system would also be included.

Most of the remaining $15 billion supplemental request would go toward rapid

improvements in infrastructure, including electricity, oil infrastructure, water and

sewerage, transportation, telecommunications, housing, roads, bridges, and hospitals

and health clinics (see Table 5 for a breakdown). According to Administration

officials who briefed Members of Congress and staff, these investments represented

the most urgent needs over the next 12 months, but by no means addressed total

reconstruction requirements in the coming year.24 Other concerns in such areas of

government reform, agriculture, economic development, and education, were not

included in the Administration request. A relatively small amount of funds, $300

million, was requested for programs designed to encourage the growth of the private

sector and jobs training.

Other reconstruction components have been funded out of DOD’s Iraq Freedom Fund,

established in P.L. 108-11, to repair of oil facilities ($502.5 million) and for costs of the

Coalition Provisional Authority ($599 million). An additional $529.2 million has come

from USAID and other agencies regular funding.

Congressional briefing by executive branch officials, Sept. 8, 2003.

CRS-40

Table 5. Iraq Supplemental: Sector Allocation

(billions of dollars)

Sector

Request

Senate

House

Security

$5.136

$4.561

Public safety, including border

enforcement, police, fire, & customs

$2.100

—

Security forces and Iraq Civil Defense

Corps

$2.100

—

Justice and civil society development

$0.900

—

Reconstruction

$15.168

$13.888

$14.088

$13.878

$5.560b

$4.561

Enacted

$4.561

Electric power rehabilitation

$5.675

$5.560

Oil infrastructure rehabilitation

$2.100

$1.900

$2.100

$1.890c

Water and sewerage services repair

and improvement

$3.710

$4.332 d

$4.332d

Water resources improvement

$0.875

Transportation and

telecommunications rehabilitation

$0.835

$0.500

$0.500f

Housing, building, road, and bridge

repair/reconstruction

$0.470

$0.370

$0.370g

Health facility construction and

medical equipment replacement

$0.850

$0.793

$0.793h

Private sector business initiatives and

job training programs

$0.353

$0.153

$0.153i

Refugee aid, local governance, other

human rights/civil society

$0.300

$0.280

$0.280j

TOTAL

$20.304

$18.449

$18.649

$18.439

$3.557

$0.775

Source: Office of the Coalition Provisional Authority Representative, September 8, 2003, OMB,

FY2004 Supplemental Appropriation request, September 17, 2003, and House and Senate

Appropriation Committees.

a. The House bill excluded $50 million requested for Iraq traffic police and $400 million for two

prisons; reduced funding for the National Security Communications Network. The conference

agreement also excluded $50 million for Iraq traffic police, reduced by $300 million funding

for two prisons, and further reduced several other requested under Justice, Public Safety

Infrastructure, and Civil Society.

b. Excluded $25 million for consultants to plan for continued development and building rehabilitation

and reduced amounts for electric generation.

c. The conference agreement reduced funds for emergency supplies of refined oil petroleum products

by $210 million.

d. House and Senate bills combined the categories of Water and sewerage services and Water

resources. The House amount excluded $153 million for solid waste management, including

40 trash trucks and $100 million for environmental restoration (marsh) projects.

e. The conference agreement excluded $153 million for solid waste management, including 40 trash

trucks and $100 million for environmental restoration (marsh) projects.

f. Excluded $4 million for a nationwide telephone numbering system, $9 million for postal information

architecture and zip codes, and $10 million for television and radio industry modernization.

CRS-41

g. Excluded $100 million for seven housing communities.

h. Excluded $150 million for a new children’s hospital in Basra and $7 million for American and Iraqi

health care organization partnerships, but included an additional $100 million for clinics and

hospital modernization.

i. Excluded $200 million for an American-Iraqi Enterprise Fund, but added $45 million for microsmall-medium enterprises.

j. Excluded $90 million for Public Information Centers in Iraq municipalities, but added $90 million

for education.

Background. Among the key policy objectives laid out by the Bush

Administration in conjunction with the war in Iraq were the restoration of basic

human services and the economic and political reconstruction of the country. The

Coalition Provisional Authority (CPA) under the administration of Ambassador L.

Paul Bremer is responsible for the formulation and implementation of this effort.

The CPA has initiated a process intended to lead to Iraqi self-rule. It has

appointed a 25-member Iraqi Governing Council and provided it with specific

powers and duties, including the choosing of a cabinet to serve as ministers under the

supervision of CPA advisors and the responsibility to set in motion formulation of

a national constitution. It has encouraged establishment of councils in villages and

cities throughout the country to run local affairs and identify community needs. With

CPA funding and encouragement, institutions of civil and economic society have

been reconstituted. Schools, including universities, hospitals and health clinics, are

functioning. The oil-for-food program continues to provide basic foodstuffs. New

police and security forces are being trained. Programs to renovate and repair electric

power, water, oil production, roads and bridges, airports, and the seaport have been

launched. Jobs programs have been instituted to help stimulate the economy and

lessen unemployment.

Although much has been accomplished since the U.S. occupation began in

April, the occupation authority in the view of many has failed to successfully

reestablish order and security, restore infrastructure, and introduce political and

economic reform, including Iraqi self-governance, in a timely manner. These

problems are interlinked; the successful conduct of much reconstruction work is

contingent on an environment of order and stability, and the lack of visible progress

in restoring basic infrastructure and institutions of security opens the door to political

discontent and opposition. The $20.3 billion supplemental request apparently sought

to address those infrastructure and security needs on which other U.S. objectives in

Iraq hinge.

Until recently, the Administration had suggested that the cost of reconstruction

through the end of 2003 could largely be met by Iraqi and already previously

appropriated U.S. resources. A national budget for Iraq covering the rest of the year,

announced by the CPA on July 7, estimated expenditures of $6.1 billion and the

creation of a Central bank currency reserve of $2.1 billion, for a total budget of $8.2

billion. New oil revenue, taxes, and profits from state owned enterprises would make

up $3.9 billion of these costs, according to the CPA’s analysis. The remaining deficit

of $4.3 billion would be covered by recently frozen and seized assets ($2.5 billion),

the Development Fund for Iraq ($1.2 billion), and $3 billion in already appropriated

CRS-42

U.S. assistance. Iraq was projected to have $1.1 billion remaining for reconstruction

by end of December 2003.25

The Administration request suggested that a re-assessment of Iraq’s immediate

reconstruction needs demanded greater outlays of revenue than projected in July. It

also suggested that presumed sources of additional revenue in the coming year —

chiefly, oil export production and international donor contributions — might not be

as large as originally anticipated. In any case, the result was a supplemental

reconstruction request nearly 20% larger than the size of the entire national budget

for Iraq projected on an annualized basis in early July.26

Issues.

Total Iraq Reconstruction Needs. The supplemental request was intended

to meet only the most important, immediate needs in Iraq in the 2004 fiscal year. Up

to that point, the cost of Iraq reconstruction was based on speculation and educated

guesswork. However, as part of the lead-in to an international donors conference

held in Madrid on October 24, the World Bank and the U.N. Development Program

released a needs assessment they conducted of 14 Iraqi economic and social sectors.27

The resulting Bank/UNDP estimates have established targets by which the adequacy

of available resources will be judged. The Bank/UNDP assessments put the cost of

reconstruction for the 14 sectors at $36 billion over four years, a figure that does not

include $19.4 billion estimated by the CPA for security, oil, and other critical sectors

not covered by the Bank assessments.28 Total Bank/CPA projected reconstruction

costs through 2007 amount to $55 billion, $17.5 billion in 2004 alone. If Iraqi oil

revenues are not sufficient to meet the projected needs — which appears likely in the

near term by most accounts — and other international donors do not pledge

significant contributions, the United States may face increased financial demands, if

it seeks to meet projected Iraqi needs.

The new needs assessment points out another possible concern. The

Bank/UNDP report suggests that Iraq cannot absorb more than $6 billion in

infrastructure program commitments (excluding oil) in 2004, in view of the unstable

security situation and the time it takes to plan and implement contracts.29 The

Administration request for infrastructure (excluding oil) was $12.4 billion. In

See [http://www.cpa-iraq.org/Budget2003.pdf] for text of the budget.

For a more detailed discussion of the Iraq reconstruction program, see CRS Report

RL31833, Iraq: Recent Development in Humanitarian and Reconstruction Assistance.

For the full text of the report online, see the World Bank website at

[http://lnweb18.worldbank.org/mna/mena.nsf/Attachments/Iraq+Joint+Needs+Assessme

nt/$File/Joint+Needs+Assessment.pdf].

“UN/World Bank Present Iraq Reconstruction Needs to Core Group.” World Bank/United

Nations press release no. 2004/100/S, Oct. 2, 2003.

The Bank further notes that, based on its experience in previous post-conflict situations,

if commitments were made on all $36 billion in identified reconstruction needs, actual

disbursements in 2004 would likely only reach $5.2 billion. United Nations/World Bank

Joint Iraq Needs Assessment, Oct. 2003, page x.

CRS-43

response to this point, OMB has reportedly confirmed that the reconstruction request

is intended to cover 18 months.30 That the Administration request in categories such

as electric power and water composes half or more of requirements projected by the

World Bank assessment over a four-year period, however, suggests that the request

may meet needs beyond even 18 months.

Iraqi Oil Revenues and Financing Reconstruction. Until recently, the

Administration had expected most costs of reconstruction to be borne by Iraq through

receipts from its oil exports. While the decrepit state of oil production infrastructure

and recurrent sabotage to pipelines and facilities have forced experts to downgrade

expectations of potential exports and receipts, any sustained increase in production

will assist the reconstruction effort. Current rates of production are nearing 2 million

barrels a day, but Iraqis do not expect to reach the prewar level of 2.8 million barrels

until spring. After subtracting 0.5 million barrels/day for domestic consumption, a

level of 2.3 million might generate between $18.5 billion and $23 billion annually,

depending on the price of oil. Production levels of 6 million/day, possible within a

decade, would require significant investment outlays.31 In the near term,

Administration officials said that their budget calculations assume an average

production of 2 million barrels per day over the next 12 months, generating about $12

billion in revenues that will roughly cover government operating expenses, but not

the type of urgent reconstruction needs identified in the supplemental request.32

Roughly $503 million has already been allocated from the 2003 Emergency

Wartime Supplemental for repair of oil facilities and restoration of production and

distribution systems. The Administration request for these purposes under the

FY2004 supplemental was $2.1 billion. Additional sums for Iraqi security forces

were in part intended to create an Iraqi force to defend against pipeline and other oil

facility sabotage.

Loans vs. Grants for Reconstruction. Closely related to the issue of Iraqi

oil revenues as a means of financing reconstruction projects was the question of

whether assistance could be extended on a loan rather than grant basis. Some argued

that, given the substantial amount of oil revenues that Iraq will generate at some point

in the future, Baghdad will have the means to service debt incurred for the purpose

of rebuilding its infrastructure. Loans, either extended bilaterally or through some

sort of trust fund, possibly managed by the World Bank, would be repaid at some

point, thereby reducing reconstruction costs to the United States, they said.

The Administration, which proposed that the entire $20.3 billion supplemental

be offered as grants, argued repeatedly during congressional hearings against adding

to Iraq’s already substantial debt obligations. Witnesses asserted that Iraq owes

roughly $200 billion in pre-war debts, reparations, and other claims. G7 leaders

agreed informally at the June 2003 summit to suspend through 2004 the requirement

“White House Defends Iraq Spending,” Financial Times, Oct. 10, 2003.

See Petroleum section by Larry Kumins in CRS Report RL31944, Iraq’s Economy: Past,

Present, Future, pp. 17-23.

Congressional briefing by executive branch officials, Sept. 8, 2003.

CRS-44

for Iraq to service any existing debt, giving time to construct some sort of multilateral

debt restructuring arrangement.33 Further, U.N. Security Council Resolution 1483

states that Iraqi oil exports or proceeds could not be attached by creditors through

2007 unless authorized by the Council.

Beyond the matter of whether Iraq should incur more debt obligations in the

near term is the question over who could legally assume responsibility for new

sovereign debt. Although it is possible that the World Bank could manage an Iraq

reconstruction trust fund that would receive contributions from international donors,

if the Bank were to use these resources for project lending, it would almost certainly

require, as it has in the past, that some sort of sovereign Iraq authority assume the

debt obligation. Until such time that legal authority is transferred to Iraqi hands, the

Coalition Provisional Authority is the temporary government of Iraq and would be

the one signing for the loans. Most legal scholars take the position that an occupying

power has no authority to incur new debts on behalf of the displaced sovereign.34

Some contend, however, that there is an exception in which a new government would

be responsible for the debt if it can be shown that the loans were required for the

welfare of the occupied territory and the terms were fair and reasonable.35

Also, while loan reconstruction assistance would likely require smaller

appropriations than grant aid, some congressional appropriation would be necessary.

Under the 1990 Credit Reform Act, Congress must provide a subsidy appropriation

in advance of the U.S. government extending direct loans or loan guarantees. The

size of the subsidy appropriation is based on several factors, including any subsidy

value of the loan terms and the likelihood that the loan will be repaid fully and on

time. Given the current state of the Iraqi economy and the high degree of uncertainty

over when the debt service payments could begin, the necessary subsidy

appropriation likely would be quite large.

As discussed in more detail above under “Congressional Action,” this issue was

closely examined by lawmakers. The Senate adopted (51-47) an amendment by

Senators Bayh, Ben Nelson, and others on October 16 converting $10 billion of

reconstruction grants to loans, which could be later restored as grants if foreign

creditors cancel 90% of Iraq’s debt. Conferees, however, rejected the Senate

proposal on a 13-16 vote.

See, for example, testimony of Secretary of Defense Rumsfeld before the Senate

Appropriations Committee on September 22 and L. Paul Bremmer before the House Foreign

Operations Appropriations Subcommittee on Sept. 24.

See, for example, Pieter H.F. Bekker, “The Legal Status of Foreign Economic Interests

in Occupied Iraq.” ASIL Insights. American Society of International Law. July 2002.

Available at the ASIL web site at [http://www.asil.org/insights/insigh114.htm]. See also

Gerhard von Glahn. The Occupation of Enemy Territory...A Commentary on the Law and

Practice of Belligerent Occupation. Minneapolis: University of Minnesota Press, 1957, p.

159, citing various sources.

von Glahn, citing (with comments) U.S. Army Judge Advocate General’s School. Law

of Belligerent Occupation. (JAGS Text No. 11) Ann Arbor: JAGS 1944, pp. ix, 277.

CRS-45

Earlier, Senator Dorgan had offered amendments in committee markup and on

the Senate floor (tabled in both venues) that would have created an authority to use

Iraqi oil to secure reconstruction financing and convert U.S. grants to loans. A

similar amendment by Senator Landrieu was also rejected. Senator Hutchison and

others submitted an amendment that did not come up for floor debate directing $10

billion of the total reconstruction supplemental to a Trust Fund, to be established

within the World Bank, out of which loans and loan guarantees would be made.

On the House side, Representative Wamp proposed but later withdrew an

amendment during Committee markup that would have withheld one-half of Iraq

funds until after the election of a new Iraqi leader, at which time the remaining

money would be available in the form of a loan. Representative Obey offered an

amendment (defeated 25-36) that, among other things, would have transferred about

$7 billion of reconstruction funds to a World Bank-administered loan facility. A

further amendment by Representative Obey regarding a shift of grants to loans was

defeated in the House 200-226.

The Supplemental’s Impact on Other Donors. Many, including

Administration officials, believed that congressional action on the supplemental

could influence the contributions of international donors at the late-October donors’

conference. Some argued that a large pledge of U.S. aid prior to the conference

might stimulate other donors to contribute more; diminution of the Administration

plan, they argued, might have the opposite effect. Opponents of making U.S. aid for

reconstruction in the form of loans also contended that other donors might follow the

American lead and offer loans rather than grants, adding further to Iraq’s debt

problems. In addition, the supplemental targeted sectors — infrastructure and

security — that other donors would be less likely to support themselves. In similar

“nation-building” exercises elsewhere, donors have tended to funnel contributions

to the social sectors, such as education and health, and grassroots democratization

and economic development, all areas relatively untouched by the supplemental.

Perhaps a more important factor in other donor calculations was the extent to

which they would have a say in the use of funds. Up to then, donors had been

reluctant to provide assistance because they were wary of being perceived as

supporting a unilateral U.S. policy. In response to this concern, donors discussed at

a September 6 meeting in Brussels, the concept of creating Iraq reconstruction trust

funds, managed by the U.N. or World Bank, which would accept and distribute

contributions. Control over how the money was spent, according to Undersecretary

of State Alan Larson who represented the U.S. at the September 6 meetings, would

be handled by some sort of a multilateral management board that might include

officials from international organizations, major donors, and Iraqis representing

interim ministries.36 The Madrid donors’ conference created two trust funds, one

managed by the World Bank and the other by UNDP.

Iraq Reconstruction an International Responsibility, Larson Says. Press briefing by

Under Secretary of State for Economic, Business, and Agricultural Affairs Alan Larson,

Sept. 4, 2003 [http://usinfo.state.gov/topical/pol/terror/texts/03090434.htm].

CRS-46

Management of Iraq Reconstruction Funds by U.S. Agencies.

Administrative control over Iraq reconstruction funds became a significant issue

during congressional debate on the $2.475 billion appropriation in P.L. 108-11. At

that time, most had expected that transfers for reconstruction and post-conflict aid

would be made to USAID, the State Department, and other traditional foreign

assistance management agencies. But with plans for the Defense Department to

oversee the governing of Iraq immediately after the end of hostilities, the White

House wanted to maintain maximum flexibility over the distribution of resources so

the President could transfer some or all of the funding to DOD. The proposal

stimulated immediate controversy with a number of critics, including Members of

Congress, arguing that aid programs should remain under the policy direction of the

State Department and under the authorities of a broad and longstanding body of

foreign aid laws. Although initial House and Senate decisions would have blocked

Administration efforts to place control of reconstruction funds with the Pentagon,

ultimately Congress agreed to allow the White House to allocate the resources among

five agencies, including DOD. Funds for the Iraq Relief and Reconstruction Fund

appropriated in P.L. 108-11 have been managed by L. Paul Bremer, head of the

Coalition Provisional Authority (CPA), and the U.S. civilian administrator in Iraq,

who reports to the Secretary of Defense.

The Administration proposed that the entire $20.3 billion be placed in the Iraq

Relief and Reconstruction Fund, as was the case with the previous supplemental, and

to continue Ambassador Bremer and the CPA’s role as administrators of the Fund

under DOD guidance. Since submission of the supplemental, however, the White

House announced the establishment of a new “Iraq Stabilization Group,”headed by

National Security Advisor Condoleezza Rice. The Group is intended to help speed

up reconstruction efforts by identifying and resolving problems that had in some

cases been the source of decision-making disputes in Washington. Some analysts

believe that the move is also intended to allow the State Department a greater voice

in reconstruction policy. At the same time, the State Department staff serving under

the CPA in Iraq is expected to grow from 55 to about 110. Nevertheless,

Ambassador Bremer will continue to report to the Secretary of Defense.37

As noted above, the Senate tabled (56-42) an amendment by Senators Leahy and

Daschle (S.Amdt. 1803) that would have placed the CPA under the direct authority

and foreign policy guidance of the Secretary of State. The House bill, however,

added a provision barring the coordination of defense or reconstruction activities in

Iraq or Afghanistan by a U.S. government officer who is not subject to confirmation

by the Senate. The House Committee wanted to ensure that whoever is in charge of

coordination be available to testify at congressional oversight hearings. This

proposal appeared to block the initiative of placing National Security Council

Advisor Rice, who is not subject to confirmation and who does not testify before

Congress, in charge of coordinating reconstruction. The White House, however,

contended that the new Iraq Stabilization Group does not affect control of

reconstruction efforts and that the job remains under control of the Defense

“White House to Overhaul Iraq and Afghan Missions,” New York Times, October 6, 2003;

“Rice to Lead Effort to Speed Iraqi Aid,” Washington Post, Oct. 7, 2003.

CRS-47

Department.38 Conferees, however, decided to delete this House-added provision

from the enacted legislation.

Reconstruction Priorities and Costs. The Administration said that the

request included only the most pressing, immediate needs for Iraq in FY2004.

However, the relative importance of certain items detailed in the request — ‘reengineering of postal service business practices’ and construction of seven residential

communities, for example — was closely questioned in Congress. Further, the costs

associated with reconstruction requests have been subject to skepticism, with some

congressional staff reportedly suggesting that the price tag was intentionally inflated

so that the Administration would not have to return to Congress to ask for more funds

in 2004.39

As mentioned above in the Congressional Action section, the House bill

proposed a $1.655 billion cut in Iraq reconstruction funding, reducing or eliminating

resources for a wide range of activities that the House found to be un-executable, low

priority, or likely to receive funding from other international donors. The Senate

adopted an amendment by Senators Dorgan and Wyden reducing Iraq reconstruction

by $1.855 billion. The Senate cuts were identical to those approved by the House,

with an additional reduction of $200 million for oil infrastructure rehabilitation. The

conference agreement closely follows the reductions proposed in both House and

Senate bills, including the Senate’s cut of $200 million for emergency supplies of

refined oil petroleum products. While the enacted legislation provides $18.649

billion for the Iraq Relief and Reconstruction Fund – $1.655 billion less than

requested – the bill further transfers $210 million from the Fund to assistance for

Jordan, Liberia, and Sudan. Consequently, the President’s $20.3 billion proposal for

Iraq was reduced by Congress to $18.439 billion, a cut of $1.885 billion. See Table

5 above for details of sector and project reductions directed by Congress.

Afghanistan Reconstruction

Afghanistan Supplemental.

The Administration’s $1.2 billion

supplemental aid request was made up of $799 million from new appropriations and

$390 million from previously appropriated DOD, State Department, and USAID

funds, which together would more than double current U.S. assistance to Afghanistan

for FY2003. The proposal came at a time of growing criticism over delays in aid

delivery, deteriorating security conditions, and concern that U.S. and international

attention had shifted to Iraq.40 Key features of the $799 million in new

“Pentagon Still in Charge in Iraq, Rice Tells Reporters,” American Forces Information

Service, Oct. 15, 2003.

“In GOP, Concern Over Iraq Price Tag; Some Doubt Need for $20.3 Billion for

Rebuilding,” Washington Post, Sept. 26, 2003.

The supplemental also arrives while Congress is still considering a $550 million regular

FY2004 request for Afghanistan. Over one-third of this total would continue infrastructure

rehabilitation, focusing largely on roads, bridges, schools, health clinics, and wastewater

facilities.

House passed and Senate-reported legislation (Foreign Operations

Appropriations, FY2004; H.R. 2800 and S. 1426, respectively) provide not less than $600

(continued...)

CRS-48

appropriations included targeting projects intended to have the most immediate

impact on the lives of the Afghan population, such as

$402 million for security, with funding included to train and support

police, border patrol, the military and counter-narcotics forces,

disarmament and de-mobilization programs, and courthouse

construction in Kabul;

$129 million to reinforce the authority of the government of

Afghanistan with budget support for high priority projects, technical

experts placed in Afghan ministries, and voter registration and

election support;

$105 million for completion of the Kabul-Kandahar-Herat major

highway, a program jointly financed by the United States, Japan, and

Saudi Arabia; and

$163 million for social programs and critical infrastructure,

including education, health, and local projects.

An additional $390 million would be made available from reallocated, prior-year

funds, but the Administration did not specify how they would be used. The White

House further asked that the $300 million limit on military drawdowns from DOD

stocks enacted in the Afghanistan Freedom Support Act of 2002 (P.L. 107-327) be

increased to $600 million.

Table 6. Afghanistan Supplemental: Sector Allocation

($ in millions)

Sector/Program

Request

Senate

House

Enacted

Disarmament, Demobilization,

Reintegration

$60

$30

Govt of Afghanistan support

$37

$70

Elections/Governance

$37

$69

Experts/Policy

$20

Roads

$105

$191

$181

Schools/Education

$40

$95

Health Services and Clinics

$28

$49

Provincial Reconstruction Teams

$50

$58

Economic Reconstruction:

(...continued)

million for Afghanistan.

CRS-49

Private Sector/Power Generation

$45

$95

Water Projects

—

$23

$422

$672

Police/Rule of Law

$120

$170

Afghan National Army

$222

$297

$287

Karzai Protection/Anti-Terrorism

$35

Security/Military Aid Total

$377

$502

$492

TOTAL, Afghanistanb

$799

$1,174

$1,164

Economic Reconstruction Total

Security/Military Assistance:

a. House bill and conference agreement included funding for Experts and Policy within the category

for Elections and Improved Governance.

b. Total does not include $61 million provided by the Senate for a USAID interim facility in Kabul,

$44 million provided in the House bill for an annex to the U.S. embassy in Kabul, or $56.6 million

provided in the conference agreement for USAID operating expenses in Afghanistan, a USAID interim

facility in Kabul, and the USAID Inspector General.

As demonstrated in Table 6, the enacted legislation increased the overall

reconstruction funding from new appropriations by $365 million with significant

changes over the Administration’s request in allocations for infrastructure

(particularly power generation and road construction), governance, and social

services. Of note, the conference agreement includes an earmark of $60 million from

the ESF for women’s programs, including technical and vocational education,

programs for women and girls against sexual abuse and trafficking, shelters for

women and girls, humanitarian assistance for widows, support of women-led NGOs,

and programs for and training on women’s rights.

The conference agreement also amends the authorization levels in the

Afghanistan Freedom Support Act of 2002 (P.L. 107-327) to be consistent with the

levels of funding provided in the FY04 Supplemental and H.R. 2800.

Background. Since the beginning of post-conflict aid in late 2001, U.S.

assistance has focused on three broad areas: security, governance, and reconstruction.

Security. Much of the U.S. program for Afghanistan is intended to establish

security institutions to bolster the authority of the central government and prevent the

regrouping of the Taliban or Al Qaeda. The pillars of this effort are (1) the presence

of an International Security Assistance Force (ISAF);(2) the establishment and

training of an Afghan National Army; (3) the demobilization of private militias; and

(4) the formation of “Provincial Reconstruction Teams” (PRTs).

Despite their defeat, Taliban groups reportedly continue to operate in

Afghanistan, mostly in the southeast, targeting U.S. and Afghan forces and creating

a perception of continuing insecurity. Factional in-fighting and increased criminal

activity have also undermined humanitarian operations. In some cases, where

CRS-50

international operations have been directly targeted, this has led to the temporary

suspension of U.N. missions or withdrawal of aid agencies from certain areas.

In mid-December 2002, the Defense Department said it would work to create

secure conditions for aid workers by forming eight “Provincial Reconstruction

Teams” (PRTs) composed of about 60 U.S. forces plus Defense Department civil

affairs officers, representatives of U.S. aid and other agencies, and allied and some

Afghan personnel. The objective of the PRTs is to provide safe havens for

international aid workers, to help with reconstruction, and to extend the writ of the

Kabul government throughout Afghanistan. PRTs, each with about 60 U.S. military

personnel, have begun operations at Gardez, Bamiyan, Konduz, and Mazar-e-Sharif.

The PRT in Mazar-e-Sharif is led by Britain and the one in Bamiyon is led by New

Zealand. Reportedly, the United States might be considering increasing the PRT

program to 16 such enclaves in which Germany and others may take a leadership

role. Some report the Provincial Reconstruction Teams (PRTs) are helping the

security situation in their deployed areas, but other reports dispute their effectiveness.

Governance and Institution Building. A conference in Bonn in December

2001, held as the Taliban regime was falling in the U.S.-led war, the pro-U.S.

Pashtun leader Hamid Karzai was selected chairman of the interim administration

and the loya jirga, held during June 11 - 19, 2002, selected him to continue to lead

Afghanistan until national elections are held sometime in 2004.

The loya jirga adjourned without establishing a new parliament. The scope and

powers of such a body might be dependent on the outcome of a “constitutional loya

jirga,” which is expected to fashion a permanent governing structure in a new

constitution. This assembly was to be held in October 2003, but it has now been put

off until December 2003. However, the draft constitution was made public on

November 3, 2003. Observers say that preparations for the 2004 elections have also

fallen behind and that the elections might be delayed beyond the planned June 2004

time frame, although the United Nations and the Afghan government have begun a

program to register voters.

Concerns remain about the power of regional leaders and their relative

independence from central government authority, although Karzai has moved since

May 2003 to bolster his authority in Kabul by shuffling or firing some local leaders.

In the runup to the planned 2004 Afghan national elections, the United States plans

to try to bolster the efficiency and effectiveness of the Kabul government by placing

about 120 U.S. officials as advisers to various Afghan ministries.

Reconstruction. The international recovery and reconstruction effort in

Afghanistan is immense and complicated, involving the Afghan government,

numerous U.N. agencies, bilateral donors, many international organizations, and

countless non-governmental organizations (NGOs). Intended outcomes of the

reconstruction process identified by the international community and the Afghan

government include political stability and security, access to basic services, an

adequate standard of living for the Afghan people, economic growth, and, in the long

term, independence from foreign aid.

CRS-51

According to many observers, successful reconstruction will stop

disillusionment with the new system in Afghanistan and will keep Afghanistan from

again becoming a haven for terrorists. Programs intended to yield benefits within a

short time frame (four to six months) initiated the transition from the humanitarian

relief phase to programs targeted toward reconstruction. These so-called “quick

impact” programs were followed by more long-term programs in education, health,

poppy eradication, and other areas. Numerous small-scale and some large longerterm projects, mostly for road reconstruction, are currently underway.

Table 7. U.S. Assistance to Afghanistan

($s – billions)

FY2001

FY2002

FY2003

Estimate

FY2004

Request

FY2004

House

FY2004

Senate

FY2004

Supplemental

$0.184

$0.686

$0.711

$0.550

$0.600

$1.164

Issues.

Reconstruction Priorities and Progress. According to some observers,

Afghans have become frustrated with what they perceive to be a lack of progress on

reconstruction.41 Many factors may be slowing the reconstruction effort: lack of

security, lack of human and physical capacity to implement substantial

reconstruction, funding shortages, and funding predominately going towards the

continuing humanitarian crisis and towards the administrative costs of the

international donor community. Analysts agree that both enhanced security and

progress on reconstruction are necessary in order to sustain international donor

involvement in Afghan reconstruction, encourage private investment in Afghanistan,

and maintain Afghans’ hope for improvement in their country and their own lives.

Effective reconstruction assistance, according to USAID, could reduce the war

and drug economies and provide incentives for beneficial economic growth, such as

government capacity building, employment generation, and agricultural

rehabilitation. Other reconstruction initiatives include road construction, urban

reconstruction, infrastructure repair, energy development, and programs for women,

education, health, and the media. The strength and influence of the central

government is viewed as a key factor in the success of the intervention and assistance

on the part of the international community.

Impact of Efforts to Accelerate Reconstruction. The international

community and the Afghan government are now seeking to increase the pace of

reconstruction. If progress on security, road construction, and reconstruction efforts

are made in advance of the 2004 elections, it could increase the chances of the

Rashid, Ahmed. “Afghanistan is Waiting for This.” Far Eastern Economic Review, Aug.

7, 2003; “US to Revamp Afghan Efforts.” Chicago Tribune, Aug. 18, 2003.

CRS-52

success of moderates in those elections. Supporters argue that additional funding

could also have an impact on decisions by the international donor community,

possibly resulting in larger contributions. It could also help efforts now being

discussed to expand the International Security Assistance Force (ISAF), which is

currently limited to Kabul.

Increased funding may also have negative effects. There are concerns that more

money could add to the already high levels of corruption. Some experts are

concerned about absorption capacity and whether additional funds can be allocated

quickly and effectively. If progress is not achieved, the increase may be seen as

largely symbolic and ineffective. Others have raised the possibility that the United

States will be perceived as giving too much support to the Karzai government in

advance of the elections next spring.

Other Donors. So far, the international community has continued to provide

significant amounts of aid and resources for the reconstruction effort, although

Afghanistan officials have reportedly complained about the slow pace at which

pledged funds were being paid. Among examples of other reconstruction efforts by

other countries, Italy is providing advice on judicial reform and Germany is helping

establish a national police force. The United States, Japan, and Saudi Arabia are

financing the building of the Kabul-Kandahar-Herat highway.

Some experts consider a long-term commitment will be necessary to ensure a

stable, democratic Afghanistan emerges. The outcome of the international donors

conference in January 2002 and of other donor conferences since then indicate a

willingness on the part of the international community to assist in the restoration of

Afghanistan. However, in a preliminary needs assessment presented in January 2002

by UNDP, the World Bank, and the Asian Development Bank, reconstruction costs

were estimated to be more than $15 billion over the next decade.42 United Nations

and Afghan government officials have since reportedly said $15 billion will be

needed over 5 years.43 Amounts pledged and committed to date fall well below these

estimates. With the estimates on the significant cost of Iraq reconstruction now

emerging, some are concerned that international donors might shift their focus to Iraq

reconstruction, and lose interest or run too low on resources to continue to participate

in Afghan reconstruction.

Other Global War on Terrorism Foreign Policy Initiatives

The supplemental proposal also included $201 million for four other foreign

policy initiatives labeled by the Administration as “Other Global War on

Terrorism”programs:

$50 million for terrorist rewards for information leading to the

capture or killing of Saddam Hussein and Osama bin Laden,

“Donors Receive Estimates of Afghanistan’s Reconstruction Ahead of Tokyo

Conference,” UNDP Press Release, Jan. 15, 2002.

“Can Afghan Reconstruction Surge After Latest Violence,” Eurasia Insight, Aug. 20,

2003.

CRS-53

$11 million for additional diplomatic security,

$40 million for USAID facilities, operations, and security in Iraq and

Afghanistan, and

! $100 million for an Emergency Fund for Complex Foreign Crises

Congress has considered a request to create a foreign policy contingency fund twice

this year as part of the regular FY2004 Foreign Operations appropriations and the

FY2003 Iraq war supplemental. For many years, Administrations have asked

Congress for various types of contingency resources that can be drawn upon

immediately to address unanticipated foreign policy emergencies. Except in the case

of humanitarian situations, however, Congress has been reluctant to support such

requests, stating that the President has other mechanisms and special authorities for

temporarily “borrowing” funds from other aid accounts over which Congress can

maintain closer scrutiny and consult in advance about the purposes of the transfers.

Congress deferred the proposal in the FY2003 supplemental (P.L. 108-11), choosing

instead to allocate the resources for specific needs in Iraq and for coalition partners.

Thus far, House and Senate-passed FY2004 Foreign Operations appropriation bills

(H.R. 2800), do not provide money for a Complex Foreign Crises Fund, as requested

by the Administration.

As enacted, the supplemental legislation includes relief aid for Liberia and

Sudan in lieu of appropriating money for the more general Emergency Fund for

Complex Crises. Congress provided $200 million specifically for Liberia, and $10

million for Sudan.

The supplemental proposal further included two provisions concerning Pakistan.

The first would extend through FY2004 an existing waiver on aid restrictions to

Pakistan. Since September 11, 2001, Congress has authorized temporary waivers of

foreign aid restrictions regarding nuclear proliferation and military coups that would

prohibit Pakistan from receiving U.S. assistance. The current waiver expires on

September 30, 2003. The supplemental also requested that up to $200 million in

FY2004 economic aid to Pakistan be made available to cover the costs of canceling

debt owed by Pakistan to the United States. As enacted, the supplemental includes

the aid waiver for Pakistan, plus $200 million in economic aid for Islamabad which

may be used for debt reduction in lieu direct grant assistance. This will presumably

remove the need for Congress to consider the debt reduction request, and a $200

million aid proposal for Pakistan when it concludes deliberation on the regular

FY2004 Foreign Operations spending measure. The enacted supplemental further

provides $100 million in additional economic aid for Jordan that had not been

requested. This too could reduce the amount necessary for Congress to include for

Jordan in the regular pending Foreign Operations bill for FY2004.

Legislation

S. 1689 (Stevens)

An original bill making emergency supplemental appropriations for Iraq and

Afghanistan security and reconstruction for the fiscal year ending September 30,

2004, and for other purposes. Senate Appropriations Committee consideration and

CRS-54

markup held, September 30, 2003. Report filed by the Senate Appropriations

Committee, October 2, 2003, S.Rept. 108-160. Considered on the Senate floor,

October 1, 2, 3, 14, 15, 16, and 17, 2003. Passed by the Senate with amendments

(87-12), October 17, 2003. Incorporated into H.R. 3289 as an amendment and

passage of S. 1689 vitiated, October 17, 2003.

H.R. 3289 (Young)

Making emergency supplemental appropriations for defense and for the

reconstruction of Iraq and Afghanistan for the fiscal year ending September 30, 2004,

and for other purposes. House Appropriations Committee markup held and ordered

to be reported, October 9, 2003. Reported by the House Appropriations Committee

(H.Rept. 108-312), October 14, 2003. Considered on the House floor, October 15,

16, and 17, 2003. Passed by the House, with amendments, October 17, 2003 (305125). Considered by the Senate, Senate struck all after the enacting clause and

substituted the language of S. 1689, passed by the Senate by unanimous consent, and

Senate requested a conference, October 17, 2003. House agreed to a motion to

instruct conferees (277-139) and appointed conferees, October 21, 2003. Conference

held and conference report agreed to, October 29, 2003. Conference report filed

(H.Rept. 108-337) October 30, 2003. Conference report agreed to in the House (298121) October 31, 2003. Conference report agreed to in the Senate, by voice vote,

November 3, 2003. Signed into law by the President (P.L. 108-106), November 6,

2003.

CRS-55

For Additional Reading

CRS Resources

CRS Report RL31187. Combating Terrorism: 2001 Congressional Debate on

Emergency Supplemental Allocations, by (name redacted) and (name redacted).

CRS Report RS21644. Defense Funding by Mission For Iraq, Afghanistan, and

Homeland Security: Issues and Implications, by (name redacted).

CRS Report RL31999. Disaster Relief and Response: FY2003 Supplemental

Appropriations, by (name redacted).

CRS Report RL31829. Supplemental Appropriations FY2003: Iraq Conflict,

Afghanistan, Global War on Terrorism, and Homeland Security, by (na

me redacted) and (name redacted).

CRS Report RL31406. Supplemental Appropriations for FY2002: Combating

Terrorism and Other Issues, by (name redacted) and (name redacted).

CRS Report RL31715, Iraq War: Current Situation and Issues for Congress, by

(name redacted) (Coordinator).

CRS products on Afghanistan

[http://www.congress.gov/erp/hotmap/afghanistan.html]

CRS products on Iraq

[http://www.congress.gov/erp/hotmap/iraq.html]

CRS products on defense policy and budgets

[http://www.crs.gov/products/browse/all-legislative-categories.shtml#Defense]

CRS products on foreign affairs

[http://www.crs.gov/products/browse/all-legislative-categories.shtml#Foreign_Aff

airs-Global]

Administration Request

President George W. Bush, “President Addresses the Nation,” The Cabinet Room,

September 7, 2003, available online at [http://www.whitehouse.gov/news/

releases/2003/09/20030907-1.html].

Office of Management and Budget, “FY2004 Supplemental: Iraq and Afghanistan

Ongoing Operations/Reconstruction,” September 17, 2003, available online at

[http://www.whitehouse.gov/omb/budget/amendments/supplemental_9_17_0

3.pdf].

CRS-56

Department of Defense, “FY2004 Supplemental Request for Operation Iraqi

Freedom (OIF), Operation Enduring Freedom (OEF), and Operation Noble

Eagle (ONE),” September 21, 2003. Available electronically at

[http://www.dod.mil/comptroller/defbudget/FY_2004_Supplemental.pdf].

Office of the Coalition Provisional Authority, “Coalition Provisional Authority

Request to Rehabilitate and Reconstruct Iraq,” September 23, 2003.

Cost Analyses

Congressional Budget Office, “Testimony on the Ability of the U.S. Military to

Sustain an Occupation in Iraq,” before the House Armed Services Committee,

November 5, 2003. Available electronically at

[ftp://ftp.cbo.gov/47xx/doc4706/11-05-IraqTestimony.pdf].

Congressional Budget Office, “Letter to the Honorable John M. Spratt, Jr. Regarding

the Estimated Costs for the Occupation of Iraq,” October 28, 2003. Available

electronically at

[ftp://ftp.cbo.gov/46xx/doc4683/10-28-Spratt.pdf].

Congressional Budget Office, “An Analysis of the U.S. Military’s Ability to Sustain

an Occupation of Iraq,” Letter to the Honorable Robert Byrd, September 3,

2003. Available electronically at

[http://www.cbo.gov/showdoc.cfm?index=4515&sequence=0].

Congressional Budget Office, “Letter to the Honorable Kent Conrad and John M.

Spratt Jr. Regarding Estimated Costs of a Potential Conflict with Iraq,”

September 2002 . Available electronically at

[http://www.cbo.gov/showdoc.cfm?index=3822&sequence=0].

Congressional Budget Office, “Letter to the Honorable Pete V. Domenici Regarding

the Cost of Activities Related to the Military Operations Taking Place in and

Around Afghanistan,” April 2002. Available electronically at

[http://www.cbo.gov/showdoc.cfm?index=3362&sequence=0].

Council on Foreign Relations, “Iraq: The Day After — Report of an Independent

Task Force on Post-Conflict Iraq,” Thomas R. Pickering and James R.

Schlesinger, Co-Chairs, Eric P. Schwartz, Project Director, March 12, 2003.

Available electronically at [http://www.cfr.org/publication.php?id=5681].

House Budget Committee Democratic Staff, “Assessing the Cost of Military Action

Against Iraq: Using Desert Shield/Desert Storm as a Basis for Estimates,”

September 23, 2002. Available electronically at

[http://www.house.gov/budget_democrats/analyses/spending/iraqi_cost_repo

rt.pdf].

House Budget Committee Democratic Staff, “The Cost of War and Reconstruction

in Iraq: An Update,” September 23, 2003. Available electronically at

[http://www.house.gov/budget_democrats/analyses/iraq_cost_update.pdf].

CRS-57

Kosiak, Steven, “Potential Cost of a War with Iraq and Its Post-War Occupation,”

Center for Strategic and Budgetary Assessments, February 25, 2003. Available

electronically at

[http://www.csbaonline.org/4Publications/Archive/B.20030225.Potential_Co

sts_of/B.20030225.Potential_Costs_of.pdf].

Nordhaus, William D., “The Economic Consequences of a War with Iraq,” in War

with Iraq: Costs, Consequences, and Alternatives, American Academy of Arts

and Sciences, December 2002. Available electronically at

[http://www.amacad.org/publications/monographs/War_with_Iraq.pdf].

Other Resources

Kay, David, “Statement by David Kay on the Interim Progress Report on the

Activities of the Iraq Survey Group (ISG) Before the House Permanent Select

Committee on Intelligence, the House Committee on Appropriations,

Subcommittee on Defense, and the Senate Select Committee on Intelligence,”

October 2, 2003. Available electronically at

[http://www.cia.gov/cia/public_affairs/speeches/2003/david_kay_10022003.

html].

U.S. Central Command, Operation Iraqi Freedom Web Site. Available electronically

at [http://www.centcom.mil/Operations/Iraqi_Freedom/iraqifreedom.asp].

CRS-58

Appendix

Table A1. Costs of Major U.S. Wars

(amounts in millions and billions of dollars)

American Revolution

Current Year

Constant FY2003 $

War of 1812

Current Year

Constant FY2003 $

Mexican War

Current Year

Constant FY2003 $

Civil War: Union

Current Year

Constant FY2003 $

Civil War: Confederacy

Current Year

Constant FY2003 $

Spanish American War

Current Year

Constant FY2003 $

World War I*

Current Year

Constant FY2003 $

World War II

Current Year

Constant FY2003 $

Korea

Current Year

Constant FY2003 $

Vietnam

Current Year

Constant FY2003 $

Persian Gulf War (1991)**

Current Year

Constant FY2003 $

$120

$3,177

million

$89

$1,000

million

$82

$1,765

million

$2,300

$50,001

million

$1,000

$21,765

million

$270

$6,471

million

$33

$588

billion

$360

$4,799

billion

$50

$408

billion

$111

$584

billion

$61

$82

billion

Sources and Notes: American Revolution through Korean War costs from the

Statistical Abstract of the United States, 1994; deflators and all other data

from the Office of the Under Secretary of Defense (Comptroller). FY2003 $

figures for American Revolution through the Korean War were updated from

FY1967 constant dollar figures cited in the Statistical Abstract.

* World War I figures include the amount of war loans to allies, which totaled

between $9.4 and $9.5 billion in current year dollars, or 28%-29% of

the total cost.

** Most Persian Gulf War costs were offset by allied contributions or were

absorbed by DOD. Net costs to U.S. taxpayers totaled $4.7 billion in

current year dollars, or 7.7% of the total cost. Source: Department of

Defense Annual Report to Congress, Jan. 1993.

CRS-59

Table A2. Costs of Major Reconstruction Efforts

(amounts in billions of dollars)

Marshall Plan (1948-1951)

Current Year $

Constant FY2003 $

Bosnia (1996-1999)*

Current Year $

Constant FY2003 $

Kosovo (1999-2001)*

Current Year $

Constant FY2003 $

Afghanistan (2001-2003)

Current Year $

Constant FY2003 $

$13.325

$105.037

$0.936

$1.041

$0.860

$0.916

$1.174

$1.185

Sources and Notes: U.S. Agency for International Development, Department

of State, and House and Senate Appropriations Committees. Deflators are

from Office of Management and Budget, February 2003.

* Although the United States continues to provide economic assistance to

Bosnia and Kosovo, figures shown here reflect amounts of humanitarian

and reconstruction aid transferred during the post-conflict,

“reconstruction” phase of economic and social stabilization efforts.

EveryCRSReport.com

The Congressional Research Service (CRS) is a federal legislative branch agency, housed inside the

Library of Congress, charged with providing the United States Congress non-partisan

This text is long and has been trimmed here. Open the source document for the complete record.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.