Hearing of the House Budget Committee - The Growing Costs of the Iraq War

Interview

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REP. ADRIAN SMITH (R-NE): Excuse me. I apologize for arriving here late from a markup in another committee.

When you talk about reset costs, what would you point to as something that might be neglected that we may need to address five years down the road or 10 years down the road rather than two years down the road?

MR. ORSZAG: I'm not exactly sure what you mean, sir.

REP. SMITH: With the reset cost of replacing equipment and various other items, long-term -- I mean, we're finding out now that some of the equipment is needing to be replaced that was not replaced 10 years ago and maybe should have been. So we're starting to see some increased costs now. Certainly the war on terror exacerbates the entire issue. Could you elaborate on that at all?

MR. ORSZAG: Sure. And again, we have -- the most dramatic increases in cost over the past several years have been in the area of procurement. And part of that is related to the reset program.

I would just note, though, that the reset program now is being so aggressively funded that our analysis suggests that it is more than offsetting what it is supposedly designed to do, which is to replace or repair equipment that's damaged in theater. In other words, it is leading to a net improvement in the quality and number of tanks and trucks and what have you relative to prewar.

REP. SMITH: So, it -- I mean --

MR. ORSZAG: Because of the money that you're providing to it.

REP. SMITH: Okay. I understand, I think, where you're going with this. Now, if -- if a 1990 -- and my years probably aren't accurate, but if a 1990 tank is needed to be replaced, what would you suggest replacing it with?

MR. ORSZAG: Well again, I think the question is not whether a 1990 tank needs to be replaced, but rather whether if a 1995 or 1998 tank is damaged in theater, whether the purpose of the emergency funding that's provided for the reset program is to restore it to operational -- you know, to its original state or whether the funds should be used to purchase a 2007 or 2008 high-technology tank. And a significant component of what's happening is the latter.

And again, that's up to you. It's just the way that the program is being described is that we're -- that it's designed just to offset the impact of the war on that 1998 tank. And that's not all that's happening.

REP. SMITH: Okay, thank you.

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