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


Location: Washington, DC


REP. XAVIER BECERRA (D-CA): I thank the chairman. I thank my colleagues for that.

Dr. Orszag, thanks very much for your testimony. I'd like to -- actually, I'm first disheartened that no one from the administration and from the Department of Defense took the opportunity and the invitation of this committee to come and testify about what has to be one of the most important things that we're facing, is how to pay for this ongoing military operation in Iraq.

I'm also saddened to learn that even though the administration is not willing to be here, what we're finding today is not that we're seeing the tail end of the costs for this war beginning to occur, but we're actually seeing the costs on an annual basis rise to pay for the president's adventure in Iraq.

My understanding is that every single cent of this war -- and to- date we're looking at over half a trillion dollars -- has been paid for with a government credit card because not a single cent of it has been paid for, neither has the president ever requested that we try to pay for any particular expense for the military campaign in Iraq, which, during times of record deficit and difficulties with other programs, makes it very difficult to understand.

I want to pick up on something that my colleague Mr. Doggett had mentioned that ordinary Americans hear us talking about billions and now of course trillions of dollars for the Iraq war, but rarely do we put it in terms that the average American can understand.

If we could turn to Chart Number 1, I'd like to just go through a couple of -- a few of these charts with you, Dr. Orszag. My understanding is that if the war costs continue under these -- in some cases, pretty rosy scenarios -- we might expect to spend somewhere on the order of $2.4 trillion by the time we get to 2017.

My understanding is that we have a lot of chicken littles out there in the world saying that Social Security won't be around. Well, $2.4 trillion is over half of what it would cost us to stabilize Social Security for the next 75 years. Any dispute with that particular figure?

MR. ORSZAG: Without disputing the $2.4 trillion as a significant sum, I would point out that that comparison does suffer from the flaw that the $4.7 trillion is in present value and the $2.4 trillion is not. And therefore it's not exactly an apples to apples comparison.

REP. BECERRA: No, not exactly. But I think even then the oranges look pretty ugly.

Can we go to the next chart, number two? Again, the war request by the president, just for the year 2008, dwarfs what the president said we could not spend for 10 million children in this country so that they could have health insurance.

That, to me, is perhaps the most astonishing, that the president said he had to veto the children's health care bill that would cover 10 million kids for a year who have no health insurance because we couldn't afford it. And there you show that 40 days of Iraq war activity would more than cover the expense.

When you see the chart that compares the two, the $196 billion that the president requested for 2008 war funding compared to the $12 billion that we would spend for 2008 to cover 10 million kids, I think it's pretty dramatic.

Chart Number 3, if I could have that one put up. I think my colleague from Texas, Mr. Edwards, went through this. Again, I think it's hard for anyone to understand why it is that the president is willing to spend so much on the war and not even have to pay for it, using the government credit card, yet his request for veterans lacks -- falls way behind. In fact, it falls behind what the Congress was willing to do when it comes to trying to protect our veterans.

Chart Number 6 -- or 5, excuse me.

Is it 6? Chart 6, excuse me -- Chart Number 6.

As many of you know, California right now has 500,000 people who have been evacuated from their homes. We've had some six people who have been killed, dozens of people who have been injured as a result of these fires, many of them first responders. We have over 1,200 homes or buildings that have been destroyed. And there still is no end in sight.

Yet, as you can see, the funding for the war dwarfs what we would spend for our first responders. And clearly, again, here the president way underfunds our war (sic) responders and even what Congress is trying to do.

But I think the interesting thing about this chart is that -- the bar on the left, the $25 billion is the cost of borrowing money. That's not the cost of funding the war. That's just to pay the interest on the money that the president is requesting. That's what happens when you pay for -- when you don't pay for something and you use the government credit card. Ultimately you have to pay for it.

Well, the cost of paying the interest payments, which have no value because it's just interest payments on debt, exceeds by a tremendous amount what we're willing to spend on our first responders back in our home states.

Charts 8 -- if we go to charts -- quickly -- Chart 8 and then I'll go to Chart 9.

Again, put more in perspective -- what we're talking about spending -- again on the government credit card, because that $330 million a day is not paid for -- that would equal the amount that we would spend for 45,000 veterans, giving them health care, new Border Patrol agents, 1,700; 46,000 more children could be in Head Start if we didn't have to spend $330 million a day.

And the final chart -- I think this one's the most telling, of course. We spend on a daily basis $330 million on this war unpaid for. In other words, our children will have to pay for this in the future. Yet when you take a look at the Gulf War, just 10 or 15 years ago, that was our net total cost, $2.1 billion for the entire cost of that war. That's because we had allies in this so-called coalition who really did come forward.

So I -- Dr. Orszag, I thank you for having come forward with this information. I hope the American public will understand that for the ordinary person in this country, there are costs to this war.

REP. : Will you yield?

REP. BECERRA: I certainly do.

REP. : As compelling -- reflecting back on your initial comments about the administration -- as compelling as your charts and these soaring numbers are, surely this is a situation in which absence speaks much louder than words or statistics.

REP. BECERRA: I yield back, Mr. Chairman. And thank you to my colleagues for the opportunity to question.


REP. BECERRA: Thank you, Mr. Chairman.

And thank you to the two witnesses for their testimony.

And Professor Bilmes, it's good to see you again.

MS. BILMES: Nice to see you.

REP. BECERRA: Let me -- and I'm going to make reference to a couple of charts that we have on the budgetary costs. I'd like to begin, actually, with Chart Number 2, which talks about the cost and comparison to other government programs and government services like children's health care.

My understanding -- actually, can we do something? Can we go back to the Chart 1 that talks about the increasing costs of the war for a second? Let's see if we -- to me, this is an incredible -- not that one, Chart 1.

There's an incredible activity occurring here in this country. We're spending more each year for our activities in Iraq since the president declared mission accomplished, and there's nothing to tell us if this will end anytime soon. In fact, every time we get a request from the president for unpaid-for monies for this military adventure in Iraq, it ends up being more than the previous request.

And so as we see this mounting debt -- because all those figures are debt; we haven't paid a cent for any of these costs of the war; it's all going to be on the government credit card -- it begins to add up.

Now if we can go back to that Chart Number 2 that talks about children's health care -- as we see the cost of war escalating, we find that the president is telling us we have to make trade-offs. One of those trade-offs is that he vetoed recently a bill to provide health care coverage to America's children who don't have health insurance. We had a bill that we put on the president's desk to give him health care coverage for 10 million children in this country over the next year for the next five years, and that would have cost us about $12 billion to accomplish, compare to the cost of just one year's worth of military campaign in Iraq of over almost -- excuse me, almost $200 billion.

The reason I ask this is because while we see the cost of war continue to escalate and now the consequences of this war beginning to hit home --10 million children, kids in families that work suffering the consequence -- we also have to ask, are we getting the best that we can out of the money that we're spending? And my understanding that at this stage, the Pentagon's auditors -- the Pentagon's auditors -- can't tell us if some $10 billion of monies that we put out there for contracts to do work, principally in reconstruction, is being spent well, or even if it got spent for reconstruction.

And so I guess the question that I have for either of the two of you is, can you tell us if we have had good accounting of all the dollars that we've expended in Iraq for the American people?

MS. BELASCO: I'm really not an auditor. There are any number of reports by the special inspector general for Iraq which would raise all sorts of questions about how well money's spent for both reconstruction and training of Iraq security forces.

REP. BECERRA: Professor Bilmes, any particular comment?

MS. BILMES: I mean, I think that the overall level of accounting and budget transparency at the Defense Department is an issue that I would strongly urge the Congress to take on, and it extends beyond just this war. I mean, the Congress has passed a number of pieces of legislation over the years, including the Financial Management Integrity Act, the CFO Act and so forth, which require a government department to produce auditable, clean financial statements.

Now, when these laws were passed, none of the government had auditable, clean financial statements. Now almost the entire government does, with the exception of the Department of Homeland Security, and that's because it's trying to consolidate 22 different agencies, and the Department of Defense, which, although there are some people who certainly are trying very hard to do it, the department as a whole has not sort of got religion about this subject.

And, you know, Secretary Rumsfeld made a speech on September 10th, 2001, saying that the number one problem facing the Defense Department was the lack of financial transparency, and that was, you know, September 10th, 2001. That was the last we ever heard of it.

Now, since then, this problem has gotten worse, not better, as a result of all the war spending, which has really blurred the procurement account, you know, to a point that the inspector general report is -- you know, it's a scary read, and the auditor reports are scary reads.

So, I mean, I think that considering this Congress almost unanimously passed the Sarbanes-Oxley bill for the private sector requiring financial transparency and personal responsibility, I would urge Congress to enact a sort of modified Sarbanes-Oxley law which would require financial transparency at the Defense Department.

REP. BECERRA: Thank you for that testimony.

And Mr. Chairman, as I prepare to yield back, I'd just like to mention that as I'm looking at some notes, with one contract alone, the Pentagon in a contract with KBR, which is the subsidiary of Halliburton, they've already identified in the Pentagon nearly $2.4 billion in questions and unsupported costs on the LOGCAP contract, which is the contract to provide logistical support to our troops, just in that one contract.

And so, Mr. Chairman, I think maybe there is some good advice that we're receiving from some of the witnesses. Certainly, if we're going to be asked to spend this much money on a military adventure by the president and at the same time swallow that he's telling us we can't afford to provide 10 million children with health care -- children of working families -- I think we really do have to have some better accounting of what we're doing in Iraq.

So with that, I yield back the balance of my time.


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