Tuesday, September 16, 2008

I feel your pain! Gotta jet!


US House Rep John Spratt Jr. chairs the Budget Committee (Paul Ryan is the Ranking Member of the Republican Party). Appearing before the committee were (first panel) the GAO's Joseph A. Christoff, (second panel) Congressional Research Service's Christopher M. Blanchard, AEI's Frederick Kagan and the Center for American Progress' Lawrence J. Korb.   We'll focus on some of the first panel only.
Spratt called the hearing to order and noted:
This hearing will be the first opportunity for the Congress to receive testimony on this report, the GAO report, since the Government Accountability Office released it several weeks ago.  GAO reports that Iraq is now running a substantial budget surplus -- it may reach $79 billion.   At the same time the CBO [Congressional Budget Office] reported last week that in contrast to Iraq's growing surplus, the budget deficit for the United States. is expected to exceed $400 billion for the current fiscal year.  That's the second largest deficit in our history.  Even bigger deficits are projected next year. This hearing will give the Budget Committee the chance to develop some insight into Iraq's fiscal situation and its ability to help pay for its own reconstruction.  So far the United States has provided more than $650 billion dollars for efforts in Iraq, $50 billion of which were for reconstruction and security forces training.  We're spending today at the rate of more than $10 billion a month which is by anybody's calculus a significant sum of money.  Given our budget deficits here at home, some find it difficult to understand why American tax payers are still funding Iraqi reconstruction and security training.  In funding the Gulf War, the first President Bush was able to secure much critical sharing from allies which greatly reduced the bill that the tax payers ultimately had to pay.  Let me say at the outset that this hearing is not a debate on the war, not a debate on the surge or plans for redeploying any troops we may have.  In fact, even the strictly budgetary issue of the total cost of the war -- military and reconstruction -- is larger than today's topic. We invited the Department of Defense to address a broader budgetary issue in our hearing this fall.  They declined to appear.  Thus today's hearing is called to examine the issue of the Iraqi budget surplus.  We on the Budget Committee want to asses for the purpose of projecting the bottom line whether the burden of Iraq's reconstruction can finally begin to shift from the United States to Iraq itself given the surplus they're currently enjoying.
Following the ranking Republican speaking, a cry of "End the occupation by defunding the occupation!" was chanted by one woman.  "You gonna call 'em?" asked Ryan leading Spratt to bang the gavel and declare to the woman, "I'm sorry you're out of order and you'll be removed from the room if you persist in doing what you're doing."  Ryan chuckled at that.
"Iraq has an estimated 115 billion barrels of crude oil reserves," declared Christoff at the start of his testimony.  "It's the third largest in the world.  And oil revenues are critical to Iraq's economy accounting for over half of the country's GDP [Gross Domestic Product] and over 90% of its revenues.  My statement today is based on the report we issued last month on Iraq's revenues, expenditures and surpluses from 2005 to 2008."
Christoff then reviewed some findings. From 2005 to 2007, $96 billion was generated in revenues (oil accounting for more than 90% of that money) and in 2008 $73 to $86 billion is the estimate for revenues "nearly as much as it generated in the prior three years."  By contrast, 2005 to 2007 saw the puppet government spent "$67 billion on operating expenses and investments.  Operating expenses such as salaries and goods and services consumed 90% of that total.  The remaining 10% was spent on investments such as structures and vehicles. In general, Iraq has spent less on investments than operating expenses."  Christoff estimates the surplus will be between $67 billion and $79 billion for this year.  He noted the claim that this would all be spent and how "a similar claim" was made from 2005 to 2007 but that never happened and instead "ended each of these years with budget surpluses."
John Spratt: If the will was there they could be spending it at a faster rate than they are?
Joseph Christoff: Well they can spend it on their operating budget with no difficulties.  They spent a large percent -- almost 80 percent -- on their operating budget. They can pay salaries.  They can buy certain operating goods and services but when it comes to the actual investment side to reconsruct bridges, roads, electricity and water facilities they fall short.
During his time, US House Rep Chet Edwards asked that Paul Wolfowitz ' statements be put up from 2003 when he was then Deputy Secretary of Defense and testified to the House Appropriations Subcommittee (March 27, 2003): "We're dealing with a country that can really finance its own reconstruction and relatively soon."
Chet Edwards: Given the GAO report, I guess I rank that administration prediction right up there with some of the predictions that we would be greeted as liberators, the war would be short-lived, it would cost the American tax payers less than a hundred billion dollars and we're turning the corner.  We've turned so many corners in Iraq I think we're all dizzy from that. Every time we turn one corner we find another roadbloc down the way.  I would like to ask you, just again, to get the facts on the table, in fact, let me ask staff to put up the chart on how much Iraq has spent and how much less it has spent than the US.  I just want to verify, Mr. Christoff, that according to this chart, the United States tax payers that are now facing historic deficits of over $400 billion this coming year, US tax payers have spent $23.2 billion on Iraq reconstruction.  Is that correct, Mr. Christoff?
Joseph Christoff: That's for four sectors that we looked at.
Chet Edwards: Okay.
Joseph Christoff: Security, oil, electricity and water.
Chet Edwards: Okay.  So reconstruction in those four sectors.  And the Iraqi government which I think now has an approximately $79 billion surplus has spent only $4.3 billion.  Is that fact --
Joseph Christoff: That's correct.
Chet Edwards: -- correct?
Joseph Christoff: Yes.
Chet Edwards: So the US tax payers -- in addition to something you can't put a dollar value on, we've sacrificed over 4,000 of our young men and women in combat there -- we've then also spent five times what the Iraqis have spent on reconstruction despite Secretary Wolfowitz' prediction that Iraq would very quickly be able to pay for its own reconstruction.  Let me ask you about this.  Am I correct in understanding from your report that the same Iraq for which we have sacrificed over 4,000 American lives has just signed a $3 billion agreement with the Communist Chinese National Petroleum Corporation to develop the Ahdab  oil field, is that correct?
Joseph Christoff: I don't have any first-hand information on it, sir.  It's just what I've read in the paper as perhaps you have as well.
Chet Edwards: Okay. Well for the record, I think that is, Mr. Chairman, correct. The Iraqi government, the same one that's building up a $79 billion surplus while American tax payers are paying for most of their reconstruction efforts has just signed a $3 billion agreement with the Communist Chinese National Petroleum Corporation.  And Mr. Chairman, it just boggles my mind to think that there would be any evidence that the Communist Chinese ability to develop oil fields is better than US corporations ability to do so.  So once again, we turn a corner and we're hit in the face with something I consider to be insulting.  
Edwards is correct re: CNP's contract.  August 29th snapshot: "Meanwhile, China scores big!  Erica Goode and Riyadh Mohammed (New York Times) announce that China National Petroleum signed a contract with the puppet government in Baghdad. With the DNC speeches this week repeatedly hitting on the borrowing from China, that will probably not go over well in this country."  Sept 3rd snapshot: " Eric Watkins (Oil & Gas Journal) states the oil contract to China National Petroleum Co (CNPC) has been approved by the Iraqi Oil Ministry today.  Today's Azzaman sees an exclusion of the US from the oil deals and insists this is due to pressure from Iran.  David Berman (Globe & Mail) dismisses 'the concern about China cornering Iraqi oil, it's nonsense'.  BBC via redOrbit documents the press conference in Baghdad today, presided over by Husayn al-Shahrastani."
US House Rep Lloyd Doggett was among the other Democrats asking questions and we'll note this exchange.

Lloyd Doggett: Do I understand from your testimony to Mr. Edwards a moment ago that a time when we were squandering our money and the Iraqis were saving their's that Iraqi citizens were paying about four cents a gallon for gasoline?
Joseph Christoff: Two years ago that's correct.
Lloyd Doggett: It's risen some since then?
Joseph Christoff: It's up to about $1.18 per gallon.
Lloyd Doggett: I think there are probably a lot of Americans who are paying for this so-called reconstruction in Iraq that would be mighty glad if they could get $1.18 gasoline. Did you play a role in the analysis of the benchmarks that the Government Accountability Office provided last year?
Joseph Christoff: Yes, sir.
Lloyd Doggett: What was that role?
Joseph Christoff: I was the director in charge of that report.
Lloyd Doggett: And have you also played the same role in responding to questions about the benchmarks from [House Armed Services Committee] Chairman [Ike] Skelton this year with the report that you just did in the last few weeks?
Joseph Christoff: Yes, I was the director on the progress report as well.
Lloyd Dogget: All of us remember, except maybe President Bush, that in January of 2007, he selected the benchmarks, the guidelines by which to measure success, by which to measure victory in Iraq and when we sought an analysis so we would have an objective information instead of just the propaganda from the administration about whether those benchmarks had been met the Congress turned to the Government Accountability Office. And my recollection is that when you came out with your report on August the 30th of last year that you determined that . . . 11 of the 18 benchmarks that President Bush had set were not met. Is that correct?
Joseph Christoff: Based on that prior report correct.
Lloyd Doggett: Yes, sir.  And you found that of the 18 benchmarks the president set himself to measure success in Iraq that only three had been met as of August 30, 2007. Now this year, a year later, you did some evaluation again.  You did not evaluate every single benchmark but you really found that there had been very little progress in the year.  We know that fortunately fewer Americans are being killed there. But in terms of the objective of the Bush policy in Iraq, you had a grand amount of success in that they met one more benchmark than they had the year before, isn't that correct?
Joseph Christoff: Well we didn't go through a benchmark by benchmark analysis but we did provide a report that talked about progess on the security front, the legislative front and the economic front in our June report.  
Lloyd Doggett: Right and I believe you found one more benchmark met than the year before.
Joseph Christoff: Again we didn't do a benchmark by benchmark analysis, sir.
Lloyd Doggett: Well if you look at the -- it may not have been called a benchmark analysis -- but you looked at some of the same factors you had the year before.  Just to begin to go through them, on the Constitutional Review Committee, you found that they'd formed the committee but the committee hadn't done anything.  Right?
Joseph Christoff: And that's still true.
Lloyd Doggett: Well they hadn't met that.  On enacting and implementing legislation on de-Baathification you found that they had enacted the legislation but they hadn't implemented and of it, right?
Joseph Christoff: That's correct.
Lloyd Doggett: Well they hadn't met the second benchmark.  On the question of enacting the hydrocarbon or oil legislation, you concluded that they had not met that again this year, did you not?
Joseph Christoff: Correct, and no progess this year either.
Lloyd Doggett: On enacting and implementing legislation on procedures to form semi-autonomous regions -- that was the fourth benchmark President Bush had -- you found that that was only partially met.  Again they passed a law to allow the provinces to act but it hadn't been implemented.
Joseph Christoff: Well on that one it will be implemented when provinces come together to form regions so that's  an open --
Lloyd Doggett: Right, but we're not there yet.
Joseph Christoff: Well no provinces have voted to form regions other than the KRG originally.
Lloyd Doggett: On enacting and implementing legislation for an Independent High Electoral Commission you found only partially meeting it.  Again, they passed a law but hadn't implemented it.
Joseph Christoff: The commission was established.  The provincial election law -- the date was established for October 1 but the implementing laws have not been enacted.
Lloyd Doggett: Right. And they won't have the elections they've been promising us they'd have for a year in October.
Joseph Christoff: October 1, they will not meet that date.
Lloyd Doggett: On the enacting and implementing legislation for a strong militia disarmament program --
Joseph Christoff: That's not met.
Lloyd Doggett: That's not met.  And I see my time's up but, Mr. Chairman, we can keep going down the objectives that President Bush set himself for success, for victory in Iraq, and you'll find that it continues to fail.  That this policy has been a failure, American tax payers are having to fund the failure while the Iraqis pay a fraction of the price we pay for a gallon of gasoline.  Thank you.

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