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 October 15, 2003
Stephen Daggett, Larry Nowels,
Curt Tarnoff, and Rhoda Margesson
Foreign Affairs, Defense, and Trade Division
Congressional Research Service ˜ The Library of Congress

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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 have said that they would like to
see congressional action on the request completed some time before October 24,
when an international donors conference is scheduled in Madrid to seek pledges of
economic assistance for Iraq. House Appropriations Committee Chairman Bill
Young has recently said that he hopes to have a conference report on supplemental
appropriations completed by then.
The House Appropriations Committee marked up its version of a supplemental
appropriations bill for defense and for reconstruction (H.R. 3289) on October 9, and
floor action began on October 15. The Senate Appropriations Committee marked up
its version of a supplemental appropriations bill, S. 1689, on September 30, and the
full Senate began floor debate on the bill on October 1. The Senate resumed
consideration of the measure on October 14.
A wide range of legislative measures addressing costs, burdensharing, and other
issues have been considered in congressional action. Proposals have included
measures providing part or all of reconstruction aid to Iraq as loans rather than grants;
conditioning funds on strict reporting requirements; requiring the president to make
greater efforts to increase international assistance; rolling back tax cuts to pay for the
bill; shifting funds from Iraq reconstruction to domestic programs; transferring
control of Iraq reconstruction from the Defense Department to the State Department;
requiring competition in contracts in Iraq; increasing personnel benefits for deployed
troops; and providing reconstruction assistance to Liberia.

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Contents
Most Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Basic Elements of the Administration Request . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Long-Term Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Impact on the Federal Budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Earlier Administration Statements about Costs . . . . . . . . . . . . . . . . . . . . . . . 8
Reliability of Current Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Future Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Issues in Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Proposals to Assert Congressional Oversight . . . . . . . . . . . . . . . . . . . . . . . 12
Taxes and Domestic Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Administration Performance in Preparing for Post-War Iraq . . . . . . . . . . . 14
Additional Funding for Various Programs . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Health Insurance for Military Reservists . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Competitive Contracting and Limitations on Profits of Corporations
with Contracts in Iraq . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Loans Rather than Grants for Iraq Reconstruction . . . . . . . . . . . . . . . . . . . . 15
Congressional Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Senate Appropriations Committee Markup . . . . . . . . . . . . . . . . . . . . . . . . . 16
Senate Floor Debate and Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Amendments Considered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Amendments Pending . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
House Appropriations Committee Markup . . . . . . . . . . . . . . . . . . . . . . . . . 22
Military and Intelligence Operations: Overview and Issues . . . . . . . . . . . . . . . . 26
Basis of the Cost Projections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Funding Flexibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Authority to Train and Equip Foreign Military Forces . . . . . . . . . . . . . . . . 30
Military Personnel Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Iraq/Afghanistan Reconstruction and Other Global War on Terrorism
Foreign Policy Initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Iraq Reconstruction and Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Supplemental Request . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Afghanistan Reconstruction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Request . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Other Global War on Terrorism Foreign Policy Initiatives . . . . . . . . . . . . . 47
Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

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For Additional Reading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
CRS Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Administration Request . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Cost Analyses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Other Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
List of Tables
Table 1. Basic Elements of the Administration Request for Additional
Funding for Iraq, Afghanistan, and Other Activities . . . . . . . . . . . . . . . . . . . 5
Table 2. Defense Funding for Iraq, Afghanistan, and Other Global War
on Terrorism Activities: FY2001-FY2003 . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Table 3. Department of Defense FY2004 Supplemental Request . . . . . . . . . . . 27
Table 4. Iraq, Afghanistan, Other Foreign Policy Funding . . . . . . . . . . . . . . . . . 33
Table 5. Iraq Supplemental: Proposed Sector Allocation . . . . . . . . . . . . . . . . . 36
Table 6. U.S. Assistance to Afghanistan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Table A1. Costs of Major U.S. Wars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Table A2. Costs of Major Reconstruction Efforts . . . . . . . . . . . . . . . . . . . . . . . 51

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FY2004 Supplemental Appropriations for
Iraq, Afghanistan, and the Global War on
Terrorism: Military Operations and
Reconstruction Assistance
Most Recent Developments
On October 9, the House Appropriations Committee marked up its version of
a supplemental appropriations bill (H.R. 3289) providing funds for military
operations and reconstruction assistance in Iraq and elsewhere. General debate began
on October 15. In the markup, the committee rejected, among other proposals, an
Obey substitute that would have reduced funds for Iraq reconstruction and would
have required that half the remaining funds be provided as World Bank loans. The
Senate Appropriations Committee marked up its version of a supplemental
appropriations bill, S. 1689, on September 30, and the full Senate began floor debate
on the bill on October 1. In the early debate on the measure, the Senate rejected
(38-59) an amendment by Senator Byrd that would have removed $15.2 billion for
Iraq reconstruction in order to review the proposal more closely and consider it at a
later point; tabled (57-42) 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; and tabled (65-42) an amendment by Senators Leahy and Daschle to
place Iraq reconstruction under the authority of the State Department. The Senate
resumed consideration of the measure on October 14.
Overview
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.1 On September 17, the
White House submitted a formal request for the funds to Congress, and on
September 21, the Defense Department provided backup material to congressional
committees.2
On September 23, the Coalition Provisional Authority that is
1 President George W. Bush, “President Addresses the Nation,” The Cabinet Room,
September 7, 2003, available electronically at
[http://www.whitehouse.gov/news/releases/2003/09/20030907-1.html].
2 Office of Management and Budget, “FY2004 Supplemental: Iraq and Afghanistan Ongoing
Operations/Reconstruction,” September 17, 2003, available electronically at:
[http://www.whitehouse.gov/omb/budget/amendments/supplemental_9_17_03.pdf].
(continued...)

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CRS-2
administering Iraq provided information on the details of its request for
reconstruction aid.
Congressional consideration of the proposal is well underway. Both House and
Senate leaders expect to complete floor action this week, clearing the way for a
conference agreement to be voted on next week, before an international donors
conference on Iraq meets in Madrid on October 24. Numerous hearings have been
conducted (cited below).
Readers in congressional offices may click on the
highlighted hearings listed below (in the .html version of this report) to link to
hearing transcripts.
2 (...continued)
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].

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CRS-3
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.
A wide range of legislative measures addressing costs, burdensharing, and other
issues have been proposed. Measures have been proposed 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.

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Perhaps the major issue in Congress has been whether to provide Iraq
reconstruction funds as grants, as the Administration proposed, or as loans. In the
Senate Appropriations markup of S. 1689 on September 30, Senator Dorgan
proposed two amendments to establish mechanisms by which Iraq would repay the
funds. The Committee tabled both amendments. Senator Dorgan then introduced
one of his proposals on the floor, which was rejected on October 14. On October 1,
Senators Hutchison, Graham of South Carolina, Collins, Craig, and Chambliss
submitted an amendment to provide $10 billion of the reconstruction aid through a
trust fund that would be reimbursed by Iraq; action on this amendment is expected
on October 15 or 16.
Other amendments in the Senate markup included a proposal to divide the
defense from the reconstruction funds, to provide only half of the reconstruction
money immediately with release of the rest conditioned on reporting requirements,
to reduce the amount of funding flexibility provided to the Defense Department, to
stiffen penalties for fraud and profiteering, and to require that U.S.-funded projects
ensure access for the disabled. The committee rejected or tabled all but the latter two
provisions, which were accepted. Many of these measures have come up, or are
likely to come up, during floor action in the Senate and may also be raised in the
House.
In the House, the Appropriations Committee marked up its version of a
supplemental appropriations bill (H.R. 3289) on October 9. The reported bill reduces
funds for some reconstruction projects that had been matters of contention in
Congress and adds funds for Afghan reconstruction. Representative Zach Wamp
proposed but then withdrew an amendment in the committee markup to provide half
the Iraq reconstruction funds as loans available once a new Iraqi government is
installed. The committee also rejected a substitute by Representative Obey that also
would have provided half the funds as loans.
As is often the case when large supplemental appropriations bills are under
consideration in Congress, a number of other funding and policy issues could arise.
Matters that have been mentioned or acted on include additional funding for
homeland security; funding for international HIV/AIDS programs; funding for the
AmeriCorps volunteer service program; a proposal to provide health insurance for
military reservists; funding for humanitarian and reconstruction aid to Liberia and,
perhaps, to some other nations; and limits on profits by companies providing support
for operations in Iraq and Afghanistan.
The following discussion (1) briefly reviews the basic elements of the request;
(2) discusses the debate about long-term costs; (3) identifies legislative proposals that
may arise as congressional action proceeds; (4) provides an overview of proposed
funding for ongoing military operations in Iraq, Afghanistan, and elsewhere; and (5)
provides an overview of proposed funding for reconstruction and security in Iraq, for
reconstruction in Afghanistan, and for other foreign policy initiatives.

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CRS-5
Basic Elements of the Administration Request
Of the $87 billion that the Administration is requesting, $65.6 billion is for
defense, and $21.4 billion is for foreign policy programs. Of the $65.6 billion for
defense, $51.5 billion is 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 is
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.
Table 1. Basic Elements of the Administration Request for
Additional Funding for Iraq, Afghanistan, and Other Activities
(amounts in billions of dollars)
Defense
$65.6
Operation Iraqi Freedom (Iraq)
$51.5
Operation Enduring Freedom (Afghanistan)
$10.5
Operation Noble Eagle (Homeland Defense)
$2.2
Coalition Support
$1.4
Foreign Policy
$21.4
Iraq Reconstruction
$15.2
Iraq Security
$5.1
Other Iraqa
$0.1
Afghanistan Reconstruction
$0.8
Other Global War on Terrorism
$0.3
Total
$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 have said that the request is 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 assumes that
current troop levels and the current pace of operations in Iraq, Afghanistan, and
elsewhere will continue unchanged through the fiscal year. The new request does
3 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.

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CRS-6
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. The World Bank and the U.N. Development
Program (UNDP) have released a needs assessment that puts the cost of
reconstruction in 14 key sectors at $36 billion over four years, not including $19.4
billion estimated by the CPA for security, oil, and other critical sectors not covered
by the Bank assessments.4 Total Bank/CPA projected 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 $103 billion in defense funding, over
and above regular defense appropriations, for military operations in Afghanistan, for
other global counter-terrorism military and intelligence operations, for homeland
defense, and, most recently — in last April’s Emergency Wartime Supplemental
appropriations bill — for the war in Iraq . Table 2 provides a summary of defense
funding by appropriations bill.
4 “UN/World Bank Present Iraq Reconstruction Needs to Core Group.” World Bank/United
Nations press release no. 2004/100/S, October 2, 2003. For the full text of the report online,
see the World Bank website at
[http://lnweb18.worldbank.org/mna/mena.nsf/Attachments/Iraq+Joint+Needs+Assessme
nt/$File/Joint+Needs+Assessment.pdf].
5 Congressional briefing by executive branch officials, September 8, 2003.

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CRS-7
Table 2. Defense Funding for Iraq, Afghanistan, and Other
Global War on Terrorism Activities: FY2001-FY2003
(amounts in billions of dollars)
Date of
Public Law
Defense
Name of Law
Enactment
Number
Funding
FY2001 Emergency Terrorism
9/18/01;
P.L. 107-38;
$17.4
Response Supplemental
1/10/02
P.L. 107-117
Appropriations Act;
FY2002 DOD Appropriations Act
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
4/16/03
P.L. 108-11
$62.6
Supplemental
Total
—
—
$103.3
Note: Total may not add due to rounding.
Since September 11, Congress has appropriated about $12 billion for Iraqi and
Afghan reconstruction and 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 to date has 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, estimates that the federal budget deficit will total $455
billion in FY2003 and $475 billion in FY2004, assuming congressional enactment

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CRS-8
of the Administration program FY2004.6 White House officials have said that the
requested additional appropriations of $87 billion for FY2004 would push the deficit
to about $525 billion for that year.7 The most recent Congressional Budget Office
(CBO) budget baseline projects deficits of $401 billion in FY2003 and $480 billion
in FY2004.8 It is important to note that the CBO baseline for FY2003 includes
outlays from the April 2003 wartime supplemental, and CBO projections for future
years assume growth with inflation in overall discretionary spending. So, in effect,
the CBO estimate of the FY2004 deficit already assumes additional supplemental
appropriations for military activities in Iraq and elsewhere roughly equal to the
amount provided in FY2003. (Reconstruction assistance for Iraq and Afghanistan,
however, is more than three times as high in the FY2004 request as in FY2003.)9
Administration officials have 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 mid-1980s. Congressional critics argue 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, contend 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, is now 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 ago that a conflict with Iraq
could cost $100-200 billion.10 Other Administration officials, however, notably then-
6 Office of Management and Budget, “Mid-Session Review of the Budget: Fiscal Year
2004,” July 15, 2003.
7 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.
8 Congressional Budget Office, “The Budget and Economic Outlook: An Update,” August
2003.
9 CBO estimates that first year outlays from the Senate Appropriations Committee reported
version of the supplemental, S. 1689, will total $37 billion.
10 For Lindsey’s original comments, see Bob Davis, “Bush Economic Aide Says Cost Of
(continued...)

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CRS-9
Budget Director Mitch Daniels, immediately dismissed Lindsey’s figures as ill-
founded, 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,
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 have become 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
10 (...continued)
Iraq War May Top $100 Billion,” Wall Street Journal, September 16, 2002, p. 1.
11 See, for example, Elizabeth Bumiller, “Budget Director Lowers Estimate Of Cost Of A
War,” New York Times, December 31, 2002 Pg. 1.
12 Deputy Secretary of Defense Paul Wolfowitz, before the House Defense Appropriations
Subcommittee, March 27, 2003.

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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
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 for which it 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
13 Secretary of Defense Donald Rumsfeld before the National Press Club, September 10,
2003.
14 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, September 16, 2003. Available electronically at:
[http://www.defenselink.mil/transcripts/2003/tr20030917-0683.html].
15 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].

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CRS-11
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
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.
16 “Donors Seen Pledging $2 billion to Iraq in Madrid,” Reuters, October 14, 2003.
17 “World Bank Considers Lending $4 Billion to Iraq,” Financial Times, October 15, 2003.
18 James O’Shea, “Force Reduction In Iraq ‘Years’ Off,” Chicago Tribune, October 5, 2003,
Pg. 1.
19 Hon. John Spratt, “News Release: Spratt Statement on Potential Cost of Operations in
Iraq,” September 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,” September 23, 2003. Available electronically at
[http://www.house.gov/budget_democrats/analyses/iraq_cost_update.pdf].

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CRS-12
Issues in Congress
A number of issues have been a focus of legislative attention, including both
issues directly related to the supplemental request and some not directly related.
Legislative measures that have been proposed or acted on include the following:
! proposals to assert congressional oversight;
! measures on taxes and domestic priorities;
! a measure to review Administration performance in preparing for
post-war Iraq;
! 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.
Proposals to Assert Congressional Oversight
Several legislators have either mentioned or formally proposed measures to
require more information from the Administration about the progress of security and
reconstruction operations and about future policy. Senator Levin has said that he and
several other Senators are considering a legislative measure setting conditions on
reconstruction funds, including a requirement that foreign governments would assist
in the reconstruction, and a requirement that the Administration submit a detailed
report on the reconstruction plans. Early in the debate over the bill, Senator Feinstein
and ten other Democratic Senators introduced a freestanding bill, S. 1594, designed
to be attached to the supplemental, that requires an extensive report on Iraq policy.
In Senator Feinstein’s words,
Our legislation requires the President within 60 days of the enactment of this act
to report to Congress on: the current economic, political, and military situation
in Iraq including the number, type and location of attacks on U.S. and Coalition
military and civilian personnel in the previous 60 days; a discussion of the
measures taken to protect U.S. troops serving in Iraq; a detailed plan for the
establishment of civil, economic and political security in Iraq, including the
restoration of basic services such as water and electricity and the construction of
schools, roads, and medical clinics in Iraq; the current and projected monetary
costs incurred by the United States, by Iraq, and by the international community;
actions taken and to be taken by the Administration to secure increased
international participation in peacekeeping forces and in the economic and
political reconstruction of Iraq; a detailed time-frame and specific steps to be
taken for the restoration of self-government to the Iraqi people; cost estimates for
achieving those goals; and U.S. and international military personnel requirements
for achieving those goals.20
20 Congressional Record, September 9, 2003, pp. S-11247-11248. In addition to Senator
Feinstein, the original co-sponsor are Senators Daschle, Dodd, Lieberman, Johnson,
Bingaman, Lincoln, Feingold, Lautenberg, Leahy, and Durbin.

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CRS-13
On September 17, Representative Tauscher introduced an identical measure in
the House, H.R. 3131, and Representative Thompson of California offered a
measure, H.R. 3132, requiring detailed reports as reconstruction assistance to Iraq
is released.
On October 1, Senator Daschle mentioned several amendments that he expected
Democrats to offer on the supplemental, including a measure to impose strict
reporting requirements before reconstruction aid could be released. 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 the section on“Congressional Action” below for a further
discussion).
Taxes and Domestic Priorities
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. On October 1, he, 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. The Administration has vigorously opposed any offsetting reduction
in tax cuts. In effect, both prominent Democrats and the White House are inviting
an ongoing debate over the issue.21 On October 14, Senator Baucus proposed another
amendment to offset costs by reducing planned tax cuts. (See below for Senate
action on Senator Biden’s amendment and for action in the House Appropriations
Committee on a substitute by Representative Obey that included a reduction in tax
cuts.)
Funding for domestic programs has also been an issue. Many legislators have
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 and DeFazio will
reportedly introduce 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 reconstruction funding by $5
billion and transfer the money to domestic priorities. (See below for a further
discussion of congressional action).
21 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, September 11, 2003, p. G-11. For the Emmanuel proposal, see “As
Appropriators, Rank And File Digest Funding Request,” National Journal Congress Daily,
September 10, 2003.

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CRS-14
Administration Performance in Preparing for Post-War Iraq
Reportedly, the Joint Chiefs of Staff has prepared a classified report, entitled
“Operation Iraqi Freedom Strategic Lessons Learned,” that, among other things,
identifies failures in preparing for post-war security operations in Iraq.22
Representative Wexler and 12 co-sponsors, have proposed a resolution, H.Res. 358,
that may be offered as an amendment to the supplemental, that requires the President
to transmit the report to the House of Representatives.
Additional Funding for Various Programs
Several measures to provide funds for various domestic and international
programs have been matters of continuing debate in Congress, and proposals to add
funds could very well be offered as amendments to the supplemental. Programs that
have been mentioned include homeland security; international HIV/AIDS programs,
in which proposed funding has so far fallen about $1 billion short of anticipated
levels; the AmeriCorps volunteer service program, for which Senator Mikulski has
proposed adding $100 million on other appropriations bill, but which could be added
to the supplemental if it is not approved earlier.
The House Appropriations
Committee recommends $345 million for Liberia peacekeeping and reconstruction
and for Sudan, in line with an earlier Dear Colleague letter from Representative
Payne and others.
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 estimates that
the provision would cost about $500 million in FY2004 and over $2 billion a year by
FY2008 as more reservists sign on. The Administration has threatened to veto the
authorization if it includes this provision. Supporters have said that they may offer
the measure as an amendment to the supplemental if it is not enacted in the
authorization. The Senate approved an amendment to its version of the supplemental
bill providing health insurance, though only to reservists who are unemployed or
ineligible for employer provided insurance (see below under “Congressional Action”
for a discussion of Senate action on this issue).
22 See “Awaiting Bush’s Supplemental, Hill Bears Down On Approps,” National Journal
Congress Daily AM, September 15, 2003.

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CRS-15
Competitive Contracting and Limitations on Profits
of Corporations with Contracts in Iraq
A politically sensitive issue is 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
have mentioned measures to address the issue.
Representative Maloney has
introduced the Clean Contracting in Iraq Act of 2003 (H.R. 3275), for example. In
its markup, the Senate Appropriations Committee approved an amendment by
Senator Leahy to stiffen penalties for fraud and profiteering on contracts for Iraq (see
below for Senate action on this issue). The House Appropriations Committee version
of the bill includes a measure to limit non-competitive procedures for reconstruction
contracts (see “Congressional Action” below for House action on this issue).
Loans Rather than Grants for Iraq Reconstruction
Some Members have drafted amendments that would require some portion 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 calls for all assistance to
be provided on a grant basis. As noted below under “Congressional Action” section,
an amendment offered, but tabled (15-14), during Senate Appropriations Committee
markup by Senator Dorgan would have created 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, on October
14, tabled (57-39) the same amendment by Senator Dorgan. 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.
Senator Hutchison and others have introduced an amendment (S.Amdt. 1798)
that would direct $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 are, 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.
Additional legislative proposals could come up as congressional action proceeds.
(For more discussion, see below under sections on Congressional Action and Iraq
Reconstruction Issues.)

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CRS-16
Congressional Action
On October 9, the House Appropriations Committee marked up its version of
a supplemental appropriations bill providing funds for ongoing military operations
and for reconstruction assistance in Iraq and Afghanistan. Floor action began on
October 15. 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. Debate
resumed on October 14.
Senate Appropriations Committee Markup
As proposed by Committee Chairman Ted Stevens and as agreed to by the
committee, the reported bill provides the amounts requested both for defense and for
foreign operations, though with some shifts of funds among various activities.
For defense, the bill provides $65.560 billion, equal to the amount requested.
The committee bill makes some minor changes in requested equipment funding and,
most notably, rejects an Administration proposal to revise military personnel
benefits. In action on some key issues, the Senate committee bill
! Extends 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).
! Provides 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 are offset by
reductions in Air Force, Navy, and Defense-Wide accounts.
! Provides 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, provides authority for DOD
to transfer an additional $5 billion subject to approval by the House
and Senate Appropriations Committees. Senator Byrd has proposed
measures to limit the funding flexibility the bill provides.
! Allows DOD to transfer $150 million into unplanned military
construction projects rather than the $500 million requested.
! Provides $200 million to provide training and equipment to the new
Iraqi Army and the Afghan National Army. The Administration had

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CRS-17
requested the funds for forces in Iraq, Afghanistan, and “other
nearby regional nations.”
! Provides $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 provides $21.445 billion, as requested, supports the full request for
Afghanistan, and makes small changes in other areas.
Regarding Iraq reconstruction, the Senate Appropriations Committee supports
the total funding request of $20.3 billion and provides 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, deletes 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 provides 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 would
! earmark $100 million of the $20.3 billion total for democracy-
building 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
! impose fines and criminal charges against persons engaged in war
profiteering and fraud relating to military action, relief, and
reconstruction in Iraq.

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CRS-18
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 re-introduced 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,
approves 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 authorizes 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 includes $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.
Amendments Considered. The major debates in the initial days of floor
action 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 proposal more
closely and consider it at a later point; and 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. The Senate rejected both proposals: it voted down the
Byrd amendment by a vote of 38-59 and tabled the Biden amendment by a vote of
57-42.

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CRS-19
Overall, during the four days of debate, the Senate acted on 15 amendments,
adopting 8 and rejecting 7. Those adopted include the following:
! a provision 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;
! an amendment 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;
! a proposal 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;
! 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 employer-
sponsored health insurance (see below, under “Military Personnel
Benefits,” for a description of the specific proposal); and
! a measure proposed 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.
The Senate also rejected the following amendments:
! an amendment by Senators Leahy and Daschle (S.Amdt. 1803,
tabled by a vote of 56-42) to place the Coalition Provisional
Authority under the direct authority and foreign policy guidance of
the Secretary of State (tabled 56-42); and
! an amendment 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 49-37);
! an amendment 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);

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CRS-20
! an amendment 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);
and
! an amendment 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).
Amendments Pending. As the Senate continues its consideration of S.
1689, several Senators have introduced amendments with the intention of reducing
the U.S. costs of Iraq reconstruction, either through a cut in the total appropriation
and redirecting the funds to another purpose or by making Iraq responsible for
repaying reconstruction loans or using its oil to secure loans.
Reconstruction Transfers as Loans. Senator Hutchison and others
propose (S.Amdt. 1798) 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 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 direct $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.
Another proposal by Senators Bayh and Nelson (S.Amdt. 1815) would require
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.
As discussed in more detail below, under the section on Iraq Reconstruction
Issues, there remain a number of legal and political challenges to implementing a
loan or oil collateralization mechanism. Whether the Iraq Governing Council has
sufficient authority to assume loan obligations, as assumed in the Bayh and Dorgan
amendments, or whether the World Bank and member states would agree to establish
a Trust Fund along the lines envisioned in the Hutchison amendment remain open
questions. Administration officials have argued against such proposals, largely on
the grounds that Iraq already faces severe debt and reparations claims that should not
be further complicated with new loans.
Reductions in Reconstruction Costs.
Some pending amendments
propose to reduce appropriations for Iraq reconstruction and redirect the funds for
other purposes:

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CRS-21
! a proposal by Senators Dodd and Corzine (S.Amdt. 1817) would
reduce reconstruction amounts by $322 million for security and
private sector programs and use the savings for added safety
equipment for U.S. military personnel;
! an amendment by Senators Byrd and Durbin (S.Amdt. 1819) would
restrict the use of funds for a series of specified projects and use the
$600 million for securing and destroying conventional munitions in
Iraq;
! a provision by Senators Byrd, Leahy, and Kennedy (S.Amdt. 1818)
would 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;
! a proposal by Senators Chafee and Leahy (S.Amdt. 1807) would cut
Iraq reconstruction by $100 million, using the funds as part of a
$200 million relief, rehabilitation, and reconstruction aid package for
Liberia.
Other pending amendments in the Senate include measures to increase the size of the
Army, to permit full concurrent receipt of military retired pay and veterans disability
benefits, and to increase Veteran’s Administration funding. These measures include
! an amendment by Senators Reed, Hagel, and Levin (S.Amdt. 1834)
to increase the end strength of the Army by 10,000, to structure the
additional forces for constabulary (i.e., peacekeeping) duty, and to
allocate $409 million from funds provided in the bill for the Iraq
Freedom Fund to cover the costs in FY2004;
! an amendment by Senators Bond, Mikulski, Dorgan, and Jeffords
(S.Amdt. 1825) to add $1.3 billion for Department of Veterans
Affairs health care;
! an amendment by Senators Reid and Lincoln (S.Amdt. 1835) to
permit full concurrent receipt of military retired pay and VA
disability compensation (the Senate added a similar provision to the
FY2004 defense authorization bill, which remains in conference);
! an amendment by Senator Lincoln (S.Amdt. 1829) to provide tax
relief to military families;
! an amendment by Senator Baucus (S.Amdt. 1831) to reverse the
accelerated reduction of top income tax rates in the 2001 tax act;
! an amendment by Senator Leahy (S.Amdt. 1833) to require a Senate
confirmed official to oversee reconstruction funds (identical to a
requirement in the House-reported version of the bill);

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CRS-22
! an amendment by Senator Reid (S.Amdt. 1836) to permit citizens
held as POWs or as “human shields” in the 1991 Gulf War to pursue
damages in court; and
! an amendment by Senators Durbin, Mikulski, and Corzine (S.Amdt.
1837) to ensure that federal employees who take leave without pay
when called up to serve in the National Guard shall continue to
receive total pay at least equal to base civilian pay.
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
! provides $86.9 billion in total, $184 million below the request;
! provides $18.65 billion for Iraq reconstruction, $1.65 billion below
the request;
! provides $1.2 billion for Afghanistan reconstruction, $400 million
above the request;
! 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; and
! adds $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
! adds funds for force protection and unexploded ordnance clearing,
offset by cuts elsewhere;
! allows 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, extends 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;
! provides 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);

---

CRS-23
! allows DOD, as requested, to transfer up to $500 million into
unplanned military construction projects, rather than the $150
million allowed in the Senate bill;
! provides $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
! provides $1.3 billion for “coalition support” to reimburse Pakistan,
Jordan, and other cooperating nations for logistical and other support
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
! provides all Iraq reconstruction in the form of a grant, as requested;
! cuts 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);
! provides 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;
! increases 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;
! limits the use of non-competitive contracts for Iraq, but with a
presidential waiver;
! continues the organizational structure for Iraq reconstruction of
Ambassador Bremer reporting to the President through the Secretary
of Defense; and
! prohibits the use of funds to pay Iraq’s foreign debts.
The Committee bill further adds several items unrelated to Iraq and Afghan
reconstruction issues concerning Pakistan, Liberia, and victims of September 11:

---

CRS-24
! 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 grants
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, the House measure
adds $100 million for disaster and famine support and $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 includes $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 –
! adds $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
! prohibits 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 is 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
is 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;

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CRS-25
! 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).
The Nethercutt amendment regarding tanker aircraft has 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 regard 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 include 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 non-
competitive 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.

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CRS-26
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. Table 3 provides a breakdown of the proposed funding as the Defense
Department presented it. 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.

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CRS-27
Table 3. Department of Defense FY2004 Supplemental Request
(amounts in millions of dollars)
Defense
Military
Depot
Procurement
Military
Working
Other
Total
Operations
Maintenance
and RDT&E
Construction
Capital Fund
Iraq Freedom Fund (IFF) Transfers
1,988.6
-
-
-
-
-
1,988.6
Military Personnel [Subtotal of IFF]
[778.8]
-
-
-
-
-
[778.8]
Other [Subtotal of IFF]
[1,209.8]
-
-
-
-
-
[1,209.8]
Military Personnel, Army
12,858.9
-
-
-
-
-
12,858.9
Military Personnel, Navy
816.1
-
-
-
-
-
816.1
Military Personnel, MC
753.2
-
-
-
-
-
753.2
Military Personnel, Air Force
3,384.7
-
-
-
-
-
3,384.7
O&M, Army
21,674.9
1,221.7
-
-
-
1,293.9
24,190.5
O&M, Navy
1,268.2
775.0
-
-
-
45.0
2,106.2
O&M, MC
1,128.0
71.0
-
-
-
-
1,199.0
O&M, MC Reserve
16.0
-
-
-
-
-
16.0
O&M, Air Force
5,484.3
419.0
-
-
-
45.0
5,948.3
O&M, Air Force Reserve
-
53.0
-
-
-
-
53.0
O&M Air National Guard
10.0
204.0
-
-
-
-
214.0
O&M, Defense-Wide
3,119.1
99.3
-
-
-
1,400.0
4,618.4
Drug Interdiction and Counter-Drug
73.0
-
-
-
-
-
73.0
Activities, Defense
Defense Health Program
658.4
-
-
-
-
-
658.4
Overseas Humanitarian Disaster & Civic Aid
35.5
-
-
-
-
-
35.5
Aircraft Procurement, Navy
-
-
128.6
-
-
-
128.6
Aircraft Procurement, Air Force
-
-
41.0
-
-
-
41.0
Procurement, MC
-
-
123.4
-
-
-
123.4
Procurement, Defense-Wide
-
-
435.6
-
-
-
435.6
Other Procurement, Army
-
-
930.7
-
-
-
930.7
Other Procurement, Navy
-
-
76.4
-
-
-
76.4

---

CRS-28
Defense
Military
Depot
Procurement
Military
Working
Other
Total
Operations
Maintenance
and RDT&E
Construction
Capital Fund
Other Procurement, Air Force
-
-
3,441.0
-
-
-
3,441.0
Missile Procurement, Army
-
-
6.2
-
-
-
6.2
Missile Procurement, Air Force
-
-
20.5
-
-
-
20.5
Procurement of Weapons & Tracked Combat
-
46.0
-
-
-
46.0
Vehicles, Army
RDT&E, Navy
-
-
34.0
-
-
-
34.0
RDT&E, Air Force
-
-
39.1
-
-
-
39.1
RDT&E, Defense-Wide
-
-
265.8
-
-
-
265.8
National Defense Sealift Fund
-
-
-
-
24.0
-
24.0
Defense Working Capital Fund
-
-
-
-
600.0
-
600.0
Military Construction, Army
-
-
-
119.9
-
-
119.9
Military Construction, Air Force
-
-
-
292.6
-
-
292.6
Intelligence Community Management
-
-
-
-
-
21.5
21.5
Account
Total Requirements
53,286.8
2,843.0
5,588.3
412.5
624.0
2,805.4
65,560.0
Source: Department of Defense, “FY2004 Supplemental Request for Operation Iraqi Freedom (OIF), Operation Enduring Freedom (OEF), and Operation Noble Eagle
(ONE),” September 21, 2003.

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CRS-29
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
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,

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CRS-30
to deploy two Army National Guard Enhanced Separate Brigades and one Marine
Expeditionary Force.23
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.24 (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 counter-
terrorism 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.
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
23 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.
24 See Department of Defense, “FY2004 Supplemental Request for Operation Iraqi Freedom
(OIF), Operation Enduring Freedom (OEF), and Operation Noble Eagle (ONE),” September
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.

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CRS-31
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 expire at the
end of FY2003 on September 30. 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 is requesting that the increased Imminent Danger Pay and
Family Separation Allowance payments continue through December 31, 2003. After
that, DOD requests 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.
The Senate Appropriations Committee 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 is whether to
provide health insurance for non-deployed military reservists. As noted above, the
Senate approved an amendment to the FY2004 defense authorization bill that would
allow non-activated 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-
Graham amendment is much more limited and more targeted than the Senate
provision in the FY2004 defense authorization bill.

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CRS-32
Iraq/Afghanistan Reconstruction and Other Global
War on Terrorism Foreign Policy Initiatives
The Administration seeks 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 $20.44 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).

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CRS-33
Table 4. Iraq, Afghanistan, Other Foreign Policy Funding
(billions of dollars)
Activity
Request
Senate
House
Iraq
$20.415
$20.354
$19.597
Reconstruction and security
$20.304
$20.304
$18.649
a
a
CPA Operating Expenses
$0.858
b
b
U.S. diplomatic facilities
$0.061
Peacekeeping for a multinational division c
$0.050
$0.050
$0.050
Broadcasting to Iraq
$0.000
$0.000
$0.040
Afghanistan d
$0.799
$0.860
$1.218
Economic reconstruction
$0.422
$0.422
$0.672
Train, equip, deploy police
$0.120
$0.120
$0.170
Military aid for Afghan army
$0.222
$0.222
$0.297
Anti-terrorism training/Karzai protection
$0.035
$0.035
$0.035
Kabul Embassy annex
$0.000
$0.000
$0.044
USAID interim facility a
$0.000
$0.061
$0.000
Other Global War on Terrorism
$0.266
$0.231
$0.410
Emergency Fund for Complex Crises
$0.100
$0.100
e
Personnel security in Afghanistan & Iraq;
Machine Readable Visa shortfall f
$0.076
$0.036
$0.156
Diplomatic & Consular Progs (rescission)
—
($0.036)
($0.036)
Terrorist Rewards and Machine Readable Visa
shortfall f
$0.050
$0.091
$0.050
USAID operating expenses — Iraq & Afghan. g
$0.040
$0.040
$0.040
h
h
Pakistan economic aid
$0.200
Other
$0.000
$0.000
$0.360
Liberia & Sudan disaster/famine relief
$0.000
$0.000
$0.100
U.N. Peacekeeping contribution for Liberia
$0.000
$0.000
$0.245
Sept. 11 Victims Compensation Program
$0.000
$0.000
$0.015
TOTAL
$21.480
$21.445
$21.585
a. The Administration and Senate bill include operating expense funding under title I (Defense), in the
account for Operations and Maintenance, Army.
b. The Administration proposes to use funds previously appropriated for Baghdad facilities in P.L.
108-11for urgent USAID needs in Afghanistan and requests in this supplemental additional
resources for Iraq facilities to replace those diverted to Afghanistan.
The Senate bill
appropriates 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 provides $35.8 million for a new U.S.
mission in Iraq in the D&CS account below and rescinds $35.8 million provided in P.L. 108-11.

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CRS-34
c. The House bill specifies the peacekeeping funds are available for both Iraq and Afghanistan.
d. The total request for Afghan reconstruction is $1.19 billion, including a $390 million
reprogramming from prior year appropriations.
e. Instead of funding this account, the Senate bill provides $100 million in disaster and famine relief
aid for Liberia and Sudan, below.
f. Under the account for Diplomatic and Consular Services (D&CS), the Administration proposes $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 provides $35.8 million as a rescission and reappropriation for
security operations in Afghanistan and Iraq, and adds funding under the separate account of
Emergencies in the Diplomatic and Consular Services to cover the MRV shortfall. The
Administration requests funds under this latter account only for rewards related to Osama bin
Laden and Saddam Hussein. The House bill provides $156.3 million in the D&CS account, of
which $109.5 million is for MRV fees and consular services, $11 million for security measures
in Afghanistan, and $35.8 million for a diplomatic mission in Iraq.
g. The Senate bill provides $40 million for USAID operating expenses in Afghanistan only.
h. The Administration requests 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 includes this authority, while the House bill includes
both the authority for debt reduction and the $200 million appropriation.
Iraq Reconstruction and Security
Supplemental Request. The $20.3 billion Administration request for
reconstruction and security in Iraq represents a significant increase from amounts
previously appropriated for reconstruction. Up to now, the United States has
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.)25
These earlier funds have been used to support a broad range of humanitarian and
reconstruction efforts. The new request is 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
25 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.

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CRS-35
and health clinics (see Table 5 for a breakdown). According to Administration
officials who have briefed Members of Congress and staff, these investments
represent the most urgent needs over the next 12 months, but by no means address
total reconstruction requirements in the coming year.26 Other concerns in such areas
of government reform, agriculture, economic development, and education, are not
included in the Administration request. A relatively small amount of funds, $300
million, has been requested for programs designed to encourage the growth of the
private sector and jobs training.
26 Congressional briefing by executive branch officials, September 8, 2003.

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CRS-36
Table 5. Iraq Supplemental: Proposed Sector Allocation
(billions of dollars)
Sector
Request
Senate
House
Security
$5.136
$5.136
a$4.561
Public safety, including border enforcement, police,
$2.100
–
–
fire, & customs
Security forces and Iraq Civil Defense Corps
$2.100
–
–
Justice and civil society development
$0.900
–
–
Reconstruction
$15.168
$15.168
$14.088
Electric power rehabilitation
$5.675
$5.675
$5.560b
Oil infrastructure rehabilitation
$2.100
$2.100
$2.100
Water and sewerage services repair and
$3.710
$3.710
$4.332c
improvement
c
Water resources improvement
$0.875
$0.875
Transportation and telecommunications
$0.835
$0.835
$0.500d
rehabilitation
Housing, building, road, and bridge
$0.470
$0.470
$0.370e
repair/reconstruction
Health facility construction and medical equipment
$0.850
$0.850
$0.793f
replacement
Private sector business initiatives and job training
$0.353
$0.353
$0.153g
programs
Refugee aid, local governance, other human
$0.300
$0.300
$0.280h
rights/civil society
TOTAL
$20.304
$20.304
$18.649
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. Excludes $50 million requested for Iraq traffic police and $400 million for two prisons; reduces
funding for the National Security Communications Network.
b. Excludes $25 million for consultants to plan for continued development and building rehabilitation.
c. The House bill combines the categories of Water and sewerage services and Water resources. The
amount excludes $153 million for solid waste management, including 40 trash trucks and $100
million for environmental restoration projects.
d. Excludes $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.
e. Excludes $100 million for seven housing communities.
f. Excludes $150 million for a new children’s hospital in Basra and $7 million for American and Iraqi
health care organization partnerships, but includes an additional $100 million for clinics and
hospital modernization.

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CRS-37
g. Excludes $200 million for an American-Iraqi Enterprise Fund.
h. Excludes $90 million for Public Information Centers in Iraq municipalities and $20 million for
business training courses.
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 seeks
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

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CRS-38
U.S. assistance. Iraq was projected to have $1.1 billion remaining for reconstruction
by end of December 2003.27
The Administration request suggests that a re-assessment of Iraq’s immediate
reconstruction needs demanded greater outlays of revenue than projected in July. It
also suggests 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 is 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.28
Issues.
Total Iraq Reconstruction Needs. The supplemental request is intended
to meet only the most important, immediate needs in Iraq in the 2004 fiscal year.
Until now, the cost of Iraq reconstruction was based on speculation and educated
guesswork. However, as part of the lead-in to an international donors conference to
be held in Madrid on October 24, the World Bank and the U.N. Development
Program have released a needs assessment they conducted of 14 Iraqi economic and
social sectors.29 The resulting Bank/UNDP estimates are likely to establish the
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.30 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 a possible concern that might affect
congressional consideration of the Administration request. The Bank/UNDP report
suggests that Iraq cannot absorb more than $6 billion in infrastructure program
commitments (excluding oil) in 2004, in view of the unstable security situation and
the time it takes to plan and implement contracts.31 The Administration request for
27 See [http://www.cpa-iraq.org/Budget2003.pdf] for text of the budget.
28
For a more detailed discussion of the Iraq reconstruction program, see CRS Report
RL31833, Iraq: Recent Development in Humanitarian and Reconstruction Assistance.
29 For the full text of the report online, see the World Bank website at
[http://lnweb18.worldbank.org/mna/mena.nsf/Attachments/Iraq+Joint+Needs+Assessme
nt/$File/Joint+Needs+Assessment.pdf].
30 “UN/World Bank Present Iraq Reconstruction Needs to Core Group.” World Bank/United
Nations press release no. 2004/100/S, October 2, 2003.
31 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
(continued...)

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CRS-39
infrastructure (excluding oil) is $12.4 billion. In response to this point, OMB has
reportedly confirmed that the reconstruction request is intended to cover 18 months.32
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.33
In the near term,
Administration officials say 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.34
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 is $2.1 billion. Additional sums for Iraqi security forces are
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 is the question of
whether assistance could be extended on a loan rather than grant basis. Some have
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
say.
31 (...continued)
Joint Iraq Needs Assessment, October 2003, page x.
32 “White House Defends Iraq Spending,” Financial Times, October 10, 2003.
33 See Petroleum section by Larry Kumins in CRS Report RL31944, Iraq’s Economy: Past,
Present, Future, pp. 17-23.
34 Congressional briefing by executive branch officials, September 8, 2003.

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CRS-40
The Administration, which has proposed that the entire $20.3 billion
supplemental be offered as grants, has argued repeatedly during congressional
hearings against adding to Iraq’s already substantial debt obligations. Witnesses have
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 for Iraq to service any existing debt, giving time to construct
some sort of multilateral debt restructuring arrangement.35 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.36
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.37
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 is
being closely examined by lawmakers. Senator Dorgan offered two amendments
during Senate committee markup (both tabled 15-14) that would have created an
35 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 September 24.
36 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.
37 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.

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CRS-41
authority to use Iraqi oil to secure reconstruction financing and convert U.S. grants
to loans. The full Senate tabled the first Dorgan amendment (57-39). Senator
Hutchison and others have submitted an amendment (S.Amdt. 1798) for floor
consideration that would direct $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. These and related amendments may be considered as the debate
continues.
The Supplemental’s Impact on Other Donors.
It is possible that
congressional action on the supplemental could influence the contributions of
international donors at the upcoming donors’ conference. Some argue that a large
pledge of U.S. aid prior to the conference may stimulate other donors to contribute
more; diminution of the Administration plan, they argue, may have the opposite
effect. Opponents of making U.S. aid for reconstruction in the form of loans also
contend that other donors may follow the American lead and offer loans rather than
grants, adding further to Iraq’s debt problems. In addition, the supplemental targets
sectors — infrastructure and security — that other donors are 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 will be the extent
to which they have a say in the use of funds. Up to now, donors have 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.38
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
38 Iraq Reconstruction an International Responsibility, Larson Says. Press briefing by
Under Secretary of State for Economic, Business, and Agricultural Affairs Alan Larson,
September 4, 2003 [http://usinfo.state.gov/topical/pol/terror/texts/03090434.htm]. Under
Secretary Larson also said that no decision had been made as to whether the United States
would participate in a trust fund.

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CRS-42
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 proposes 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.39
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, adds
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 wants to ensure that whoever is in charge of
coordination be available to testify at congressional oversight hearings. Senator
Leahy has proposed a similar amendment (S.Amdt. 1833) for Senate consideration.
These proposals appear 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.
Reconstruction Priorities and Costs. The Administration has said that
the request includes only the most pressing, immediate needs for Iraq in FY2004.
However, the relative importance of certain items detailed in the request — ‘re-
engineering of postal service business practices’ and construction of seven residential
39 “White House to Overhaul Iraq and Afghan Missions,” New York Times, October 6, 2003;
“Rice to Lead Effort to Speed Iraqi Aid,” Washington Post, October 7, 2003.

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CRS-43
communities, for example — is being 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 is intentionally inflated so
that the Administration will not have to return to Congress to ask for more funds in
2004.40 As mentioned above in the Congressional Action section, several Senate
amendments are pending that would reduce funding for what the sponsors regard as
low-priority needs and redirect the resources for domestic or other military programs
in Iraq. The House bill proposes a $1.655 billion cut in Iraq reconstruction funding,
reducing or eliminating resources for a wide range of activities that the Committee
found to be un-executable, low priority, or likely to receive funding from other
international donors. See Table 5 above for details of sector and project reductions
recommended in the House bill.
Afghanistan Reconstruction
Request. The Administration’s $1.2 billion supplemental aid request, of
which $799 million would be for new appropriations and $390 million would come
from previously appropriated DOD, State Department, and USAID funds, would
more than double current U.S. assistance to Afghanistan for FY2003. The proposal
comes at a time of growing criticism over delays in aid delivery, deteriorating
security conditions, and concern that U.S. and international attention has shifted to
Iraq.41 Key features of the $799 million in new appropriations include 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;
40 “In GOP, Concern Over Iraq Price Tag; Some Doubt Need for $20.3 Billion for
Rebuilding,” Washington Post, September 26, 2003.
41 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
million for Afghanistan.

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CRS-44
! $163 million for social programs and critical infrastructure,
including education, health, and local projects.
An additional $390 million will be made available from reallocated, prior-year funds,
but the Administration has not specified how they will be used. The White House
is further asking 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. U.S. Assistance to Afghanistan
(billions of dollars)
FY2004
FY2003
FY2004
FY2004
FY2004
FY2001
FY2002
Supple-
Estimate
Request
House
Senate
mental
$0.226
$0.527
$0.647
$0.550
$0.600
$0.600
$1.189a
a. Of which $799 million is requested as new appropriation and $390 million is a re-allocation of
prior year DOD, State Department, and USAID appropriations.
If progress on security, road construction, and reconstruction efforts are made
in advance of the 2004 elections, it could increase the chances of the success of
moderates in those elections. Supporters argue that additional funding could also
have an impact on decisions by the international community at the upcoming donors
conference, possibly resulting in larger contributions. It could also help efforts now
being discussed to expand the International Security Assistance Force (ISAF), which
is now limited only 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.
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

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CRS-45
a perception of continuing insecurity. Factional in-fighting and increased criminal
activity have also undermined humanitarian operations. In some cases, where
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, and Konduz, and Britain is
establishing a PRT in Mazar-e-Sharif.
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 2003.42
However, the unveiling of the draft constitution for
public discussion is expected to go forward shortly. 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 Kabul’s authority 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
42 Collett-White, Mike. Afghan Constitution Postponed, Elections May Be Too. Reuters,
August 28, 2003.

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CRS-46
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.
The Afghan government and the international community are now seeking to
increase the pace of reconstruction.
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 longer-term projects, mostly for road reconstruction, are currently
underway.
According to some observers, Afghans have become frustrated with the pace of
reconstruction.43 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.
Afghanistan officials have reportedly complained about the slow pace at which
pledged funds were being paid. Others 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.
43
Rashid, Ahmed. “Afghanistan is Waiting for This.” Far Eastern Economic Review,
August 7, 2003; “US to Revamp Afghan Efforts.” Chicago Tribune, August 18, 2003.

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Other Global War on Terrorism Foreign Policy Initiatives
The preliminary supplemental proposal also includes $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,
! $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-passed and Senate-reported FY2004 Foreign Operations
appropriation bills (H.R. 2800 and S. 1426, respectively), do not provide money for
a Complex Foreign Crises Fund, as requested by the Administration.
The supplemental proposal further includes 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 requests 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. The House, in H.R. 2800, the Foreign
Operations Appropriations measure for FY2004, approved the use of $65 million for
such purposes.
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
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, and 3, 2003.

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CRS-48
For Additional Reading
CRS Resources
For CRS products on Afghanistan, go to
[http://www.congress.gov/erp/hotmap/afghanistan.html]
For CRS products on Iraq, go to
[http://www.congress.gov/erp/hotmap/iraq.html]
For CRS products on terrorism and counter-terrorism, including the Global War on
Terrorism, see the CRS Terrorism Briefing Book at:
[ http://www.congress.gov/brbk/html/ebter1.shtml]
For CRS products on defense policy and budgets, go to
[http://www.crs.gov/products/browse/all-legislative-categories.shtml#Defense]
For CRS products on foreign affairs, go to
[http://www.crs.gov/products/browse/all-legislative-categories.shtml#Foreig
n_Affairs-Global]
Administration Request
President George W. Bush, “President Addresses the Nation,” The Cabinet Room,
September 7, 2003, available electronically 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
electronically at
[http://www.whitehouse.gov/omb/budget/amendments/supplemental_9_17_0
3.pdf].
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, “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].

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CRS-49
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].
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].

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CRS-50
Appendix
Table A1. Costs of Major U.S. Wars
(amounts in millions and billions of dollars)
American Revolution
Current Year
$120
million
Constant FY2003 $
$3,177
million
War of 1812
Current Year
$89
million
Constant FY2003 $
$1,000
million
Mexican War
Current Year
$82
million
Constant FY2003 $
$1,765
million
Civil War: Union
Current Year
$2,300
million
Constant FY2003 $
$50,001
million
Civil War: Confederacy
Current Year
$1,000
million
Constant FY2003 $
$21,765
million
Spanish American War
Current Year
$270
million
Constant FY2003 $
$6,471
million
World War I*
Current Year
$33
billion
Constant FY2003 $
$588
billion
World War II
Current Year
$360
billion
Constant FY2003 $
$4,799
billion
Korea
Current Year
$50
billion
Constant FY2003 $
$408
billion
Vietnam
Current Year
$111
billion
Constant FY2003 $
$584
billion
Persian Gulf War (1991)**
Current Year
$61
billion
Constant FY2003 $
$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.

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CRS-51
Table A2. Costs of Major Reconstruction Efforts
(amounts in billions of dollars)
Marshall Plan (1948-1951)
Current Year $
$13.325
Constant FY2003 $
$105.037
Bosnia (1996-1999)*
Current Year $
$0.936
Constant FY2003 $
$1.041
Kosovo (1999-2001)*
Current Year $
$0.860
Constant FY2003 $
$0.916
Afghanistan (2001-2003)
Current Year $
$1.174
Constant FY2003 $
$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.

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