Iraq Costs Surge, May Force Bush to Shuffle Funds, Seek More
May 3 (Bloomberg) -- U.S. military operations in Iraq may be $4 billion over budget by August, forcing President George W. Bush to shift money from other Pentagon accounts or ask Congress for more money before the November election, say Republican and Democratic lawmakers.
``If the tempo of combat stays like it has been since early April, they'll have to increase the troops strength and they'll need a supplemental budget of well over $75 billion,'' said Representative John Murtha, 71, a member of Congress from Pennsylvania since 1974 and the senior Democrat on the House Appropriations Committee panel that approves defense spending.
The monthly cost of the war is approaching $6 billion, at least $2 billion more than Bush projected two months ago, said Senator Lincoln Chafee, 51, a first-term Republican from Rhode Island who is chairman of the Foreign Relations subcommittee that oversees Iraq. The Pentagon has spent more than $70 billion in Iraq since January 2003, according to data provided by the Pentagon comptroller.
The Pentagon stepped up shipments last week of M1 Abrams tanks, Bradley Fighting Vehicles and M-16 bullets following insurgencies in Fallujah and cities near Baghdad that pushed the Army and Marines into their fiercest battles since Bush declared an end to major combat a year ago Saturday. At least 128 servicemen were killed in April, the worst monthly toll yet.
`Continuing Challenges'
U.S. troops face ``serious and continuing challenges'' in Iraq, Bush said in a weekly radio address Saturday that marked the first anniversary of his declaration of an end to major combat operations there. ``We are likely to see more violence from groups opposed to freedom.''
Bush, 57, won approval from Congress to spend $87.5 billion this fiscal year and $62.6 billion in 2003, mostly for military operations and reconstruction in Iraq. This year's funding from Congress included $69 billion specifically for military operations in the Middle Eastern country. White House Budget Director Joshua Bolten said in February the administration wants to wait until January before making a request for as much as $50 billion more.
The president is likely to allow the Pentagon to cover a shortfall with money intended for other uses, said Steve Kosiak, a budget analyst for the Center for Strategic and Budgetary Assessments, a Washington research group that focuses on defense planning.
Flexible budget rules may enable Bush to delay until after the election a public debate over the rising war costs, said Charles Pena, director of defense policy studies at the Cato Institute, a Washington-based research group that promotes limited government, free markets and individual liberty.
Borrowing
The administration can fill its budget shortfall through ``reprogramming,'' or borrowing from money appropriated for unrelated military operations and programs, Kosiak, 44, said.
The Pentagon did that before between October 2002 and April 2003 when it transferred $25.9 billion in money earmarked for maintenance to fund Iraq operations until Congress passed an emergency funding bill.
``When you have the single-largest budget of all the federal government, you have a lot of latitude for moving lots of money around from one program to another,'' Pena said.
A report submitted to Congress by the U.S.-led Coalition Provisional Authority, which runs Iraq, shows that of the $18.4 billion Congress approved for non-military reconstruction in Iraq, only $2.3 billion had been spent through March 24.
`Political Embarrassment'
The Bush administration wants to avoid ``the political embarrassment of having to come forward and admit that this venture is costing a lot more than they ever represented at the outset,'' said Representative John Spratt, 61, from South Carolina, the senior Democrat on the House Budget Committee.
``In the current situation we are going to make it through just fine until Sept. 30 and therefore we still remain where we were in terms of needing a supplemental in 2005,'' said former Pentagon Comptroller Dov Zakheim.
Costs for Iraq have contributed to the U.S. federal budget deficit, expected to widen to a record $477 billion this year, and Congress won't be inclined to give up government revenue by making tax cuts permanent at a time when more money is needed for the war, Chafee said.
To secure more money from Congress, Bush may have to sacrifice part of his 10-year, $1.7-trillion package of tax cuts that he wants to be made permanent, Chafee said in an interview.
Democratic presidential challenger John Kerry, 60, said Friday that the U.S. should share the burden in Iraq with more countries. Kerry, a four-term U.S. senator from Massachusetts who received the Bronze and Silver Stars for valor and three Purple Hearts for being wounded in Vietnam, said he would seek a greater role for the United Nations and NATO to ease the strain on American resources and troops.
`Moment of Truth'
``This is a moment of truth in Iraq,'' Kerry said at Westminster College in Fulton, Missouri on Friday. ``To do this right, we have to truly internationalize both politically and militarily: we cannot depend on a U.S.-only presence.''
Resistance in the Iraqi city of Fallujah resulted in a siege by U.S. Marines and the death of at least 280 people since April 5. About 594 of the 732 servicemen killed in the Iraq war through early Friday occurred since May 1, 2003, the day Bush stood before a banner reading ``Mission Accomplished.''
U.S. defense spending rose 15.7 percent in the first quarter, the Commerce Department said last week, the most in three quarters as violence in Iraq escalated.
``Government purchases for defense added pretty considerably to gross domestic product'' last quarter, said David Resler, chief economist at Nomura Securities International Inc., who cautioned that excessive outlays could affect interest rates.
General Richard Myers, chairman of the Joint Chiefs of Staff, said the cost of Iraq operations will be about $4 billion over budget by the end of the fiscal year, Sept. 30.
Officials are now looking ``to see if we have the wherewithal within the budget to cover extra costs,'' Myers said in testimony today before Congress April 21.
`Stressed Budget'
``The budget is wholly out of sync with what's happening on the ground,'' Spratt said. ``You've got a much more stressed budget than what was originally put together.''
The monthly military cost in Iraq is running at about $4 billion, according to the Pentagon. Spending peaked in September at $7 billion and dropped to as low as $2.7 billion in November. Expenses climbed to $6.4 billion in January as violence by Sunni and Shiite Muslims spread.
Murtha, Chafee and other lawmakers said they are concerned Bush intends to delay a funding request until after the Nov. 2 election. House Armed Services Committee Chairman Duncan Hunter, 55, a Republican from California, said he plans to seek Congressional approval for at least $20 billion as a ``bridge'' between the end of the 2004 fiscal year and early January.
A year ago, Zakheim estimated troops in Iraq would need an average of $2.2 billion a month. He raised that estimate in June to about $3 billion.
Even before the recent flare-up of fighting, ``it appeared we planned to win this war by carpet bombing Iraq with money,'' Chafee said.
Humvees and M16s
The cost has risen to meet the need for additional transport, ammunition, and the maintenance of aircraft and tanks. AM General Corp. has logged recent orders for more of its Humvee transport trucks, Alliant Techystems Inc. is shipping more small- caliber ammunition, and Jacksonville, Florida-based Armor Holdings Inc. is providing materials to reinforce vehicles.
The Army last year accelerated the purchase of more heavily armored Humvees from AM General, which builds the basic vehicle, and Armor Holdings O'Gara-Hess & Eisenhardt subsidiary, which applies the armor.
The Army's requirement grew to 4,402 so-called Up-Armored Humvees today from 235 in August 2003 as Iraq's insurgency has intensified and roadside attacks using improvised explosives have increased. There are 2,750 of the fortified Humvees in Iraq with a goal to reach the 4,402 mark in October, Army officials have told Congress.
The program since last year has received more than $400 million in emergency defense spending.
More Armor
The Army has indicated it needs almost $6 billion to buy body armor, trucks, ammunition and other items excluded from the administration's budget proposal. The U.S. will also need about $700 million just for the three-month retention of 20,000 servicemen ordered April 15. There are about 135,000 there now.
``We face tough times; we've had some tough times,'' Bush told reporters Friday at the White House. ``We're making progress.''
The Pentagon hasn't determined how much money it will need for fiscal 2005, Deputy Defense Secretary Paul Wolfowitz, 60, told the House Armed Services Committee on April 21. The military will make a request once it has ``a better fix on costs and what will be needed,'' he said.
Growing Deficit
Bush faces the prospect of a fiscal drain similar to what happened during the administration of President Lyndon Johnson, said Hawaii Senator Daniel Inouye, 79, the senior Democrat on the Appropriations Committee panel that handles defense spending.
From 1963 to 1968, federal spending rose annually by 4.8 percent as Johnson, a Democrat, funded the war in Vietnam and his Great Society entitlements, including education, Medicare health insurance and urban renewal projects, according to the Cato Institute. The federal deficit increased from $4.8 billion to $25.2 billion, or 2.9 percent of gross domestic product.
This year, the estimated deficit would equal 4.2 percent of GDP, due partly to the Bush administration's tax cuts and 5.5 percent annual expansion in real federal spending. The increase excludes the $87.5 billion supplemental appropriation for Iraq during the fiscal year ending Sept. 30.
`All Over Again'
``There are a lot of similarities between the Great Society and war in Vietnam, and the tax cuts and war in Iraq,'' Chafee said. ``We are doing it all over again.''
Republican John McCain, 67, a Vietnam prisoner of war from 1967 to 1973 who now represents Arizona in the Senate, and Senator Ted Kennedy, 72, a Massachusetts Democrat, have also compared the Iraq war to Vietnam.
White House spokesman Scott McClellan said the comparison is an election-year tactic aimed at provoking voter anger.
Bush on April 13 affirmed his plan to transfer power to an Iraqi government on June 30. He also said he would approve requests for more troops from his generals as coalition partners Spain, Honduras and the Dominican Republic prepare to withdraw their forces earlier than planned.
Defense Secretary Donald Rumsfeld, 71, said in November the administration by next month planned to curtail its force in Iraq to 105,000 from as many as 134,000 at a cost of about $28,500 per G.I. The U.K. has the second largest contingent in Iraq, with about 11,000 soldiers.
Limited Support
``The support hasn't been what the administration has hoped,'' said Bathsheba Crocker, co-director of the post-conflict reconstruction project at the Center for International Studies in Washington. The U.S. will have to garrison ``a fairly robust'' force in Iraq ``through the end of 2005,'' she said.
The U.S. is working with 30 nations in Iraq, showing that Bush ``has worked with our allies around the world,'' Scott Stanzel, a spokesman for the Bush campaign, said Friday.
Many of the same members of Congress who criticized Bush's handling of the Iraq war costs also said they would be supportive if the president came to them early for more money.
``The House and the Senate, Democrats and Republicans, are going to support whatever it takes to back up our troops in the field,'' Spratt said.
Most legislators would support a request for $75 billion in supplemental military spending in fiscal 2005, Murtha said.
`We Have to Pay'
``We have no alternative, we have to pay,'' said Murtha, the first combat veteran of the Vietnam War elected to Congress and a recipient of two purple hearts for being wounded in battle and the Bronze Star for valor. Denying troops the funding they need would ``be an absolute, complete disaster.''
McCain, who ran against Bush to be the Republican party's presidential candidate in 2000, called on the president to acknowledge the rising war costs.
``The fundamental truth is we face the security task mostly alone,'' McCain said in an April 22 speech in Washington. The president ``needs to be perfectly frank -- bringing peace and democracy to Iraq is an enormous endeavor that will be very expensive, difficult and long.''
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