Iraq's Budget Surplus Hearing Committee on The
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IRAQ’S BUDGET SURPLUS HEARING BEFORE THE COMMITTEE ON THE BUDGET HOUSE OF REPRESENTATIVES ONE HUNDRED TENTH CONGRESS SECOND SESSION HEARING HELD IN WASHINGTON, DC, SEPTEMBER 16, 2008 Serial No. 110–40 Printed for the use of the Committee on the Budget ( Available on the Internet: http://www.gpoaccess.gov/congress/house/budget/index.html U.S. GOVERNMENT PRINTING OFFICE 44–426 PDF WASHINGTON : 2008 For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800 Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001 VerDate 0ct 09 2002 12:28 Dec 04, 2008 Jkt 000000 PO 00000 Frm 00001 Fmt 5011 Sfmt 5011 J:\DOCS\HEARINGS\110TH\110-40\44426.TXT HBUD1 PsN: DICK COMMITTEE ON THE BUDGET JOHN M. SPRATT, JR., South Carolina, Chairman ROSA L. DELAURO, Connecticut, PAUL RYAN, Wisconsin, CHET EDWARDS, Texas Ranking Minority Member JIM COOPER, Tennessee J. GRESHAM BARRETT, South Carolina THOMAS H. ALLEN, Maine JO BONNER, Alabama ALLYSON Y. SCHWARTZ, Pennsylvania SCOTT GARRETT, New Jersey MARCY KAPTUR, Ohio MARIO DIAZ–BALART, Florida XAVIER BECERRA, California JEB HENSARLING, Texas LLOYD DOGGETT, Texas DANIEL E. LUNGREN, California EARL BLUMENAUER, Oregon MICHAEL K. SIMPSON, Idaho MARION BERRY, Arkansas PATRICK T. MCHENRY, North Carolina ALLEN BOYD, Florida CONNIE MACK, Florida JAMES P. MCGOVERN, Massachusetts K. MICHAEL CONAWAY, Texas NIKI TSONGAS, Massachusetts JOHN CAMPBELL, California ROBERT E. ANDREWS, New Jersey PATRICK J. TIBERI, Ohio ROBERT C. ‘‘BOBBY’’ SCOTT, Virginia JON C. PORTER, Nevada BOB ETHERIDGE, North Carolina RODNEY ALEXANDER, Louisiana DARLENE HOOLEY, Oregon ADRIAN SMITH, Nebraska BRIAN BAIRD, Washington JIM JORDAN, Ohio DENNIS MOORE, Kansas TIMOTHY H. BISHOP, New York GWEN MOORE, Wisconsin PROFESSIONAL STAFF THOMAS S. KAHN, Staff Director and Chief Counsel AUSTIN SMYTHE, Minority Staff Director (II) VerDate 0ct 09 2002 12:28 Dec 04, 2008 Jkt 000000 PO 00000 Frm 00002 Fmt 5904 Sfmt 5904 J:\DOCS\HEARINGS\110TH\110-40\44426.TXT HBUD1 PsN: DICK C O N T E N T S Page Hearing held in Washington, DC, September 16, 2008 ........................................ 1 Statement of: Hon. John M. Spratt, Jr., Chairman, House Committee on the Budget ..... 1 Prepared statement of ............................................................................... 2 Hon. Paul Ryan, ranking minority member, House Committee on the Budget ............................................................................................................ 3 Joseph Christoff, Director of International Affairs and Trade, Govern- ment Accountability Office ........................................................................... 4 Prepared statement of ............................................................................... 6 Frederick W. Kagan, Ph.D., resident scholar, American Enterprise Insti- tute ................................................................................................................. 42 Prepared statement of ............................................................................... 44 Lawrence J. Korb, Ph.D., senior fellow, Center for American Progress ...... 48 Prepared statement of ............................................................................... 50 Christopher M. Blanchard, analyst in Middle Eastern affairs, Congres- sional Research Service ................................................................................ 59 Prepared statement of ............................................................................... 61 (III) VerDate 0ct 09 2002 12:28 Dec 04, 2008 Jkt 000000 PO 00000 Frm 00003 Fmt 5904 Sfmt 5904 J:\DOCS\HEARINGS\110TH\110-40\44426.TXT HBUD1 PsN: DICK VerDate 0ct 09 2002 12:28 Dec 04, 2008 Jkt 000000 PO 00000 Frm 00004 Fmt 5904 Sfmt 5904 J:\DOCS\HEARINGS\110TH\110-40\44426.TXT HBUD1 PsN: DICK IRAQ’S BUDGET SURPLUS TUESDAY, SEPTEMBER 16, 2008 HOUSE OF REPRESENTATIVES, COMMITTEE ON THE BUDGET, Washington, DC. The Committee met, pursuant to call, at 9:35 a.m., in Room 210, Cannon House Office Building, Hon. John M. Spratt presiding. Present: Representatives Spratt, Edwards, Schwartz, Kaptur, Becerra, Doggett, Berry, McGovern, Scott, Etheridge, Baird, Moore of Kansas, Bishop, Ryan, Conaway, Tiberi, Porter, Alexander, Smith, and Jordan. Chairman SPRATT. I call the Committee hearing to order, and first of all thank everyone for attending today’s hearing on Iraq’s Budget Surplus, and especially our witnesses. This hearing will be the first opportunity for the Congress to re- ceive testimony on this report, the GAO Report, since the Govern- ment Accountability Office released it several weeks ago. GAO re- ports that Iraq is now running a substantial budget surplus. It may reach $79 billion. At the same time the CBO reported last week that in contrast to Iraq’s growing surplus, the budget deficit for the United States is expected to be $400 billion for the current fiscal year. That is the second largest deficit in our history. Even bigger deficits are projected next year. This hearing will give the Budget Committee the chance to de- velop some insight into Iraq’s fiscal situation and its ability to help pay for its own reconstruction. So far the United States has pro- vided more than $650 billion for our efforts in Iraq, $50 billion of which is for reconstruction and security forces training. We are spending today at the rate of more than $10 billion a month, which is by anybody’s calculus a significant sum of money. Given our budget deficits here at home, some find it difficult to understand why American taxpayers are still funding Iraqi recon- struction and security training. In funding the Gulf War, the first President was able to secure much greater cost sharing from our allies which greatly reduced the bill that the taxpayers ultimately had to pay. Let me say at the outset that this hearing is not a debate on the war, not a debate on the surge, or the plans for redeploying any troops we may have. In fact, even the strictly budgetary issues of the total cost of the war, military and reconstruction, is larger than today’s topic. We invited the Department of Defense to address the broader budgetary issue in a hearing this fall, but they declined to appear. Thus today’s hearing is called to examine the issue of the Iraqi (1) VerDate 0ct 09 2002 12:28 Dec 04, 2008 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 J:\DOCS\HEARINGS\110TH\110-40\44426.TXT HBUD1 PsN: DICK 2 budget surplus. We on the Budget Committee want to assess for the purpose of projecting the bottom line whether the burden of Iraq’s reconstruction can finally begin to shift from the United States to Iraq itself given the surplus they are currently enjoying. To help us understand the budget surplus we have two panels. On the first is Mr. Joseph Christoff, the Director of International Affairs and Trade at the Government Accountability Office. Mr. Christoff is joining us to present GAO’s latest information on Iraq’s budget surplus. Mr. Christoff, thank you for coming and we look forward to your testimony. On the second panel we have Mr. Chris- topher Blanchard from CRS, Dr. Larry Korb from the Center for American Progress, Dr. Fred Kagan from the American Enterprise Institute. The second panel will continue the discussion on this topic by giving us their expert opinions. On behalf of the Com- mittee I also welcome Mr. Blanchard, Mr. Korb, and Mr. Kagan. We will come to you as soon as we finish with this panel. But before turning to the testimony of the witnesses let me turn to my colleague Mr. Ryan from Wisconsin for any comments he may care to make. Mr. Ryan? [The prepared statement of John Spratt follows:] PREPARED STATEMENT OF HON. JOHN M. SPRATT, JR., CHAIRMAN, HOUSE COMMITTEE ON THE BUDGET I would like to thank everyone for coming to today’s hearing on ‘‘Iraq’s Budget Surplus,’’ particularly our witnesses. This hearing will be the first opportunity for Congress to receive testimony on this report since the Government Accountability Office released it. GAO reports that Iraq is now running a substantial budget surplus that may reach $79 billion. At the same time, the Congressional Budget Office reported last week that in contrast to Iraq’s growing budget surplus, the budget deficit for the United States is expected to exceed $400 billion for the current fiscal year—the sec- ond largest deficit in U.S. history—with even bigger deficits projected for next year. This hearing will give the Budget Committee the chance to develop some insight into Iraq’s fiscal situation and its ability to help pay for its own reconstruction. So far, the United States has provided more than $650 billion for our efforts in Iraq, $50 billion of which is for reconstruction and security forces training. We are spend- ing at a rate of $10 billion a month—a significant sum of money. Given our budget deficits here at home, some find it difficult to understand why American tax- payers—rather than Iraqis—are still funding Iraq reconstruction projects and secu- rity training. In funding the Gulf War, the first President Bush was able to secure much greater cost-sharing from our allies, greatly reducing the bill that the Amer- ican taxpayers had to fund. Let me say at the outset that today’s hearing is not a forum to debate the war or the surge or the plans for redeploying our troops. In fact, even the strictly budg- etary issue of the total costs of the war—military and reconstruction—is broader than today’s topic. We invited the Department of Defense to address that broader budgetary issue in a hearing this fall, but they have declined to appear. Thus, today’s hearing is called to examine the issue of Iraq’s budget surplus. We on the Budget Committee want to assess, for the purpose of projecting the bottom- line, whether the burden of Iraq’s reconstruction can finally shift from the U.S. to Iraq, given the current budgetary surplus in Iraq. To help us understand Iraq’s budget surplus, we have two panels. On the first panel we have Mr. Joseph Christoff, the Director of International Affairs and Trade at GAO. Mr. Christoff is joining us to present GAO’s latest information on Iraq’s budget surplus.