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Iraq Estimates Were Too Low, U.S. Admits

Times Staff Writers

The White House acknowledged Monday that it substantially underestimated the cost of rebuilding Iraq and that even the additional $87 billion it was seeking from a wary Congress would fall far short of what is needed for postwar reconstruction.

Administration officials said President Bush’s emergency spending request -- which would push the U.S. budget deficit above the half-trillion-dollar mark for the first time -- still left a reconstruction funding gap of as much as $55 billion.

“It is fair to say that the level of decay and underinvestment in the Iraqi infrastructure was worse than almost anybody on the outside anticipated,” said one senior administration official. “We were all surprised,” said another.

The revised estimates underscored the political challenge facing the president, who asked Americans on Sunday evening to prepare themselves for a longer and costlier engagement in Iraq, and members of Congress, who are being asked to more than double the financial commitment of U.S. taxpayers.

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It comes amid the increasing clamor of the 2004 election cycle and growing concern about the wisdom of spending more money overseas when the U.S. economy is shedding jobs and the federal deficit is ballooning.

Administration officials stressed that they had no plans to ask Congress for more than the $87 billion during the coming fiscal year, which ends just before next year’s presidential election.

They said they would pressure other countries to come up with the additional funds needed to restore security in Iraq and repair its ravaged infrastructure. An international donors conference is scheduled for Oct. 23-24 in Madrid to solicit money for reconstruction.

“The stability of Iraq, the stability of a different kind of Middle East, will serve well the interests of the entire international community,” national security advisor Condoleezza Rice said on CBS’ “Early Show.” “Therefore it is important that the entire international community be involved in this heroic effort.”

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But some independent reconstruction specialists questioned whether other nations would be willing to dig deep to cover the rising costs of reconstruction following a U.S.-led military intervention that many of the governments considered a mistake.

“From what we have been hearing about the donors conference, they’ll be lucky if they get $1 billion,” said Bathsheba Crocker, co-director of the Post-Conflict Reconstruction Project at the Center for Strategic and International Studies.

The White House gave few details of how the $87-billion appropriation for fiscal 2004 would be spent, beyond saying that $16 billion would go to cover work in Afghanistan and elsewhere and the rest to Iraq. Of the $51 billion allocated for military operations in Iraq, it provided a breakdown for just $1.2 billion, prompting calls from lawmakers for more candor.

“Their constantly updated demands for money without any specifics suggests either that there are no specifics to the administration’s plan or that they are so unpalatable that they don’t want them publicized,” said Sen. Jack Reed (D-R.I.), a member of the Senate Armed Services Committee.

Pentagon officials have said the military is spending $3.9 billion per month on 130,000 U.S. troops in Iraq, or about $47 billion a year.

In addition, the Pentagon is requesting $800 million to transport and support international troops in Iraq, $300 million to buy body armor and $140 million for more heavily armored Humvees for U.S. forces.

Of the $20 billion earmarked for nonmilitary reconstruction expenses in Iraq, $15 billion would be allocated for infrastructure improvements and $5 billion for security measures.

Senior administration officials, who briefed reporters on condition of anonymity, conceded that their initial projections of reconstruction costs proved too low and their estimates of Iraqi oil export revenue were too high.

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Iraq is struggling to restore an oil industry debilitated by three decades of intermittent war, international sanctions and government neglect and, more recently, by looting, sabotage and power outages.

Occupation authorities have lowered their estimates of next year’s oil revenue from about $15 billion to $12 billion. All of that will be needed to finance the day-to-day operations of Iraq’s government, officials said, leaving none for investment in the nation’s infrastructure.

Administration officials say they believe a total of $50 billion to $75 billion is needed to restore the oil industry, repair the dilapidated electrical grid and rebuild water systems, roads, bridges, ports, railroads, airports, schools, hospitals and other public facilities.

“Our estimate is based on what we think is necessary to put the Iraqi economy in the kind of shape where it can take off and generate substantial revenues without outside assistance,” one official said.

Bush is asking Congress to provide $20 billion of that amount. The remaining money, U.S. officials say, would have to come from other countries, international financial institutions such as the International Monetary Fund and World Bank, and future oil earnings.

Administration officials said the lack of public information about prewar conditions in Iraq made it impossible to foresee the full extent of the country’s reconstruction needs. The $87 billion the president requested in his televised address to the nation would come on top of $79 billion already appropriated for 2003, bringing total proposed spending to $166 billion over two years.

The $20 billion sought for reconstruction projects would be a substantial increase over the $2.5 billion provided by the 2003 spending bill for Iraq relief and reconstruction.

One official said it represented “what is necessary and appropriate” for the U.S. to contribute toward the highest-priority reconstruction projects.

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Although some portion of the $87 billion would be spent after 2004, the additional outlays would increase next year’s deficit from an estimated $475 billion to at least $525 billion, officials said.

That would increase the deficit from 4.2% of the nation’s gross domestic product to 4.7%, a level considered uncomfortably high but still below the records set during the Reagan administration in the 1980s.

Despite the swelling shortfall, officials said that they saw no need for additional tax increases or spending cuts beyond those that have already been proposed by the administration and that they would continue to press Congress to extend the Bush tax cuts that are scheduled to expire in future years.


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