[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]




 
   GLOBAL WAR ON TERRORISM [GWOT]: ACCURACY AND RELIABILITY OF COST 
                               ESTIMATES

=======================================================================

                                HEARING

                               before the

                   SUBCOMMITTEE ON NATIONAL SECURITY,
                  EMERGING THREATS, AND INTERNATIONAL
                               RELATIONS

                                 of the

                              COMMITTEE ON
                           GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                               __________

                             JULY 18, 2006

                               __________

                           Serial No. 109-232

                               __________

       Printed for the use of the Committee on Government Reform


  Available via the World Wide Web: http://www.gpoaccess.gov/congress/
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                     COMMITTEE ON GOVERNMENT REFORM

                     TOM DAVIS, Virginia, Chairman
CHRISTOPHER SHAYS, Connecticut       HENRY A. WAXMAN, California
DAN BURTON, Indiana                  TOM LANTOS, California
ILEANA ROS-LEHTINEN, Florida         MAJOR R. OWENS, New York
JOHN M. McHUGH, New York             EDOLPHUS TOWNS, New York
JOHN L. MICA, Florida                PAUL E. KANJORSKI, Pennsylvania
GIL GUTKNECHT, Minnesota             CAROLYN B. MALONEY, New York
MARK E. SOUDER, Indiana              ELIJAH E. CUMMINGS, Maryland
STEVEN C. LaTOURETTE, Ohio           DENNIS J. KUCINICH, Ohio
TODD RUSSELL PLATTS, Pennsylvania    DANNY K. DAVIS, Illinois
CHRIS CANNON, Utah                   WM. LACY CLAY, Missouri
JOHN J. DUNCAN, Jr., Tennessee       DIANE E. WATSON, California
CANDICE S. MILLER, Michigan          STEPHEN F. LYNCH, Massachusetts
MICHAEL R. TURNER, Ohio              CHRIS VAN HOLLEN, Maryland
DARRELL E. ISSA, California          LINDA T. SANCHEZ, California
JON C. PORTER, Nevada                C.A. DUTCH RUPPERSBERGER, Maryland
KENNY MARCHANT, Texas                BRIAN HIGGINS, New York
LYNN A. WESTMORELAND, Georgia        ELEANOR HOLMES NORTON, District of 
PATRICK T. McHENRY, North Carolina       Columbia
CHARLES W. DENT, Pennsylvania                    ------
VIRGINIA FOXX, North Carolina        BERNARD SANDERS, Vermont 
JEAN SCHMIDT, Ohio                       (Independent)
BRIAN P. BILBRAY, California

                      David Marin, Staff Director
                Lawrence Halloran, Deputy Staff Director
                       Teresa Austin, Chief Clerk
          Phil Barnett, Minority Chief of Staff/Chief Counsel

Subcommittee on National Security, Emerging Threats, and International 
                               Relations

                CHRISTOPHER SHAYS, Connecticut, Chairman
KENNY MARCHANT, Texas                DENNIS J. KUCINICH, Ohio
DAN BURTON, Indiana                  TOM LANTOS, California
ILEANA ROS-LEHTINEN, Florida         BERNARD SANDERS, Vermont
JOHN M. McHUGH, New York             CAROLYN B. MALONEY, New York
STEVEN C. LaTOURETTE, Ohio           CHRIS VAN HOLLEN, Maryland
TODD RUSSELL PLATTS, Pennsylvania    LINDA T. SANCHEZ, California
JOHN J. DUNCAN, Jr., Tennessee       C.A. DUTCH RUPPERSBERGER, Maryland
MICHAEL R. TURNER, Ohio              STEPHEN F. LYNCH, Massachusetts
JON C. PORTER, Nevada                BRIAN HIGGINS, New York
CHARLES W. DENT, Pennsylvania

                               Ex Officio

TOM DAVIS, Virginia                  HENRY A. WAXMAN, California
                  R. Nicholas Palarino, Staff Director
                        Robert A. Briggs, Clerk
             Andrew Su, Minority Professional Staff Member


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on July 18, 2006....................................     1
Statement of:
    Walker, David M., Comptroller General of the United States, 
      Government Accountability Office; Bradford R. Higgins, 
      Assistant Secretary, Chief Financial Officer, Bureau of 
      Resource Management, Department of State; John P. Roth, 
      Deputy Comptroller (Program/Budget), Office of the 
      Undersecretary of Defense (Comptroller), Department of 
      Defense; James R. Kunder, Assistant Administrator for Asia 
      and the Near East, U.S. Agency for International 
      Development [USAID]; Donald B. Marron, Acting Director, 
      Congressional Budget Office; and Amy F. Belasco, Specialist 
      in National Defense, Foreign Affairs, Defense and Trade 
      Division, Congressional Research Office....................    23
        Belasco, Amy F...........................................    73
        Higgins, Bradford R......................................    48
        Kunder, James R..........................................    60
        Marron, Donald B.........................................    65
        Roth, John P.............................................    54
        Walker, David M..........................................    23
Letters, statements, etc., submitted for the record by:
    Belasco, Amy F., Specialist in National Defense, Foreign 
      Affairs, Defense and Trade Division, Congressional Research 
      Office, prepared statement of..............................   115
    Higgins, Bradford R., Assistant Secretary, Chief Financial 
      Officer, Bureau of Resource Management, Department of 
      State, prepared statement of...............................    50
    Kucinich, Hon. Dennis J., a Representative in Congress from 
      the State of Ohio:
    NBER Working Paper Series....................................    74
    Prepared statement of........................................    15
    Kunder, James R., Assistant Administrator for Asia and the 
      Near East, U.S. Agency for International Development 
      [USAID], prepared statement of.............................    62
    Marron, Donald B., Acting Director, Congressional Budget 
      Office, prepared statement of..............................    67
    Roth, John P., Deputy Comptroller (Program/Budget), Office of 
      the Undersecretary of Defense (Comptroller), Department of 
      Defense, prepared statement of.............................    56
    Shays, Hon. Christopher, a Representative in Congress from 
      the State of Connecticut, prepared statement of............     5
    Walker, David M., Comptroller General of the United States, 
      Government Accountability Office, prepared statement of....    26
    Waxman, Hon. Henry A., a Representative in Congress from the 
      State of California, prepared statement of.................    10


   GLOBAL WAR ON TERRORISM [GWOT]: ACCURACY AND RELIABILITY OF COST 
                               ESTIMATES

                              ----------                              


                         TUESDAY, JULY 18, 2006

                  House of Representatives,
       Subcommittee on National Security, Emerging 
              Threats, and International Relations,
                            Committee on Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 2 p.m. in room 
2154, Rayburn House Office Building, Hon. Christopher Shays 
(chairman of the subcommittee) presiding.
    Present: Representatives Shays, Burton, Platts, Dent, 
Kucinich, Van Hollen, Ruppersberger, Higgins, and Waxman.
    Staff present: J. Vincent Chase, chief investigator; R. 
Nicholas Palarino, Ph.D., staff director; Robert A. Briggs, 
analyst; Robert Kelley, chief counsel; Raj Lalla, Jake Parker, 
and Jeff Hall, interns; Phil Schiliro, minority chief of staff; 
Karen Lightfoot, minority communications director/senior policy 
advisor; Jeff Paran, minority counsel; David Rapallo, minority 
chief investigative counsel; Andrew Su, minority professional 
staff member; Earley Green, minority chief clerk; and Jean 
Gosa, minority assistant clerk.
    Mr. Shays. I would like to call this hearing to order.
    Before we begin the hearing, I just would like to have a 
dialog with David Walker, the Comptroller General.
    Mr. Walker, you testified at a hearing on national security 
on April 25th, going back a few months ago. In the hearing Mr. 
Ruppersberger raised some very real and disturbing questions 
about contracts and the fact that we need to address this 
issue. At one point in the hearing I asked Mr. Ruppersberger to 
yield. I said, ``Would the gentleman suspend for just a 
second,`` and Mr. Ruppersberger said, ``Yes, I will.'' ``Mr. 
Shays--'' that is me--``I will say to you that you give us a 
list of some contractors--'' talking to you, Mr. Walker--``some 
areas within DOD that need a look, and we will have a hearing 
or a series of hearings on that, and the sooner you provide it 
to us the sooner we will do it.''
    Your response, Mr. Walker, was, ``I will give you a list.'' 
And then Mr. Shays: ``Let me just tell you something,'' and 
then I spoke, made some comments, I said, ``I want you, 
whatever it is, if it is Haliburton that is on the list, 
whatever it is I want you to give this subcommittee a list of 
things that have just irritated you, you are outraged by, or 
whatever, or suspect things. We will have a hearing, and I will 
pledge to this committee that we will call them in, whatever it 
is, and let's get the politics out of it to the extent we can 
and go for it.''
    Mr. Walker, your response was, ``I will do that.''
    I would like to know if you have yet provided the committee 
with a list.
    Mr. Walker. No, I haven't. You and I agreed, Mr. Chairman, 
that by Friday you will have the following: No. 1, you will 
have three to four examples of contracting problems. In 
addition to that, as part of that you will have example of 
contracts that are a problem. Furthermore, you will also have 
specific contractor and/or governmental challenges that 
contribute to those contracting problems, and you will have it 
by Friday.
    Mr. Shays. Thank you, sir. Would you also rate them in 
terms of which deserves to be looked at first, second, and 
third? In other words, I don't know how long your list will be, 
but if it is whatever we would like to just prioritize it, and 
we will follow your list, however you prioritize it.
    Mr. Walker. I will do that. And the thing I think that is 
important, Mr. Chairman, is, while we will give three to four 
specific examples, in some cases the Government shares part of 
the responsibility for these contracting problems. That is 
where I think there was a miscommunication. So I will provide 
that by Friday.
    Mr. Shays. Let me just say there is no miscommunication. I 
don't want to go down that road. I was very clear in wanting a 
list, and we have not yet gotten the list; is that correct? We 
have not yet gotten the list?
    Mr. Walker. That is correct.
    Mr. Shays. Yes. I am not trying to place any blame on you, 
Mr. Walker. I am just trying to say that I said the sooner you 
provide it the better and we will get to it. It is now July 
18th and this was a hearing in April. I want the record to 
clearly note that we are still waiting for this list.
    Mr. Walker. You will get it by Friday.
    Mr. Shays. Thank you, sir.
    A quorum being present, the hearing on Global War on 
Terrorism: Accuracy and Reliability of Cost Estimates will come 
to order.
    The global war on terrorism touches on all parts of the 
U.S. Government budget, covering homeland defense and military 
and diplomatic operations abroad. To combat terrorism, the 
United States has initiated three military operations: 
Operation Enduring Freedom, covering Afghanistan and other GWOT 
operations ranging from the Philippines to Djibouti, that began 
immediately after the September 11th attacks; Operation Noble 
Eagle, providing enhanced security for U.S. military bases and 
other homeland security initiatives; Operation Iraqi Freedom 
that began in the fall of 2002 with the buildup of troops for 
the March 2003, invasion of Iraq and continues with counter-
insurgency and stability operations.
    Determining the total amount of funding for the global war 
on terrorism is challenging because of the various ways in 
which funds are appropriated and the failure of the Department 
of Defense [DOD], to have auditable financial statements.
    According to the Government Accountability Office, Congress 
has appropriated approximately $430 billion to pay for military 
and diplomatic efforts related to the global war on terrorism 
during the year 2001 through fiscal year 2006. This $430 
billion was provided through regular appropriations as well as 
supplemental and bridge appropriations that fall outside the 
normal budget process. Most of this money was allocated for 
ongoing military and diplomatic operations overseas, especially 
in Iraq and Afghanistan.
    For military operations, the DOD has received $386 billion 
for the global war on terrorism. For reconstruction and 
stabilization programs in Iraq and Afghanistan, the Departments 
of State, Defense, and the U.S. Agency for International 
Development have received the remaining $44 billion.
    Today we ask how effective are the Departments of Defense 
and State processes for producing reliable, accurate, and 
timely cost estimates for the global war on terrorism. The GAO 
has found DOD reporting problems make it difficult to know 
precisely how much the war costs. The global war on terrorism 
cost reporting by DOD is based on military services reports. At 
two Army divisions the GAO reviewed Army posting procedures and 
found 35 percent of transactions improperly posted.
    Additionally, U.S. Government agencies, such as the 
Department of State, do not formally track all global war on 
terrorism costs because they do not distinguish whether certain 
expenses are solely attributable to the global war on 
terrorism. Furthermore, both Defense and State cannot 
accurately predict future commitments because of inaccurate 
reporting procedures and failure to distinguish global war on 
terrorism costs from other obligations.
    Beyond inaccuracies in reporting, global war on terrorism 
costs and future commitments, there is also controversy over 
the practice of seeking funding through supplemental spending 
measures. Many believe--and I am one of them--that since the 
global war on terrorism will be a continued investment over the 
long term, these costs should be part of the normal budget 
process.
    According to the Congressional Research Service [CRS], 
supplemental appropriations have been the most frequent means 
of financing the initial stages of military operations during 
war; however, past administrations have requested funding for 
ongoing operations in regular appropriations bills as soon as a 
projection of costs could be made. This should also be the case 
for the global war on terrorism.
    Why should we want accurate war costs? The answer is 
obvious: decisionmakers and the public they represent need to 
know how much this war costs and will cost. The U.S. commitment 
to the global war on terrorism will likely involve the 
continued investment of resources, requiring decisionmakers to 
require difficult tradeoffs as the Nation faces increasing 
fiscal challenges in the years ahead.
    Today we welcome our distinguished witnesses, including the 
U.S. Comptroller General; the Assistant Secretary and Chief 
Financial Officer for the Department of State, and the Deputy 
Comptroller for the Department of Defense; the Assistant 
Administrator for Asia and the Near East, U.S. Agency for 
international Development; the Acting Director for the 
Congressional Budget Office; and the Specialist in National 
Defense with the Congressional Research Service. We thank them 
all for appearing before us and we hope this hearing will 
educate the American public about the cost of the global war on 
terrorism.
    At this time the Chair would receive the very distinguished 
ranking Member of the Government Reform Committee, the full 
committee, Mr. WaxmAn.
    [The prepared statement of Hon. Christopher Shays follows:]

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    Mr. Waxman. Thank you, Mr. Chairman.
    The purpose of today's hearing is to assess the Bush 
administration's global war on terror. Based on the facts and 
the data we have before us, it is clear that the 
administration's approach is failing.
    There are two key problems with the administration's 
approach to countering global terrorism. The first is that 
costs are spiraling out of control with inadequate 
accountability. The second is that the administration's actions 
have actually incited terrorism.
    First, estimated spending has quadrupled over the past 5 
years, increasing from about $31 billion to more than $122 
billion this year. Obviously, huge costs are associated with 
Iraq, but massive waste, fraud, and abuse have undermined our 
efforts both to rebuild Iraq and to provide support to our 
troops.
    Three years ago, we first raised the question about these 
out-of-control costs. The excuse then was the fog of war. This 
isn't the fog of war, it is the fog of incompetence, the fog of 
indifference, the fog of arrogance. We have out-of-control 
costs, while at the same time our troops don't have the armor 
and equipment they need, and it is mind boggling. This has to 
stop. The incompetence, the fraud, waste, and abuse, the 
squandering of billions and billions of dollars, it has to 
stop. We owe accountability to America's families that are 
paying for this war.
    For example, the Bush administration handed out over $9 
billion in bricks of cash to Iraqi ministries with no monetary 
controls, and it now has no idea what happened to that money; 
$9 billion in cash simply vanished.
    One U.S. official who worked for the CPA, Frank Willis, 
described it as the ``Wild West.'' He said Iraq was a free-
fraud zone, with no accountability to prevent corruption.
    The administration also squandered money it should have 
spent on our troops. By now we all know that Haliburton had 
monopoly contracts to provide our troops with meals and housing 
and laundry services. When we talked to former Haliburton 
employees, they told us how the company intentionally inflated 
its prices. They said the informal company motto was: don't 
worry about the price, the contract is cost plus. But the 
administration has let them get away with it. GAO reported that 
the Army set no spending limits on Haliburton until 2004. 
According to the Government Accountability Office, cost 
constraint did not become a factor until almost a year into the 
operation.
    This is an incredible thing. The administration didn't 
control Haliburton's overcharges until a year after the 
invasion; meanwhile, our troops didn't have the body armor they 
needed, they lacked night vision goggles, and they were driving 
around in unarmored Humvees. As a result, we have now spent $50 
billion on Iraq reconstruction, including $30 billion from U.S. 
taxpayers, but we have virtually nothing to show for it. We 
spent $2 billion on Iraq's oil infrastructure, but production 
is well below pre-war levels. We invested $4 billion on 
electricity generation, but peak output has been at pre-war 
levels. The situation is the same for drinking water.
    As Mr. Walker, the head of the Government Accountability 
Office, testified just last week before this committee, the 
Bush administration has yet to prove that is has made a 
difference in the Iraqi people's quality of life.
    Well, the second problem is that the administration is 
actually inciting more terrorism. When he testified before the 
9/11 Commission, Richard Clarke, National Security Council 
official under President Bush, warned that Iraq had no link to 
Al Qaeda and that unilaterally invading Iraq without the 
support of our allies would increase terrorism and further 
endanger the United States. He also warned that Iraq would 
divert us from the war on terror. Well, the facts are that the 
Bush administration never put more than 20,000 troops in 
Afghanistan to hunt for Osama Bin Laden, but he has now over 
100,000 troops mired in Iraq. Why?
    The Bush administration spent only a few billion in 
Afghanistan, but it has spent literally hundreds of billions of 
dollars in Iraq. Bin Laden might be in Afghanistan. He might be 
in Pakistan. But I have seen no intelligence reports suggesting 
that he might be in Iraq.
    What are the results of this misguided approach? Global 
terror attacks are now at record levels. Worldwide terrorist 
attacks have increased steadily each year since 2001, growing 
from a few hundred per year to an astonishing 11,000 per year. 
Deaths and injuries from terrorist attacks have also 
skyrocketed, increasing from about 5,500 in 2001 to a record 
39,000 last year.
    Iraq is a quagmire of waste and incompetence. Osama Bin 
Laden remains at large, taunting the administration and 
rallying more recruits. North Korea now has several nuclear 
weapons, where before it had none. Hezbollah has become 
emboldened and is openly attacking Israel. Iran is actively 
seeking nuclear weapons and is essentially ignoring this 
administration's overtures.
    This is the result of 5 years of this administration's 
global war on terror. This is the result of 5 years of a rubber 
stamp Republican Congress. And these are the trend lines, the 
facts, and the data, and they show no signs of reversing.
    Thank you, Mr. Chairman.
    [The prepared statement of Hon. Henry A. Waxman follows:]

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    Mr. Shays. Mr. Kucinich, you have the floor.
    Mr. Kucinich. I want to thank the Chair for holding this 
hearing and thank him and Mr. Waxman. Mr. Waxman, thank you for 
your leadership on this.
    This is an urgent hearing, because this administration from 
day one has intentionally mislead, distorted, and flat out lied 
to the American people and the Congress about the real cost of 
the war in Iraq. It is imperative for Congress and the American 
people to know how much taxpayers' dollars are being spent in 
Iraq and Afghanistan. Furthermore, it is essential that we 
understand the key assumptions driving new requests for the 
war; namely, how long does the administration intend to stay in 
Iraq and Afghanistan? And what, if any, taxpayer money is being 
used to build permanent bases in Iraq?
    Currently the war in Iraq being conducted with no end in 
sight and, except for this committee, not much congressional 
oversight, costs our country $8 billion a month, $2 billion a 
week, and $267 million a day. The cost of the war today is 
estimated at $296 billion.
    Now, with this kind of money we could hire over 5 million 
public school teachers for a year, we could build over 2.5 
million additional housing units, would could have paid for 
tens of millions of young people to attend HeadStart programs, 
provided 4-year scholarships at public universities for over 10 
million American young people.
    When you factor in the latest request for war funding by 
the administration, the total cost of war in Iraq and 
Afghanistan is set to exceed half a trillion dollars in the 
next fiscal year. Through the end of 2006, Congress will have 
appropriated a total of $437 billion, with Iraq accounting for 
nearly 75 percent, 75 percent of these costs. Factoring in the 
costs for 2007, the cost will reach $600 billion soon.
    Not only do the costs of the war in Iraq account for the 
vast majority of this funding, but they continue to increase 
year after year. Annual appropriations for Iraq jumped 30 
percent between 2004 and 2006 and have now surpassed $100 
billion per year.
    Former U.S. Chief Economist and Nobel-laureate Joseph 
Stieglitz estimated the long-term cost of the war in Iraq as 
being between $1 and $2 trillion--trillion. In selling the Iraq 
war to the American people, the administration insisted the 
total cost would be between $50 and $60 billion, a tremendous 
amount of money, but when former White House economic advisor 
Lawrence Lindsay estimated a high limit of $100 billion to $200 
billion for the entire operation, the administration condemned 
the estimate as very, very high, and Mr. Lindsay was soon out 
of a job.
    Top administration officials have also proclaimed that much 
of the expense would be self financed through oil revenue and 
other Iraqi assets. Secretary Rumsfeld told the American 
people, ``I don't believe the United States has a 
responsibility for reconstruction, as Iraqi resources would be 
so readily available.'' The administration knowingly made these 
claims, and those claims were false, just like the false claims 
of WMDs.
    The administration's predictions were either wilfully 
ignorant of expert assessment or meant to hide the true cost 
from Congress and the American people. But the American people 
are confronted with the grim reality in their pocketbooks. 
Their children's debt burden is increasing, funds are 
continuing to be siphoned away from education, Social Security, 
health care, or the repair of devastation caused by Hurricane 
Katrina.
    But the costs do not end there. The human costs are in true 
sense immeasurable. Over 2,500 American soldiers have lost 
their lives. Estimates have been up to 48,000 wounded. Scores 
of Iraqi citizens, actually perhaps over 100,000 innocent Iraqi 
citizens killed, countless injured. While our coffers have been 
emptied to fund this war, far too many coffins have been 
filled.
    These mighty costs and how the American people were so 
ardently assured otherwise are not the end of the story. There 
are also significant problems in how this taxpayer money is 
being accounted for and the questions on how transparently it 
is being spent. This administration has yet to answer questions 
I raised about $9 billion in Iraqi reconstruction funds that 
have still not been accounted for. GAO continues to tell us it 
has significant concerns about the reality of the Department of 
Defense cost reporting, concluding that neither Congress nor 
the DOD can know how much the war on terror is costing or how 
appropriated funds are being spent.
    Problems with transparency go even further. In order for 
Congress to responsibly set funding levels, we need to talk 
about the assumptions behind the requests, whether they are 
about troop levels, plans for permanent bases in Iraq, troop 
rotation plans, or equipment replacement. Instead, these 
assumptions are not made at all transparent in the supplemental 
or emergency funding requests that make them up 91 percent of 
Pentagon funding for the global war on terror and the war in 
Iraq.
    This administration has stonewalled this Congress at every 
turn, continuing to refuse to turn over the most basic of 
information needed for us to provide even minimal oversight. We 
must not abandon, we will not abandon our constitutional 
responsibility to provide checks and balances to the executive 
branch, especially with an administration that has proven its 
lack of credibility time and again.
    It is great that the panelists are here. I thank them for 
their expertise on these issues and hope we can find a way to 
work to make the funding process more transparent and more 
accountable. The American people certainly deserve to know the 
full costs of prosecuting the war, how those costs are 
affecting their everyday lives today and in years to come.
    Mr. Chairman, once again I want to thank you for the 
leadership that you have shown on these issues in providing an 
open forum that otherwise wouldn't be provided in this House. 
Thank you.
    [The prepared statement of Hon. Dennis J. Kucinich 
follows:]

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[GRAPHIC] [TIFF OMITTED] T4659.011

    Mr. Shays. I thank the gentleman very much.
    Mr. Higgins, you have been very patient since you were the 
first here.
    Mr. Higgins of New York. Thank you, Mr. Chairman.
    I just wanted to make reference to the Government 
Accountability Office report which was the subject of a similar 
hearing in this committee last week. The report had stated that 
a number of the assumptions that the administration had made 
relative to the financing of the Iraqi war have changed. I 
would just state that assumptions don't change; facts change, 
and facts serve as a basis for new assumptions. The assumptions 
that the administration had made relative to the financing of 
this war were dead wrong and fundamentally flawed.
    The fact of the matter is the administration said that this 
war would be financed and its reconstruction by oil revenues 
and also from the international community. That obviously has 
not happened. And $1.5 billion, or $6 billion a month is the 
cost to this Government, and in many cases it is off budget, so 
it is for future generations. So on the actual accuracy of the 
number and this characterization of assumptions that have 
changed, I think we need to talk about facts that have changed 
that should form the basis for new assumptions if we are to be 
at all productive in this process.
    I would also say that the administration has an obligation 
to level with this Congress and the American people about the 
true cost, because not only does it affect the current 
Government and this Congress, but it affects future 
generations, as well.
    Then there is the deeper issue which has been touched upon 
in this committee about accountability in the outlay, the 
expenditure of these dollars, however much they are in reality. 
That is, if moneys are not being spent for their intended 
purpose to reconstruct Iraq, then where are they? Is there 
fraud and abuse? Is it pervasive? Is it isolated? These are the 
kinds of issues that we need to know, as well.
    With that I will yield back.
    Mr. Shays. I thank the gentleman.
    Mr. Van Hollen, you will close up here.
    Mr. Van Hollen. I thank you, Mr. Chairman, and thank you 
for holding another in a very important series of hearings. 
This hearing is entitled Global War on Terrorism: Accuracy and 
Reliability of Cost Estimates. I think that is a very important 
issue to be investigating. But I also think it is important 
that we sort of take the veil off the global war on terrorism 
and look at the different components, because within that 
overall umbrella you, of course, have military action against 
Afghanistan and also action against Iraq and other efforts in 
terrorism.
    This country, this Congress, in fact, the world community 
was united behind the United States in our decision to take 
action in Afghanistan. After all, the terrible attacks of 
September 11, 2001, were launched by Al Qaeda, Osama Bin Laden 
as its head, from Afghanistan while the Taliban government gave 
them refuge and safe haven.
    And the international community, as we know, passed a 
resolution at the United Nations unanimously condemning that 
and joining the United States in the fight on terrorism in 
Afghanistan, and NATO, for the first time in its history, 
invoked one of the articles of its charter saying an attack 
against one was an attack against all. That was a necessary 
military action against the people directly responsible for 
attacking this United States on September 11, 2001, and I think 
the American people were fully prepared to bear the costs of 
that war and continue to bear the costs, because we need to get 
it right in Afghanistan.
    We recall last time we were engaged in Afghanistan after 
the Soviet Union left, the United States decided it didn't have 
its interests engaged there any more, left, and what you had 
was a failed state that Al Qaeda took advantage of. We don't 
want that to happen again in Afghanistan. We need to finish the 
job, and the American people are united there.
    The situation in Iraq is very different. I think we need to 
approach it differently when we consider the cost, because that 
was a war of choice. We now know there were no weapons of mass 
destruction. We know there was no collaboration between Osama 
Bin Laden and Al Qaeda on the one hand and Saddam Hussein on 
the other.
    The President, in a speech he gave shortly before going to 
war before the American Enterprise Institute, predicted that by 
going to war in Iraq you would create a domino effect of 
democracy and stability in the Middle East region. We just have 
to look at the terrible events going on there today to know 
that the opposite has happened.
    So the war in Iraq was very different, and when we consider 
the costs we have to consider them differently.
    Finally, when it comes to accountability I think you see a 
very different standard applied to the two. Again, when it came 
to Afghanistan people understood the risks. They understood the 
challenge. They understood the threat, and they responded. In 
the case of Iraq we have a series of predictions by 
administration officials that were dead wrong, and yet the 
people who were wrong were either rewarded in some way or 
otherwise received positive reinforcement. The people who were 
wrong received positive and the people who were right were 
consistently sort of diminished.
    Since we are focusing on costs here I will close here, Mr. 
Chairman, but I do think it is important to go back when 
Lawrence Lindsay, who was the chief economic advisor, predicted 
that the cost of the war would be between $100 billion and $200 
billion, and Mitch Daniels, who was then the head of Office of 
Management and Budget and others in the administration said it 
is not going to be that high.
    Well, we now know that Lawrence Lindsay's predictions were, 
in fact, low--low not just for the global war on terror but low 
for Iraq. We are already far above that number, and we haven't 
begun to see the end of it. Yet, Paul Wolfowitz, when he was 
Deputy Secretary of Defense, also famously predicted that, when 
it came to reconstruction, Iraqi oil revenue would be able to 
pay the cost. We haven't even gotten back to pre-war levels 
there.
    So whether it was on weapons of mass destruction, whether 
it was on this claim, the manufactured link between Al Qaeda on 
the one hand and Saddam Hussein on the other, whether it was 
the cost of the war, and many other things, people just got it 
wrong. And when you continue to ignore people who get it wrong, 
when you ignore or reward failure, you get more failure. 
Unfortunately, that is what we have today in Iraq.
    Thank you, Mr. Chairman.
    Mr. Shays. The Chair would recognize Mr. Dent.
    Mr. Dent. Thank you, Mr. Chairman. I do want to thank you 
for holding this hearing. It is very important that we continue 
this oversight on the Iraq issue.
    With that, I would like to yield my time to the chairman 
for a statement.
    Mr. Shays. Thank you. I won't use much time, but to just 
say to my colleagues that I agree with their very real 
criticism about our assessment of the cost of this war. That is 
why we are having this hearing. I would disagree with my 
colleagues about their sense of the importance of the war in 
Iraq. I happen to believe it is a noble effort and I believe, 
in fact, that Iraq is the central front in the global war on 
terror, and I just want to be on record as saying that. But 
this is a hearing, and now I would introduce our colleagues 
here who are testifying.
    This is Global War on Terrorism: Accuracy and Reliability 
of Cost Estimates. We have before us the Honorable David M. 
Walker, Comptroller General of the United States, Government 
Accountability Office; we have Mr. Brad Higgins, Assistant 
Secretary, Chief Financial Officer, Department of State, and I 
would say a constituent, which places additional burdens on 
you, Mr. Higgins, and on me; Mr. John P. Roth, Deputy 
Comptroller, Office of the Undersecretary of Defense, 
Department of Defense; Mr. James R. Kunder, Assistant 
Administrator for Asia and the Near East, U.S. Agency for 
International Development, referred to as USAID; Mr. Donald M. 
Marron, Acting Director, Congressional Budget Office; and Ms. 
Amy Belasco, Specialist in National Defense, Foreign Affairs, 
Defense and Trade Division, Congressional Research Office. I 
think my statement gave you a larger title than your title 
actually is.
    It is nice to have you here and to welcome you. At this 
time, as you know, we do swear in our witnesses.
    [Witnesses sworn.]
    Mr. Shays. Note for the record our witnesses have responded 
in the affirmative.
    I thank you all for your patience. As you know, we like our 
witnesses to address us for 5 minutes, but this committee does 
not put the clock on the first 5 minutes. But, given that we 
have six panelists, it would be good to be as close to the 5-
minutes as you can, but we are not going to stop you if you go 
over.
    Mr. Walker, you have the floor.

   STATEMENTS OF DAVID M. WALKER, COMPTROLLER GENERAL OF THE 
 UNITED STATES, GOVERNMENT ACCOUNTABILITY OFFICE; BRADFORD R. 
 HIGGINS, ASSISTANT SECRETARY, CHIEF FINANCIAL OFFICER, BUREAU 
  OF RESOURCE MANAGEMENT, DEPARTMENT OF STATE; JOHN P. ROTH, 
      DEPUTY COMPTROLLER (PROGRAM/BUDGET), OFFICE OF THE 
UNDERSECRETARY OF DEFENSE (COMPTROLLER), DEPARTMENT OF DEFENSE; 
JAMES R. KUNDER, ASSISTANT ADMINISTRATOR FOR ASIA AND THE NEAR 
EAST, U.S. AGENCY FOR INTERNATIONAL DEVELOPMENT [USAID]; DONALD 
 B. MARRON, ACTING DIRECTOR, CONGRESSIONAL BUDGET OFFICE; AND 
    AMY F. BELASCO, SPECIALIST IN NATIONAL DEFENSE, FOREIGN 
  AFFAIRS, DEFENSE AND TRADE DIVISION, CONGRESSIONAL RESEARCH 
                             OFFICE

                  STATEMENT OF DAVID M. WALKER

    Mr. Walker. Chairman Shays, Ranking Member Kucinich, 
members of the subcommittee, I appreciate the opportunity to be 
with you this morning.
    I assume that my entire statement will be entered into the 
record and I now move to summarize it.
    As has been noted, the testimony today is dealing with 
funding, reported costs, and future commitments of the global 
war on terrorism, and our testimony is focused on the overseas 
costs, as per the request of the key subcommittee staff.
    At the outset, Mr. Chairman, as I said last week, I want to 
compliment you and this subcommittee for your continued 
commitment to oversight in this area. I think you are to be 
commended for that. It is very important, and you are one of 
the few continuing to do that.
    I testified last week, as has been mentioned, on the new 
national strategy for victory in Iraq. During that testimony I 
noted several positive attributes about the new strategy, 
including a clear purpose and scope and the fact that strategy 
identifies Iraq as ``a vital national interest and a central 
front in the war on terror.'' However, I also noted during that 
hearing that there were certain deficiencies, one of which was 
the absence of adequate current and future cost data for Iraq.
    While this hearing is focused on the financial costs, 
needless to say there is no way to compare the financial cost 
with the loss of human life.
    Since the beginning of the global war on terrorism in 2001, 
Congress has appropriated about $430 billion to the Department 
of Defense and other U.S. Government agencies for military, 
diplomatic, and other efforts in support of the global war on 
terrorism. This funding has been provided through regular 
appropriations, as well as supplemental appropriations, which 
are provided, as you know, outside the normal budget process.
    Since September 2001, DOD has received roughly $386 billion 
for global war on terrorism military operations, including 
funding for homeland defense through Operation Noble Eagle. 
This $386 billion includes bridge funding in fiscal years 2005 
and 2006 to continue global war on terrorism operations until 
supplemental appropriations could be enacted.
    In addition, U.S. Government agencies, including the 
Department of State, the USAID have received about $44 billion 
since 2001 to fund reconstruction and stabilization programs in 
Iraq and Afghanistan, and an additional $400 million for the 
commander's emergency response program in Iraq and Afghanistan.
    For fiscal year 2007, DOD has requested another $50 billion 
in bridge funding for military operations, and other U.S. 
Government agencies have requested $771 million for 
reconstruction and stabilization activities.
    Since 2001 U.S. Government agencies have reported hundreds 
of billions of dollars in cost associated with the global war 
on terrorism; however, as we have previously reported, we have 
certain concerns with regard to the DOD's reliability and cost 
reporting. I might note for the record some progress has been 
made since our last testimony, especially with regard to 
timeliness, but we still have concerns with regard to 
reliability of some of these cost estimates. I wish reliability 
was only a concern with regard to Iraq or the global war on 
terrorism. As you know, Mr. Chairman, it has been a concern 
throughout financial management throughout DOD for a number of 
years.
    DOD's reported costs for GWOT operations overseas have 
grown steadily in each fiscal year through fiscal year 2005 
from about $105 million in fiscal year 2001 to begin for the 
preparations for operations in Afghanistan to about $81.5 
billion in fiscal year 2005, and has been mentioned about $1.5 
billion a week with regard to Iraq. With this steady growth, it 
is important to assure that all commands seek to control costs 
to the extent possible, while providing appropriate support for 
our troops.
    With regard to the cost of military operations, about $23 
billion has been obligated for Iraq construction and 
stabilization, in addition to those military operations, as of 
2006. However, U.S. Government agencies other than DOD do not 
formally track all global war on terrorism costs.
    Let's face it, though: DOD is most of the money. This, 
along with DOD's cost reliability and reporting problems make 
it difficult but not impossible for the decisionmakers to 
reliably know how much the war is costing, to determine how 
appropriated funds are being spent, and to use historical data 
to predict future trends. Predicting future costs will be 
difficult but not impossible because they are dependent on 
several direct and indirect cost variables; however, they are 
likely to be hundreds of billions of dollars in the future. I 
know CBO will probably testify some on that.
    With regard to GWOT costs, they are likely to continue for 
the foreseeable future. No one knows for sure how long the 
global war on terrorism will last. Decisionmakers will have to 
carefully weigh priorities and make difficult choices, given 
increasing fiscal pressures. In assessing the tradeoffs, we 
would encourage the Department of Defense to consider moving 
other GWOT costs into the baseline budget, as it has done with 
Operation Noble Eagle.
    I know, Mr. Chairman, you have had some concerns with 
regard to continued supplemental funding. This is consistent 
with our prior suggestion that, once an operation reaches a 
known level of effort or reasonably reliable level of effort 
and the costs are more predictable, more funding should be 
built into the baseline budget. This has been the approach that 
has been used in other conflicts in the past, and we believe it 
should be considered for this conflict, as well.
    Thank you, Mr. Chairman. I would be happy to answer any 
questions you or the other Members may have.
    [The prepared statement of Mr. Walker follows:]

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    Mr. Shays. Thank you, Mr. Walker.
    Mr. Higgins.

                STATEMENT OF BRADFORD R. HIGGINS

    Mr. Higgins. Chairman Shays, Congressman Kucinich, and 
members of the subcommittee, thank you for asking me to appear 
before you to discuss the Department of State's budget process 
for funding the global war on terror.
    In my confirmation hearing this past January, I made a 
commitment to not only seek the funds sufficient to complete 
our mission, but also to make sure that these funds were spent 
for maximum effect, issues that I believe are central to this 
hearing.
    In my role as Assistant Secretary for Resource Management 
and the Chief Financial Officer, I am responsible for 
administering the development of the Department's internal 
planning, budgeting, and accounting functions. As you are 
aware, the department recently reorganized the administration 
of foreign assistance programs under the new Director of U.S. 
Foreign Assistance, Ambassador Randall Tobias. While I work 
closely with Ambassador Tobias to coordinate budgetary matters 
for both the foreign assistance and the State operating 
accounts, he has authority for both State and USAID foreign 
assistance funding and programs. As such, I am pleased to have 
joining me as a witness to help respond to questions on foreign 
assistance USAID's Assistant Administrator for Asia and Near 
East, Jim Kunder.
    I am here today to discuss the Department's resources 
associated with the global war on terror in Iraq and 
Afghanistan. In response to your specific questions, to date 
the Department has appropriated $34.6 billion for foreign 
assistance activities and State Department operations in Iraq 
and Afghanistan, representing approximately 8 percent of the 
total U.S. Government funding for these two countries.
    Breaking this down further, $26.5 billion has been provided 
for Iraq and $8.1 billion for Afghanistan.
    Of the $34.6 billion, $31.1 billion has been provided in 
supplemental appropriations, as well, of the $34.6 billion, 
$30.5 billion or 88 percent was for foreign assistance. The 
remaining $4.1 billion, or 12 percent, was appropriated for 
State and USAID operations and for construction of embassy and 
other facilities in Iraq and Afghanistan. Of the funding 
appropriated to date, $28.2 billion, greater than 80 percent, 
has been obligated.
    The Department separately tracks and regularly reports on 
the status of these supplemental funds, such as through the 
quarterly Section 2207 report on the Iraq relief and 
reconstruction fund that we all know as IRRF, as well as other 
periodic reports required by law. In order to develop reliable 
and accurate budget estimates, the Department works very 
closely with its embassies in both Iraq and Afghanistan to 
identify critical requirements and to better manage the very 
high but very necessary expenses that are crucial to winning 
the global war on terror.
    Costs that can be adequately projected and justified are 
included in the President's annual budget submission; however, 
because conditions are dynamic it is important that both our 
budget approach and our response remain flexible to provide 
additional resources outside the annual appropriations process, 
as warranted by changing circumstances.
    As conditions evolve, the Department will work diligently 
to integrate our resource requirements for both countries into 
the Department's annual budget submission. Costs that could not 
be reasonably funded through the use of existing Department 
funds have been provided through supplemental appropriations. 
This supplemental funding has been critical to the Department 
in supporting our operations and our activities, for which we 
are grateful to Congress for its support.
    We are all aware that the operating environment in Iraq and 
Afghanistan is both constantly changing and hostile. These 
timely supplemental appropriations, which are much closer to 
when the funds are actually used, have allowed the Department 
to better project funding requirements for the extraordinary 
security and evolving assistance required to further our 
diplomatic efforts.
    Thank you for the opportunity to address the subcommittee. 
I look forward to addressing your specific questions.
    [The prepared statement of Mr. Higgins follows:]

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    Mr. Shays. Thank you, Mr. Higgins. I am sure you will get a 
number.
    Mr. Roth.

                   STATEMENT OF JOHN P. ROTH

    Mr. Roth. Thank you, Mr. Chairman. Chairman Shays, Mr. 
Kucinich, members of the subcommittee, thank you for the 
opportunity to speak with you about the current process for 
funding the global war on terror.
    I have been in the Department of Defense for 32 years, 22 
of these years with the Office of the Defense Comptroller. My 
principal role is to build a budget, whether it is the baseline 
budget for the Department of Defense or a supplemental request. 
Drawing on this experience, I am happy to address the important 
questions raised in your letter of invitation.
    To date, the Congress has appropriated approximately $382 
billion for the Defense Department and the intelligence 
community for the global war on terror. As of April 2006, 
approximately $323 billion of this amount has been spent or 
obligated. The question of whether supplemental appropriations 
as opposed to baseline budgeting is the best vehicle for 
funding the ongoing cost of military operations in the time of 
war is, in fact, a fair one.
    In 2001 the administration and congressional leaders worked 
together to provide supplemental appropriations as the most 
appropriate mechanism to fund the global war on terror. For our 
part, the Department can do it either way. However, because 
supplementals are prepared much closer to the time the funds 
will actually be used, they are a more accurate reflection of 
conditions on the ground. They are a more accurate prediction 
of what the cost of the war will actually be and, importantly, 
a process that allows quicker access to the funds at the time 
when they are needed most, and to make an important point, 
because, regardless of whether the war is funded through the 
supplemental appropriations or baseline budgeting, we must not 
lose sight of the fact that our first priority must be to give 
the men and women who put their lives on the line every day to 
protect our freedom what they need and when they need it.
    The same is true of the bridge funding provided by Congress 
in recent years. Like the supplementals, they ensure that the 
U.S. forces have the support they need when they need it 
without the services having to resort to sub-optimal actions to 
cash-flow critical military operations.
    As for the accuracy and reliability of information on the 
cost of war, the Department diligently and meticulously reports 
the cost of war to both Congress and to the Government 
Accountability Office. Congress has mandated nine distinct 
reports on the cost of the global war on terrorism. These 
include one biannual and seven quarterly reports to Congress, 
as well as the monthly report we provide to the GAO.
    Approximately 10 briefings on the cost of war are generally 
given to Congress in the oversight committees every year. 
Indeed, as part of the process of defending the Defense budget, 
over 31,000 pages of budget justification and reports are 
provided to Congress every year; 475 different reports were 
provided in fiscal year 2006, alone.
    So we take our role as steward of the taxpayers' money very 
seriously and we work to ensure that all cost of war 
information, both in the baseline budget and the supplemental, 
is as accurate and reliable as possible. Indeed, this 
seriousness has been borne out not only with respect to the 
cost of war, but by the substantial progress the Department has 
made in business transformation and financial management.
    Two consecutive reports by the Government Accountability 
Office have cited the Department's progress in business systems 
modernization efforts. The Office of Management and Budget 
recently raised the Department's progress rating for financial 
management from yellow to green, indicating that improvement 
efforts are proceeding according to plan.
    So with that, Mr. Chairman, I conclude my formal remarks 
and I look forward to your questions. Again, I thank the 
committee for the opportunity to discuss these issues, and I am 
happy to respond to your concerns.
    [The prepared statement of Mr. Roth follows:]

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    Mr. Shays. Thank you.
    Mr. Kunder.

                  STATEMENT OF JAMES R. KUNDER

    Mr. Kunder. Mr. Chairman, Mr. Kucinich, members of the 
subcommittee, thank you for the opportunity to be here today.
    First, let me just answer directly the question asked by 
the committee on numbers. Thus far, the U.S. Agency for 
International Development in Iraq and Afghanistan has received 
$9 billion for reconstruction assistance. In response to the 
direct question of what percentage has been obligated, in 
excess of 97 percent of that money has been obligated to this 
point.
    The issue of supplemental funding, we try to maximize the 
amount of money put into the regular budget request, but also, 
as Mr. Roth just testified, there are times when additional 
extraordinary expenses arise, especially in highly changeable 
circumstances like Iraq and Afghanistan. For fiscal year 2007, 
we put the entire program budget at USAID in to the regular 
appropriations request.
    The only amount that we added in the supplemental were 
those security costs for static and mobile security because we 
were unable to estimate those going on. But increasingly we are 
trying to put the bulk of the money into the regular 
appropriations request, but in these kind of highly variable 
environments it is virtually impossible to project the year 
out, as circumstances change both on the program and security 
side.
    I would like to point out that Ambassador Tobias, the new 
Director of Foreign Assistance and AID Administrator is 
attempting on the State and AID side, as Brad Higgins said 
earlier, to come up with a new accounting system that will 
allow us additional ability to track global war on terrorism, 
anti-terrorism efforts. This program is still in development, 
as you can imagine. It requires a great deal of budgetary 
consultation.
    But certainly, as that system is developed further, we look 
forward to sharing the ideas with the Congress and presenting 
those ideas to you, but it explicitly does attempt to break out 
from each of the existing funding categories development 
assistance, economic support fund, and so forth, that 
proportion of the money on the State and AID side that is going 
into the global war on terror.
    In conclusion, I would just like to add one other comment. 
While naturally the focus of this subcommittee's questions 
today is on Iraq and Afghanistan, I think one of the 
complicating factors in examining the true cost of the global 
war on terror is certainly a number of programs supported by 
the Congress and implemented by USAID around the world we think 
are consistent with the global war on terror.
    But these are programs, for example, to reform the 
education system in Indonesia or to look at broadcasting 
systems in Bangladesh or Egypt, or a number of capacity 
building programs in Mindenau to make government more 
responsive. We think those are also undermining terrorism and 
are part of the global war on terror but, of course, are much 
more difficult to account for because they also have a 
developmental and reconstruction impact.
    Those are the points I would make at this point. I look 
forward to answering any questions the committee may have.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Kunder follows:]

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    Mr. Shays. Thank you.
    Dr. Marron.

                 STATEMENT OF DONALD B. MARRON

    Dr. Marron. Thank you, Mr. Chairman, Congressman Kucinich, 
members of the subcommittee. It is a pleasure to be here today 
to talk about the accuracy and reliability of cost estimates 
for the war on terrorism.
    CBO estimates that since September 2001 the Congress has 
appropriated $432 billion for military operations and other 
activities related to the war on terrorism. About $393 billion 
was allocated to the Department of Defense and about $40 
billion was appropriated for diplomatic operations and foreign 
aid. CBO estimates that of these amounts $290 billion has been 
appropriated for operations in Iraq.
    You will notice that each of the witnesses today brings 
with them their own different sets of numbers and the estimates 
for these various measures will differ somewhat, and I think 
that illustrates the fact that there is a certain degree of 
judgment that has to go in when estimating this, that the data 
are not speaking uniquely with a single voice, and that, 
depending on the judgments the estimators make, we sometimes 
get different numbers.
    CBO has frequently been asked to estimate the future costs 
of operations in Iraq and the war on terrorism. Last week, for 
example, CBO released a report requested by Congressman Spratt, 
the ranking member of the House Budget Committee, in which we 
estimated the cost of two Iraq scenarios that he specified. 
Those two scenarios would imply that additional cost for Iraq 
would be somewhere in the neighborhood of $200 billion to $400 
billion over the next 10 years.
    Now, estimating future war cost is always difficult because 
of uncertainty about the pace and scale of future military 
operations. However, better estimates could be provided to the 
Congress if more information was available. Let me just give a 
few examples.
    First, the DOD's supplemental budget requests for the war 
on terrorism have typically been accompanied by much less 
justification than its regular requests. Such limited 
information is not always sufficient to understand how DOD 
develops its budget requests.
    Second, the DOD's monthly obligation reports on the war on 
terrorism also provide only limited information. These reports, 
for example, provide little guidance on how some of the funds 
were obligated. For example, in fiscal year 2005 a significant 
fraction of the obligations were reported in various categories 
that were listed as other, which didn't provide sort of enough 
detail for us to really understand what was driving those and 
to understand in particular whether those costs were likely to 
be repeated in the future.
    The reports also do not include obligations for classified 
activities, which CBO estimates have been at least $25 billion 
to date.
    Finally, obligation reports would be more useful if they 
contained some information on the pace of operations, such as 
troop levels, flying hours, vehicle miles in a given month. 
Such information would be very useful in analyzing monthly cost 
variations.
    Third, funds for Iraq and the war on terrorism were 
reported in the same appropriation accounts that fund the 
regular non-war budget. This makes it difficult to sort out how 
much is actually spent, how much actual outlays are on war-
related activities and distinguishing that from the non-war.
    Fourth, CBO frequently has difficulty obtaining the monthly 
reports on war obligations and other data. For example, the 
Agency often receives that information months after the data 
are officially approved for release. This could be addressed by 
establishing a standard, more comprehensive distribution list 
for the war obligation reports and other data. It would also be 
helpful to have access to the contingency operations support 
tool, the cost model that DOD uses to formulate its 
supplemental requests.
    A final, broader issue involves the timing of budget 
requests. Since fiscal year 2001, funding for activities in 
Iraq and the war on terrorism has been provided through a 
combination of partial year bridge appropriations enacted near 
the beginning of the fiscal year and mid-year supplemental 
appropriations. Some have suggested that, to better assist in 
planning future Defense budgets, DOD should include the entire 
fiscal year's cost of activities in Iraq and the war on 
terrorism in its regular budget request.
    That approach would have both positive and negative 
consequences. On the positive side, including war costs in the 
regular request would give the Congress more time to debate and 
modify the budget request for those activities and to balance 
those costs against other budget priorities. Also, fully 
funding those operations at the beginning of the fiscal year 
would help DOD avoid any potential funding issues that might 
arise from delayed enactment of mid-year supplemental 
appropriations.
    On the negative side, budgeting for activities in Iraq and 
the war on terrorism in combination with the regular budget 
request could result in less clarity about which funds go to 
war-related activities and which were intended strictly for 
peacetime activities. In addition, submitting the request with 
the regular budget could lead to less accurate cost 
projections, given the long lead times involved.
    Thank you. I would be happy to answer any questions.
    [The prepared statement of Dr. Marron follows:]

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    Mr. Shays. Thank you, Dr. Marron.
    Ms. Belasco.

                  STATEMENT OF AMY F. BELASCO

    Ms. Belasco. I would like to submit my full statement for 
the record.
    Mr. Shays. It will be submitted for the record. You know 
what? If you would allow me, just so I don't forget, let me 
just take care of that business. I ask unanimous consent that 
all members of the subcommittee be permitted to place an 
opening statement in the record and that the record remain open 
for 3 days for that purpose. Without objection, so ordered.
    I ask further unanimous consent that all witnesses be 
permitted to include their written statements for the record. 
Without objection, so ordered.
    Mr. Kucinich. Mr. Chairman, I ask unanimous consent to put 
the working papers in the record, the Stieglitz Report.
    Mr. Shays. It is Joseph----
    Mr. Kucinich. Stieglitz, the Nobel-laureate.
    Mr. Shays [continuing]. Stieglitz we will put in the 
record, without objection. It is dated February 2006.
    [The information referred to follows:]

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    Mr. Shays. You have the floor, ma'am.
    Ms. Belasco. Chairman Shays, Ranking Member Kucinich, and 
distinguished members of the subcommittee, my name is Amy 
Belasco and I am a Specialist in National Defense at the 
Congressional Research Office.
    This hearing addresses an important oversight issue. How 
can Congress get accurate and reliable projections of the cost 
of the global war on terrorism? Projecting future costs depends 
on having accurate records of past costs and on understanding 
how those costs may change as troop levels or the pace of 
operations change.
    I would like to make several points about this issue. The 
Department of Defense has not shared with Congress estimates of 
how all the funds appropriated for each of the three operations 
that make up the global war on terrorism--and that is Operation 
Iraqi Freedom, Operation Enduring Freedom that funds 
Afghanistan and other counter-terrorism operations, and 
Operation Noble Eagle for enhanced base security. DOD has not 
provided individual estimates for these operations of how 
moneys have been and are likely to be spent.
    CRS was unable to resolve some discrepancies in DOD's war 
cost information. DOD has also not identified for Congress the 
planning assumptions that underlie its requests, for example, 
the number of troops deployed. That also drives future costs. 
DOD also does not record the outlays associated with war 
spending that are necessary to verify war expenses.
    Another point is that war funding for procurement may make 
it possible to reduce DOD's regular budget because equipment is 
being replaced sooner than planned.
    Finally, to minimize problems in financing war operations, 
options could include funding most operational costs up front 
or submitting future war requests in February with the regular 
budget.
    While it is sometimes difficult to project these costs 
because of the uncertainties of war, it is not impossible, 
particularly in the 5th year of operations.
    In response to numerous congressional inquiries and in the 
absence of administration figures, CRS estimated the cost of 
military operations, reconstruction, foreign aid, embassy 
operations, and veterans health care since the September 11th 
attacks for the three operations. Of the $437 billion 
appropriated thus far through fiscal year 2006, CRS estimates 
that $319 billion or 73 percent is for Iraq, $88 billion or 20 
percent is for Afghanistan and other counter-terrorism 
operations, and $26 billion or 6 percent is for enhanced 
security, and about $4 billion CRS could not allocate.
    In addition to this $437 billion, the administration's 
fiscal year 2007 budget includes a $50 billion placeholder 
figure to cover the first part of war costs, although a formal 
request has not been submitted. With that $50 billion, the 
total for the global war on terror would reach $487 billion, 
and the total for all of fiscal year 2007 is likely to exceed 
$500 billion based on this year's costs.
    Of the $437 billion appropriated through fiscal year 2006, 
CRS estimates that about 90 percent, or $397 billion, is for 
the Department of Defense, with the remainder for foreign aid, 
diplomatic operations, and VA medical costs.
    As of March 2006, CRS estimates that about $302 billion of 
these DOD funds are obligated and $95 billion is unobligated. 
Of those unobligated funds, CRS estimates they would be split 
$71 billion for Iraq, $12 billion for Operation Enduring 
Freedom, and $2 billion for enhanced security.
    CRS found both strengths and weaknesses in DOD's ability to 
estimate and track war costs. DOD uses a fairly sophisticated 
model to estimate the specific expenses for each military 
operation that are in addition to its normal operating costs, 
and those costs reflect assumptions about troop levels, the 
pace of operations, and support costs. The Defense Finance 
Accounting Service [DFAS], then tracks these expenses by 
recording when contracts are signed and people are due to be 
paid, but does not capture whether funds are ultimately spent, 
i.e., whether they result in outlays.
    Nevertheless, CRS found several discrepancies and gaps in 
DOD's war cost information, including cases where obligations 
appear to exceed available budget authority and cases where 
budget authority has not been spent. DFAS reports also do not 
capture about $7 billion in budget authority that CRS and I 
believe also GAO believe was appropriated for war, and the DFAS 
reports also do not track the cost of intelligence that is 
managed outside of the Defense Department and the cost to equip 
new Army modular units in fiscal year 2005 and 2006 that was 
included in supplementals.
    For Congress to evaluate future war estimates, it would be 
useful for DOD to fill in two significant gaps in war cost 
information: tracking outlays and identifying troop levels. 
First, DOD cannot currently identify whether the obligations 
reported by the Defense Finance Accounting Service are 
ultimately spent or how much of those are spent and where they 
are spent--in other words, the outlays. This is the cost DOD's 
war funds and baseline regular appropriations are mixed in the 
same accounts and war funds cannot be separately identified. 
Without outlay data, DOD cannot verify expenses, nor can 
Congress identify how war expenses affect the budget deficit.
    Second, in its testimony DOD generally identifies only the 
number of troops in country at particular times, which run 
roughly 140,000 in Iraq and about 20,000 in Afghanistan, or 
about 160,000 altogether. This number does not include all 
deployed military personnel supporting these operations in 
neighboring countries or those who are conducting other 
counter-terrorism operations such as those in Djibouti or the 
Philippines. Future costs depend on the total number of 
deployed personnel, rather than those in country.
    CRS found several estimates of the total number of deployed 
troops in 2005 for Operation Enduring Freedom and Operation 
Iraqi Freedom, which ranged from about 230,000 to 300,000.
    Conducting oversight of how costs change as troop levels 
change depends on having accurate data on past, current, and 
future troop levels.
    Distinguishing war and peace costs is another important 
issue. DOD now receives substantial amounts of funds for war-
related procurement. Some of these moneys are for unanticipated 
new requirements such as additional armored Humvees. Other 
funds, however, are to equip new Army modular units, to replace 
war-worn equipment, which is known as reset, and to upgrade 
equipment. Since DOD's plans already call for transformation or 
modernization of its forces, this war-related procurement may 
also meet these needs. For this reason, it may be that DOD's 
regular budget could be reduced because equipment is 
essentially being swapped out sooner than planned.
    There is a couple of key things that are needed to build 
war funding requests and to provide oversight over those 
requests. Options for improving oversight could include 
directing DOD to estimate by operation, by category, and by 
year how all appropriated funds are or will be spent. DOD could 
also identify its planning assumptions such as troop levels 
that drive costs in previous and new requests. DOD could also 
estimate overall and annual reset and upgrade plans and 
potential offsets within its regular budget.
    Finally, Congress could choose to direct DOD to set up 
separate appropriation accounts for each operation so that war 
appropriations, obligations, and outlays can be accurately 
identified.
    Finally, the subcommittee asked me to look at what the 
effect is of supplemental requests on war funds.
    Mr. Shays. If you could kind of bring it to a conclusion, 
how much more do you have there?
    Ms. Belasco. I am sorry?
    Mr. Shays. How much more in your testimony?
    Ms. Belasco. One paragraph.
    Mr. Shays. OK.
    Ms. Belasco. Since September 11th, the administration has 
submitted supplemental requests for war funds well after the 
fiscal year is underway. Although this allows DOD to estimate 
costs based on later data, it reduces visibility on annual 
costs. If war costs were submitted with the regular budget, DOD 
could then submit adjustments later.
    To ensure that the Army and Marine Corps were not faced 
with difficulties in meeting costs midway through the year, 
Congress could consider options such as appropriating three-
quarters of the day to day operating funds at the beginning of 
the fiscal year and a minimal amount of procurement funds, or 
about $45 billion, remains unobligated.
    Thank you for inviting me.
    [The prepared statement of Ms. Belasco follows:]

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    Mr. Shays. Thank you.
    I am going to call on Mr. Kucinich, but I just would like 
to open with a question that won't be answered yet, but I would 
like to know where all of you agree and where you disagree in 
terms of what specific recommendations you would make, not just 
options, would make for improving our ability to understand 
what we are spending on each war--Iraq, Afghanistan, the 
general war on terrorism, and so on. So just as a bit of a 
heads-up.
    Mr. Kucinich, you have the floor. We are going to do 10-
minute questioning. With that I would give my colleague 10 
minutes.
    Mr. Kucinich. I thank the gentleman.
    To Mr. Roth, how many people at the Pentagon keep track of 
the actual cost of the war?
    Mr. Roth. Congressman Kucinich, I don't have a specific 
number in terms of number of people. Clearly, the costs of war 
are covered by various levels and various echelons, beginning 
in the theater, itself. Every unit that deploys to the theater 
has with it a financial management team that goes that includes 
budget folks, accounting folks, and auditors, as well. We have 
standing audit teams that go to Iraq and Afghanistan to monitor 
costs. Then up and down the chain of command, as well, the 
various commands that are in charge of those troops also 
monitor costs and track costs and provide data on the costs of 
war, all the way up to and including military departments and 
the Office of the Secretary of Defense.
    Mr. Kucinich. Do you have dozens or hundreds or how many?
    Mr. Roth. I would say it is at least hundreds.
    Mr. Kucinich. Hundreds; 200; 300; 400?
    Mr. Roth. Sir, it would be a guess to put any----
    Mr. Kucinich. See, this is where the problem begins, Mr. 
Chairman. This GAO report says ``We have significant concerns 
about the overall reliability of Department of Defense's 
reported cost data.'' If this gentleman who worked there for 32 
years, testifying on behalf of the people who are filing the 
figures, he doesn't even happen to know how many people are 
working on this. Then the GAO reports that they don't know 
about the reliability of the cost data.
    There seems to be some problem here. This gentleman told 
this subcommittee--you cited chapter and verse of your absolute 
assurance of all the information you have given this Congress, 
and when you did that you created a picture of candor of the 
Department of Defense. I am wondering how that squares with the 
GAO report that says neither the Department of Defense nor 
Congress can reliably know how much the war is costing. Can you 
tell us how much the war is costing? How much is the war in 
Iraq, how much has it cost and how much will it cost the 
American people?
    Mr. Roth. The cost of Iraq through April has been $215 
billion for the cost of DOD military operations. The cost of 
the other operations, as I testified in my statement, the cost 
of the obligations through April were $323 billion. So Iraq was 
$215 billion and the other operations are $108 billion. These 
costs were reported to us on a monthly basis. It is something 
we call the Cost of War Report that is processed through our 
accounting system and provided up the chain of command, 
beginning with the many hundreds of people--again, all I said 
was I couldn't put a specific point total to the number of 
people, but there are hundreds of people that input the data 
all the way from the theater to the buying commands to support 
commands and the various other echelons of support.
    We make every effort to make these reports as accurate as 
we possibly can. In our view they are, in fact--we diligently 
work to make them accurate and we work diligently to make them 
timely. Like any other process, we work to improve these 
reports. We look at----
    Mr. Kucinich. Are these estimates or actual costs?
    Mr. Roth. These are actual costs.
    Mr. Kucinich. Now, Mr. Walker, you have given this 
subcommittee a report that raises questions about the 
reliability of the Department of Defense's reported cost, and 
you say they include longstanding deficiencies in their 
financial management and the use of estimate instead of actual 
cost and the lack of supporting documentation. Now, how does 
that square with what Mr. Roth just said?
    Mr. Walker. Well, first, Mr. Kucinich, I think it is 
important to put this in context, and that is financial 
management is a high-risk area at the Department of Defense, 
has been for years, and it is likely to remain to be for 
several more years.
    Mr. Kucinich. Why?
    Mr. Walker. There are several challenges.
    Mr. Kucinich. Why?
    Mr. Walker. Well, several reasons. No. 1, they have 
thousands of legacy, non-integrated information systems that 
are capturing financial and other management information system 
at a very decentralized level involving multiple services and 
other units, and they have, in many cases, major keypunch 
errors, inconsistencies. This is a problem that exists well 
beyond Iraq. This is a fundamental problem with regard to Iraq.
    With regard to global war on terrorism, part of it is what 
is the definition of an incremental cost associated with global 
war on terrorism, how consistently is that done. It is my 
understanding that some of the costs that are being reported 
are estimated costs, not actual costs.
    Mr. Kucinich. What is the difference between what you call 
an actual cost and what Mr. Roth calls an actual cost?
    Mr. Walker. Well, I will give you one example. Actual 
costs, trace it back to the payroll. We know exactly who got 
paid what and we know whether and to what extent it was an 
incremental cost associated with Iraq. My understanding is they 
can't do that. That is the difference between estimated and 
actual.
    Mr. Shays. Could the gentleman yield just for a 
definitional term? We will give him time.
    Mr. Kucinich. Of course. Sure.
    Mr. Shays. When we say incremental cost, we are saying we 
have added the war to the budget of the Department of Defense. 
In other words, they are already paid a certain amount. How 
much is a legitimate incremental difference that is designated 
or earmarked for Iraq. Is that what you mean by incremental?
    Mr. Walker. Correct. For example, Mr. Chairman, we had to 
mobilize a number of National Guard and Reserve troops. That is 
an incremental cost because of this operation. There are 
hazardous duty pay and certain types of other pays they get 
paid because somebody is in Iraq or because they are in 
Afghanistan that they wouldn't otherwise receive other than 
those operations, so they are intended to be a cost that we 
would not have incurred but for the operation.
    Mr. Kucinich. Now, Mr. Walker, you made it a point to say 
that you created a pretty strong case that there aren't any 
cost controls. Given the fact that the cost controls are a 
problem, how much could the war in Iraq end up costing the 
taxpayers? Do you have any idea at all?
    Mr. Walker. We don't have adequate cost controls, and, in 
addition to that, we are debt financing all of this, so the 
real cost is actually more than whatever the short-term cost.
    Mr. Kucinich. Well, let's go into that for a minute. When 
you say we are debt financing it, you mean we are borrowing 
money from other places to pay for the war?
    Mr. Walker. Well, no, we are borrowing money in many cases 
from foreigners to pay for the war.
    Mr. Kucinich. That is what I mean. Now I will repeat the 
question. Since we are borrowing money from foreign countries 
to pay for this war, how much money has the United States 
borrowed from foreign countries to pay for this war?
    Mr. Walker. I wouldn't be able to tell you off the top. I 
will tell you that over 90 percent of our recent debt offerings 
have been purchased by foreign players. In fact----
    Mr. Kucinich. Would the GAO be able to provide for this 
subcommittee----
    Mr. Walker. I will be able to try to provide you what we 
can, Mr. Kucinich.
    Mr. Kucinich. I think that would be helpful so we know how 
much money we are borrowing from foreign countries to pay for 
this war.
    Mr. Walker. Again, that is overall, not necessarily for 
Iraq. It is with regard to total Government financing, rather 
than to separate it. It would be impossible to separate it out 
for Iraq.
    Mr. Kucinich. Right. I understand. However, since you made 
the case that we don't have reliable figures, that they are not 
doing very well at controlling costs, that there is 
longstanding deficiencies in their financial management system, 
that they are using estimates instead of actual cost, that 
there is a lack of supporting documentation, Mr. Walker, you 
have basically made a case for a ballooning cost of the war, 
and since they are borrowing money from other countries to pay 
for the war you have made the case that our borrowing from 
other countries is going to increase commensurately. Is that 
correct?
    Mr. Walker. There is a difference between our revenues and 
our expenditures, and to the extent that difference exists and 
to the extent that we have to go to others to finance it, then 
we are going to have to pay interest on that. There is no doubt 
about it. In fact, my understanding is that CBO has done some 
estimates showing with and without borrowing cost, if you will, 
not necessarily for this but for----
    Mr. Kucinich. You mentioned, Mr. Walker, that you keep 
track of costs, payroll for example. Now, what about with 
respect to contractors? Isn't it true that, with respect to 
contractors, that you brought a report to this subcommittee 
that indicated that $9 billion, essentially about $9 billion, 
could not be properly accounted for?
    Mr. Walker. My understanding, Mr. Kucinich, and I want to 
double check this for the record, is that $9 billion may have 
been Iraqi money, not U.S. money. I want to double check that 
for the record.
    Mr. Kucinich. Is it OK to lose track of Iraqi money?
    Mr. Walker. It is not OK to lose track of any money, but 
there is a difference as to our audit authority.
    Mr. Kucinich. But it is a question of it is Iraqi money, 
but who was handling that money? Who was responsible for 
handling that money, Mr. Walker?
    Mr. Walker. I would like to provide something for the 
record. My understanding, it was a shared responsibility 
between the United States and the Iraqis, but----
    Mr. Kucinich. So half of the problem of losing track of $9 
billion, at least half, had to do with your responsibilities, 
Mr. Roth? Who was responsible for that?
    Mr. Roth. I would have to answer for the record, sir. I am 
not aware of who was responsible for that $9 billion. I do not 
think it was the Department of Defense.
    Mr. Kucinich. Well, we know it is a provisional government, 
but we created that provisional government. It was under the 
direction of the United States at the time. Now, Mr. Walker, 
you know, you pointed that out in a report earlier.
    I just want to say that I respect Mr. Roth's 32 years of 
service to this country, and I can't ask you to pay for the 
sins of a number of administrations, but one thing is for sure, 
though: we don't know what this war is going to cost. The 
Department of Defense has a notorious lack of accountability 
when it comes to taxpayers' funds. Now we are borrowing money. 
This is insane. We are borrowing money for foreign countries to 
pay for a war that we shouldn't have gotten into in the first 
place. I mean, unbelievable.
    Mr. Shays. Mr. Burton, would you like time? You have the 
time?
    Mr. Burton. Mr. Walker, are there any other agencies of the 
Government that have trouble with their accounting systems?
    Mr. Walker. There are other agencies that have financial 
management problems, but none on the scale of the Department of 
Defense. It is not close.
    Mr. Burton. I understand, but we are in a war and wars cost 
a lot of money. But can you tell me how many agencies are 
having accounting problems?
    Mr. Walker. I will double check this for the record, but as 
I recall, Mr. Burton, from a financial audit standpoint, about 
21 of 24 Federal agencies can successfully withstand an audit 
and get an opinion on their financial statements, overwhelming 
majority a clean opinion. The Defense Department, not just 
because of Iraq, because of other operations, is unauditable, 
and they, themselves, file an annual certification that says 
that they are unauditable. It has been that way for many years. 
That is not new, Mr. Burton. It has been that way since 1947 
when it was created. And they are making some progress.
    Mr. Burton. Since 1947?
    Mr. Walker. Since 1947.
    Mr. Burton. When Truman was President?
    Mr. Walker. That is correct.
    Mr. Burton. Yes. Well, I imagine wars are kind of hard to 
keep track of as far as the expenditures are concerned, and I 
am sure that this is a continual problem, and I know that you 
will be making recommendations to the Defense Department to 
help them straighten this out. We obviously would like to have 
more accountability if it is possible.
    The one thing that I know is I know that we don't know the 
total cost of the war and we probably won't for some time, but 
I do know what the cost will be if we lose the war. If we lose 
the war I know it will cost a lot more. It will cost people 
freedoms, it will cost people human rights, it will cause them 
all kinds of problems.
    Winning the war against terror is something that we all 
have to face and we all have to realize it has to be won. I 
understand that there are accounting problems and I would like 
to see those accounting problems solved and I hope that the 
Defense Department will try to do a better job, but the one 
thing that I feel is extremely important is that every American 
knows what the stakes are.
    We were attacked on September 11th; 3,000 people were 
killed. It was worse than what happened in Pearl Harbor back in 
the 1940's. We started a world war because of that, and that 
war, World War II, cost 50 million lives; 50 million people 
died in World War II. We started that war against Japan and 
Germany because they attacked us at Pearl Harbor, and more 
people died in the World Trade Center than died in Pearl 
Harbor.
    I think the people of the United States need to realize 
that we can't afford to lose a worldwide war against terror. 
The terrorists have attacked in Spain, they have attacked in 
London, they have attacked in France, they have attacked in 
Latin America, they have attacked all over the place, and they 
are not going away. They are like cockroaches.
    And it is a very insidious war. It is a war unlike anything 
we have ever seen. We had frontal attacks in World War II. We 
had frontal attacks in Vietnam. We had frontal attacks in Korea 
and in World War I. We had trench warfare. This is a very 
insidious thing. You have people walking around with bombs on 
their bodies and they come into a crowded shopping center or 
into a school bus and they blow it up and kill a bunch of 
people or they fly an airplane into a building, and they will 
do anything they can to destroy the things we believe in and 
our way of life.
    While I am just haranguing on about the need to win the 
war, I don't want to be distracting from the purpose of this 
hearing. Obviously I would say to Mr. Roth and the Defense 
Department work harder. Make sure that you account for every 
dollar that you possibly can. I think everybody in this 
country, every taxpayer wants to know that the money is being 
well spent.
    And I think that the Secretary of Defense wants to know 
where the money is spent and make sure that it is well spent. 
And I know that everybody is trying to do that job over there. 
If we haven't done as good a job as we should have since 1947, 
then we just have to try harder.
    But the one thing that I would like to end my statement by 
saying is we cannot afford to lose the war against the 
terrorists, no matter what it costs, no matter what it costs.
    I yield back my time.
    Mr. Shays. Would the gentleman yield?
    Mr. Burton. I would be happy to yield.
    Mr. Shays. He has about 5 minutes and 40 seconds.
    I thank the gentleman for his statement and I happen to 
agree with it very strongly, but I still would like out of this 
hearing to do a better job of getting a handle on our 
expenditures. So what I would like to do is we have had 
different numbers, and they range from a higher level by CRS to 
a slightly lower level, $9 billion.
    What would account, as you understand it, for the 
difference between GAO's estimates, say, and CRS's? The CBO 
estimate is $432 billion, GAO is $430 billion, and CRS's is 
$438 billion. Do we know what would account for that 
difference?
    Mr. Roth. Let me at least start, Mr. Chairman. First of 
all, let me make a comment here, because there have been a 
number of comments made here about the reliability and the 
accuracy of Defense data. We do, in fact, provide accurate 
data.
    Having said that, we understand the need to improve the 
data that we have provided. We have in place a financial 
management improvement audit readiness plan that will address 
many of these issues that the GAO has identified in terms of 
audit readiness, improved accuracy and timeliness of data, and 
improved business practices. So I need to state for the record, 
sir, that the impression that DOD across the board does not, in 
fact, provide accurate data we would not subscribe to. That is 
not, in fact, the case.
    Mr. Shays. The fact is, though--and this is the regretful 
fact--DOD has not had auditable accounts since basically the 
end of World War II, and it is a fact under every 
administration. Frankly, I thought that would be one of the 
things that Mr. Rumsfeld would have spent time on, but 
obviously it has gone in a different direction.
    My testimony from the GAO is that you are making 
improvements. When you will get to auditable accounts and pass 
an audit will be, I don't know, I hope in my lifetime. It is 
why I used to vote against the Defense budget. I didn't want to 
vote for a Defense budget that wasn't auditable. I started 
voting for them when our men and women were on the firing line 
in Iraq.
    That is my challenge there.
    Mr. Roth. Yes. We understand that.
    Mr. Shays. But what I want to then say is, given that your 
accounts are not auditable, you can't account for the 
expenditures in DOD if you make certain assumptions? What? What 
enables? Why can we have confidence that the DOD numbers will 
be accurate as it relates to the war?
    Mr. Roth. We have confidence in the numbers because we have 
a substantial amount of oversight and a systemic way of looking 
at the numbers, reviewing the numbers, and doing, for example, 
a variance analysis on the numbers on a monthly basis. We do, 
in fact, oversee the numbers. We have confidence that the 
numbers are, in fact, correct. There are circumstances where we 
find that people in the field, for example, made some mistakes 
in terms of transactions. Where we find that, we dutifully go 
out and correct those kinds of----
    Mr. Shays. But, having said we have confidence in the 
numbers, we all--and maybe CRS and GAO would speak to this--we 
have to make assumptions about the incremental costs. What 
concerns me is we have a budget for DOD. It has men and women 
and equipment. But we then send men and women and equipment 
over to Iraq.
    In one sense, the full cost of that general would have been 
paid whether he was in Iraq or somewhere else. That is what I 
think the answer to my question would have been. We have to 
make certain assumptions as to how much we attribute to the war 
and how much would have just been an ongoing expense.
    Then you have the Comptroller General who has made the 
point there is a tale to this. There is a tale of health cost 
ad infinitum. There is a cost of equipment that has been, 
frankly, either destroyed or just worn out. And so we 
understand you won't get it perfect. Is there a process that 
you have, a scientific process that enables you to distinguish 
incremental costs?
    Mr. Roth. There is, Mr. Chairman. The definition of 
incremental cost, as Mr. Walker alluded to, as well, is very 
well defined. We have it outlined in our financial management 
regulations. The example you provide is actually a very good 
one.
    When a military member goes to the theater on an assignment 
to take part in the contingency operation, the base pay of that 
military member is not, in fact, an incremental cost. You are 
absolutely correct, Mr. Chairman. That military member would be 
paid whether that military member were sitting in Fort Campbell 
here at home or whether that military member were sitting 
somewhere in Iraq. However, there are special pays that get 
activated when that member goes into the theater, things like 
imminent danger pay, hazardous duty pay, assignment pay.
    Mr. Shays. Let me get into this, because the time is 
running out.
    Mr. Roth. OK. Those pays are incremental costs of the 
operation.
    Mr. Shays. I didn't mean to leave out CBO, and so please 
feel free to jump in. Maybe you could just comment. Mr. Walker, 
you were nodding your head. If you would just comment, and then 
we will go to Mr. Waxman. Yes, Dr. Marron.
    Dr. Marron. Representing the middle number of your range, I 
will start out. Appropriations are, at some level, the easiest 
thing to track because you can track them at the moment that 
the laws pass Congress. They don't involve actions taken later 
on, primarily.
    I believe the primary difference that occurs between the 
three numbers are some judgments about certain appropriations 
that happen not through that process but by transferring moneys 
from the regular budget. Essentially, CRS, CBO, and GAO have 
made different judgments about how much money on net was 
transferred from other accounts into activities associated with 
the war on terrorism.
    Mr. Shays. Mr. Walker, do you want to just make a comment 
or should I go to----
    Mr. Walker. I think that is true. Some of our numbers are 
based on overseas costs, only. As has also been mentioned, you 
know, we don't have numbers with regard to some of the 
classified operations. And as has also been mentioned by 
someone else, there is supplemental funding that has occurred 
that is not for the global war on terrorism but is for Army 
modularity, which obviously wouldn't be in here and hopefully 
wouldn't be in anybody's cost.
    Mr. Shays. Do you want to just make a comment?
    Ms. Belasco. If I have this correct, CRS and CBO are fairly 
close in terms of the moneys for Defense. For example, CBO is 
about $393 billion and CRS is $397 billion. As you said, those 
are basically how much moneys were transferred.
    I don't actually know where DOD's number of $382 billion, 
if I am correct--is that what you said----
    Mr. Roth. Yes.
    Ms. Belasco [continuing]. Where that total comes from and 
why it is about $15 billion less than the CRS number. And GAO's 
number, if I have it correct, is $386 billion for Defense. 
Again, I don't know why that number is less.
    Mr. Shays. Thank you.
    Mr. Waxman.
    Mr. Waxman. Mr. Chairman, before I ask any questions I want 
to comment on the statements made by our colleague, Mr. Burton 
from Indiana. We didn't start World War II. World War II was 
imposed upon us when the Japanese attacked Pearl Harbor, they 
invaded the United States, and when Nazi Germany declared war 
against the United States. It was not a war of choice; it was a 
war we were forced into.
    We were attacked on September 11, 2001. No one can argue 
that Saddam Hussein led that attack on us. That attack was from 
Osama Bin Laden and Al Qaeda. There was almost unanimous vote 
of the Congress and support of the American people to go to 
Afghanistan to root out Osama Bin Laden and the Al Qaeda and to 
overturn the Taliban that gave them a place from which to 
operate.
    The war in Iraq is a war of choice. It is the only war of 
choice that this country has ever taken, and it was a war based 
on many false premises. I know our chairman thinks this is a 
noble war. I don't think it ought to be confused with a war 
against terrorists who would strike us. I think it was a war 
against the Iraqi people based on the assumption that Saddam 
Hussein had weapons of mass destruction which he did not have, 
based on the assumption he was an imminent threat to us, which 
he was not, and based on a desire by people in this 
administration to redo the whole Middle East by the idea that 
we were going to invade Iraq and transform them into a 
different reality.
    Well, it has come home to us that the easy war we thought 
we were going to engage in was not so easy after all.
    If we look at what we were told not by the space Defense 
auditors, not by OMB, and not by the Budget Office about what 
this war would cost us, because this hearing is about 
estimating costs for the Iraq war, Mr. Van Hollen already 
referred to this in his opening statement but let me just 
repeat it: Paul Wolfowitz, not an auditor but a Deputy Defense 
Secretary, said that the cost of the Iraq war, ``We are dealing 
with a country that can really finance its own reconstruction 
and relatively soon.''
    And Andrew Natsios, the Director of USAID, said on 
Nightline that the most the United States would spend on 
reconstruction was $1.7 billion. The head of the Office of 
Management and Budget, working for President Bush, Director 
Mitch Daniels at the time the war started, said total cost 
would be between $50 billion and $60 billion. And White House 
economic advisor Lawrence Lindsay, giving perhaps the highest 
estimate, said the that cost would be between $100 billion and 
$200 billion.
    But now we know, as Mr. Walker testified last week, that we 
have already spent more than $300 billion in Iraq, and the Bush 
administration is now seeking over $100 billion more for next 
year. Well, these administration estimates were off not by just 
a little but substantially by orders of magnitude.
    I want to put this in some perspective. People think that 
Congress adopts a budget, and in adopting the budget we set out 
our priorities for spending. If we are in a war we have to set 
that out. We have to set out our priorities for revenue raising 
in order to spend, and we try, the people think, to balance 
that budget so that the amount of money we spend is equal to 
the amount of money that we take in, except under some rare 
circumstances where we have to go out and borrow that money.
    Well, I don't think people running this Government care how 
much this war may cost because they assume we can just borrow 
it. They are not going out and raising money to pay for it. In 
fact, this administration, at a time when we are borrowing 
money to fund this war, is giving tax breaks to billionaires. 
It has never been the situation where this country has ever 
been at a war when we have said to people we are going to give 
you tax breaks.
    But we are not giving people tax breaks alone, we are 
giving those at the very top tax breaks. We are saying to them 
you don't have to make a sacrifice to help fund this war. We 
are going to send our volunteer Army, men and women, they are 
the ones who will make the sacrifice. And when you come back to 
the United States your children and grandchildren will be 
paying for this war in higher taxes and a lower quality of 
life, because it doesn't matter, we are borrowing it.
    I think it was Vice President Cheney that was credited with 
saying deficits don't make any difference. We can go out and 
borrow the money. They don't make any difference. What he was 
talking about, I believe, is that they didn't make any 
difference politically because people didn't mind at the moment 
that the costs were going to be passed on to future 
generations.
    Democrats have always believed that you pay as you go 
along. You decide on these priorities. You actually make a 
budget. You try to stay with it. There are costs that you can't 
anticipate, but there are costs you can anticipate and there 
are costs you try to control.
    But the Republicans running the Government in Washington 
today want to say that this noble cause can be paid for by 
future generations and by the sacrifices of young men and women 
who are the ones on the front line.
    Now, these cost estimates that we have had been way off. 
Mr. Roth, my question for you as the Defense Department 
witness, and an auditor, as well: how much does the 
administration currently estimate that the war in Iraq will 
ultimately cost the American people, if you can give us such a 
figure?
    Mr. Roth. Congressman Waxman, we in the Defense Department 
have not attempted to project a cost beyond the current fiscal 
year. Given the unpredictability on certainty of the costs, I 
don't have any basis to develop any detailed analysis beyond 
this year. So what we normally do is provide the detailed 
justification material to support the supplemental request when 
it comes to Congress. Beyond that period of time, that is, in 
fact, why we have argued supplemental appropriations are, in 
fact, an appropriate way to finance that. We don't have a sound 
basis to come up with an estimate beyond the current fiscal 
year.
    Mr. Waxman. Well, when the war started the administration's 
response is that we are taken by surprise, they never 
anticipated any insurgency, they thought they could reconstruct 
Iraq with no worries about security. That argument, of course, 
is ridiculous, and they should have known it because General 
Shinseki warned the administration that they would need several 
hundred thousand troops, and he was ridiculed for his candor.
    And the former President Bush, President Bush's father, 
after the first Gulf war explained his decision not to invade 
Baghdad by warning that a U.S. occupation would result 
``incalculable human and political cost, that there would be no 
viable exit strategy, and the United States could still be an 
occupying power in a bitterly hostile land.'' Well, how could 
we have been taken by surprise? People were telling this 
administration, they were telling the American people what to 
expect, and yet President George W. Bush, Secretary Rumsfeld, 
even Secretary of State Colin Powell all bought into the idea 
that it was all going to work out well and we could do this on 
the cheap.
    How could the Defense Department, in trying to make 
estimates of cost, fail to anticipate the cost of battling the 
insurgency, Mr. Roth? Do you have any idea how they came to 
that conclusion that they couldn't, they didn't have to figure 
out cost for battling an insurgency when the war started?
    Mr. Roth. Again, Congressman Waxman, in terms of when we 
build the budgets, there is no basis to say in terms of 
battling the insurgency as separate and distinct cost element 
along those lines, so, sir, I don't have any insightful comment 
to make on that.
    Mr. Waxman. Well, even when we look at the experience of 
the past 3 years and we look at the amount of money that has 
been wasted, the Bush administration still pays the money. For 
example, in Haliburton's $2.4 billion oil contract in Iraq the 
Pentagon's own auditors identified over $263 million in 
excessive and unsubstantiated costs. Those were the auditors 
working for the Pentagon, and the administration ignored their 
own auditors and paid Haliburton 97 percent of these charges, 
and then paid Haliburton award fees and bonuses on top of that.
    I just feel, Mr. Chairman and my colleagues, this has to 
stop. We owe it to the American people who are paying for this 
war and to the troops who are giving their lives for it that we 
have to stop the waste, fraud, and abuse, and we have to fight 
against the terrorists that threaten us in a smart and informed 
way, not one where we are seen to be wrong at every turn, so 
much so that we can't even figure on what the costs are going 
to be from 1 year to the next.
    I yield back the balance of my time.
    Mr. Shays. I thank the gentleman.
    I would recognize Mr. Platts and ask if he would just yield 
me a speck of his time and I can return in favor.
    Mr. Platts. Certainly, Mr. Chairman. I yield to the 
chairman.
    Mr. Shays. Thank you.
    Mr. Roth, I find your answer really very surprising, and I 
just want to say that your statement needs to be very accurate 
for the fact you are speaking before Congress and you are under 
oath. I don't think you meant to imply that there have been no 
estimates of what this war will cost in the future, because 
that is your answer.
    Mr. Roth. Sir, I have not participated in any effort to 
forecast the cost into the future.
    Mr. Shays. Are you aware----
    Mr. Roth. What we do is we prepare----
    Mr. Shays. I understand what you said.
    Mr. Roth. We prepare the cost estimates in support of our 
budget.
    Mr. Shays. There is no one in DOD that is trying to 
estimate what the cost will be if we have this number of troops 
or if we have this number of troops? There is no estimate of 
those potential costs?
    Mr. Roth. I am not aware of any estimates in terms of 
trying to forecast future force levels because due to the 
unpredictability of the nature of the war and these kinds of 
things. I am not aware of any effort.
    Mr. Shays. I think Congress has asked DOD to do that. Am I 
wrong, Dr. Marron or Ms. Belasco? Haven't we asked them to give 
us a projection of future costs?
    Ms. Belasco. There was a statutory requirement for that and 
DOD sent in a letter--I think it was actually an OMB letter--
saying that they couldn't give any estimates for, I think, 
fiscal year 2006 to fiscal year 2012 because of the 
uncertainty. They were supposed to ask for--the requirement was 
that they had to submit an estimate unless the President 
submitted a waiver saying that for national security reasons 
they couldn't do it. They never submitted the waiver; they just 
sent a letter in saying they couldn't do it.
    Mr. Shays. Mr. Walker, could you enlighten us on this?
    Mr. Walker. We have recommended that they attempt to do 
that, but my understanding is they have not endeavored to do it 
to date.
    Mr. Shays. Well, I have used a minute of my colleague's 
time, slightly more than that, but I find that beyond 
comprehensive, frankly. As President of the United States and 
as a Congress, we would want you to be able to tell us what 
will be based on this number of troops, based on this scenario, 
based on this scenario, and I can't believe that we would not 
have asked you to do it and I can't believe that we would not 
expect you to do to it.
    I thank the gentleman for yielding.
    Mr. Platts. Thank you, Mr. Chairman. I appreciate your 
hosting this hearing. I think it is very important.
    I want to try to focus on I think what we are really after, 
which is the accuracy of what we know and the financial 
management of DOD and Department of State and all agencies 
involved in the global war on terror, because, while I think it 
is safe to say that we can't predict with any great certainty 
what next year or the following year will be on the war front 
from a strategic military standpoint, but what we can predict 
with more certainty is our ability to compile and accurately 
report the dollars appropriated and ultimately expended, and 
even there though we are going to have uncertainty.
    I guess the way I would say it is we can with certainty say 
we are going to be not very exact because of DOD problems and 
financial management. That is what I want to get into here, 
which I think is what we are really after.
    General Walker has been with us in our Subcommittee on 
Financial Management a number of times, and DOD's efforts of 
reform that have been going on for several years, and that is 
really where I want to maybe take the discussion a little bit.
    I will start with Mr. Roth. One, I appreciate all of your 
testimonies and your service and your different capacities and 
Mr. Roth at DOD. OMB about a year ago put out their A-123 
regulations regarding internal controls to all departments and 
agencies, a deadline of June 30th of this year to bring forth 
your plans, to have them done, and to report on those plans as 
part of the financial audit information in November.
    I was wondering if you can give us an update on where DOD 
stands in complying with the A-123 regulations on internal 
controls, because, as the subcommittee chair for Financial 
Management, it seems like I keep coming back to if we want, as 
we talk about in the title here, accurate and reliable cost 
estimates, we start at the bedrock, which is internal controls, 
because if you don't have those in place you may have numbers, 
but whether they are accurate or not you never know. So where 
does DOD stand with A-123 compliance?
    Mr. Roth. I will have to provide for the record 
specifically where we are with A-123 compliance, per se. But, 
having said that, let me say we have in place a financial 
improvement and audit readiness plan that we put into place in 
December 2005. This plan does, in fact, address improving 
internal controls, dealing with material weaknesses, and 
ensuring our fiscal stewardship, and so it lays out in a very 
systemic, a very integrated way a plan to address these kinds 
of deficiencies and to achieve on an event and performance 
basis in improving our overall financial management 
stewardship.
    And so already to date there are a number of success 
stories in areas like military pay, in areas in terms of 
reducing our material weaknesses. For example, during 2005 our 
material weaknesses were decreased from approximately 47 to 34. 
Of those material weaknesses, the financial weaknesses were 
reduced from 17 to 13. So we do, in fact, have a very systemic 
plan. We track it on a monthly basis. We do periodic reviews. 
And we have in place a very comprehensive plan to deal with all 
the kinds of weaknesses that others have identified and all the 
kinds of improvements that are necessary to bring us into an 
auditable condition.
    As far as where we stand on the 123, per se, I will have to 
provide that for the record.
    Mr. Platts. If you could provide that to the subcommittee 
for the record, I think the fact that DOD is not even able to 
be audited, let alone get even a qualified opinion, goes to the 
whole issue here of these accurate and reliable cost estimates.
    Mr. Platts. That plan is in place, Mr. Walker. I am not 
sure, has GAO reviewed and commented on the plan that was 
referenced and how they are moving forward with it? Are you 
aware?
    Mr. Walker. We have seen several. I don't know that we have 
seen the latest. I will followup with my staff and provide 
something for the record on that, Mr. Platts.
    Mr. Platts. And, Mr. Roth, how about your IG? I know that 
the DOD IG has been very involved in these issues. Are they 
involved in reviewing that plan and the headway you are making 
and commenting on the progress?
    Mr. Roth. Well, it is a plan that has been vetted 
throughout the Department of Defense, and all the stakeholders, 
if you will, and all the interested parties have looked and 
have taken part in preparing that plan. It, for example, was a 
key. The development of that plan and the fact that we have 
that plan or are making progress along the lines of the kinds 
of efforts and initiatives that are outlined in the plan did, 
in fact, lead, for example, the Office of Management and 
Budget, as I alluded to in my statement, to change our progress 
rating under the Presidential management agenda in financial 
management from yellow to green. It was in large part because 
of the existence of this plan and the fact that the Department 
is, in fact, carrying out the plan and is, in fact, achieving 
many of the goals that are outlined in that plan.
    Mr. Platts. One of the challenges at DOD has been every 
different component having its own financial management system 
and there was an effort to tally those, and the last count I 
saw we were at 3,000 and counting, in different systems, and so 
the ability to bring all the information together was very 
difficult. Where do we stand in that effort of trying to unify 
the various agencies, components within DOD to have a unified 
reporting system that is able to better communicate across the 
lines?
    Mr. Roth. Along those lines, sir, we are implementing a 
standard financial language throughout the Department. This is 
going to be a new accounting structure that will enable the 
Department to manage our costs, value assets, for example, 
forecast future needs, develop better historic trends, and the 
like, and so we are in the process of trying to address those 
kinds of issues to try to put the overall financial information 
system, the overall accounting system on a more common 
denominator, more common language kind of a basis.
    Mr. Platts. Is there a timeframe for when we can expect 
that to be in place, that common language?
    Mr. Roth. I will have to get back to you. I will have to 
provide that for the record. I don't have that date right here.
    Mr. Platts. I would appreciate that.
    I appreciate the effort that is being made at DOD and, in 
fact, Secretary Rumsfeld, September 10, 2001, gave a very 
important speech at DOD about business systems modernization. 
The events of September 11th happened the next day and kind of 
overtook the importance of that message. That being said, he 
has reasserted that message, you know, numerous times in trying 
to bring the DOD into a financially accountable department, but 
it seems that each time we have had hearings that it is always 
something in the works. We are not seeing an actual outcome 
achieved, as opposed to something in the works.
    Mr. Walker, your assessment of where we are with this 
systems improvement of getting that ability to communicate 
within the Department in a more uniform fashion?
    Mr. Walker. The latest plan that I have seen is clearly 
superior to the last plan. It is a lot more realistic in its 
approach. It doesn't set, at least the financial management 
portion of it doesn't set arbitrary timeframes for an end gain 
to get a clean opinion. It is focused on specific line items 
and specific entities, so I think that is a clear plus. But, 
you know, candidly, it is going to take them years to get to 
where they need to be.
    Last thing, Mr. Platts, I think is important, if you 
wouldn't mind, is why do you care about cost? I mean, 
ultimately you are going to have to do what you have to do, but 
there are several reasons why I think the chairman has asked 
for this. I mean, one, you need to exercise your oversight 
responsibilities, which you are trying to do with regard to the 
funding and the accountability for the funding.
    Second, you have to have a decent cost accounting system in 
order to review the justification for resource requests, 
whether they are part of the baseline or the supplemental or 
anything else. Third, ultimately you want to try to get a sense 
for what this is going to cost us longer term. You have to have 
timely, accurate, useful information in order to accomplish 
those objectives. That is why it is important.
    Mr. Platts. Final question before I run out of time. Mr. 
Roth, an issue that we looked at and GAO again has been a 
proponent of is a chief management officer in the Department to 
allow us to have more continuity within DOD to get to this end 
goal that we are all after. Has the Department looked further 
at that proposal from GAO? And, if so, where does it stand?
    Mr. Roth. The Department is on record as saying that a 
chief financial management officer is not something that we 
will endorse. That said, I mean, we feel, we have in place 
strong management controls led, you know, from the most senior 
echelons of the Department to deal with the business 
transformation, business modernization kinds of efforts, to try 
to improve our business systems and our financial management 
systems and the like, and so we think we do, in fact, have 
adequate systems in place. We do, in fact, think we have an 
adequate architecture in place to deal with those kinds of 
issues.
    Mr. Platts. Mr. Walker, I am glad to let you respond as 
long as the chairman will let you.
    Mr. Walker. If it is OK, Mr. Chairman, it is very 
important.
    No. 1, our recommendation was not with regard to chief 
financial officer. They have a chief financial officer. It was 
a chief management official to be responsible for the overall--
taking a more strategic, integrated, and consistent approach to 
the business transformation process.
    For the record, I might note that the Defense Business 
Board, which advises Secretary Rumsfeld and Deputy Secretary 
England, recommended for the establishment of a chief 
management officer at the principal undersecretary level two 
level recently, and this week I will be speaking with 
representatives of another entity that has been charged by the 
DOD to conduct a separate study on this issue, as per 
congressional direction. I also know that one of the world's 
largest consulting firms is going to, within the next few 
weeks, come out recommending this, as well. So I think the jury 
is still out.
    Mr. Platts. Thank you, Mr. Walker, and thank you, Mr. 
Chairman. Sorry for going over.
    Mr. Shays. That is all right. We are going to give the 
gentleman from Maryland an additional minute and a half, so he 
will have 11\1/2\ minutes.
    Mr. Van Hollen. Thank you, Mr. Chairman. Again, thank you 
for holding this hearing. Thank you all for your testimony here 
today. Mr. Roth, I think you are bearing the brunt of the 
questions for the simple reason that most of the moneys are 
spent in the Defense Department, and, as you say in your 
testimony, your principal role is to build the budget, whether 
it is a base budget for DOD or a supplemental request.
    If I could just underscore this issue which has come up in 
numerous hearings, and Mr. Walker has underlined that on behalf 
of the Government Accountability Office, with respect to DOD's 
record, whether you are at war or not war, and financial 
management, my understanding is since 1990, when GAO first 
instituted its risk/high risk watch, agencies that would be on 
a watch list for poor financial management, Defense Department 
has been on there.
    It is not enough for people to say we have a lot of costs 
because we are at war at this particular time. The fact of the 
matter is that has been the record there for many, many years, 
whether we are in conflicts or not in conflicts, and this 
Congress bears a fair amount of responsibility for making sure 
we have the adequate oversight. I know the chairman of this 
subcommittee has said it is one of the issues he wants to 
address going forward.
    Second, just to pick up on another point you made, Mr. 
Walker, which is that one thing we want to get a hold of, 
obviously, is the accuracy of expenditures already made. We 
should be able to do that if we have good accounting records. 
But the purpose of this hearing is not just to count dollars 
spent. The purpose of this hearing in the memo sent out by the 
chairman is one sentence: the purpose of hearing is to examine 
the accuracy and reliability of cost projections for the global 
war on terror. I already talked about the fact that I think we 
should desegregate that umbrella, Afghanistan, Iraq. I know we 
are going to get the numbers, but we are talking about accuracy 
of cost projections.
    Now, we had some very good testimony from our 
representative from CRS, Ms. Belasco, who outlined a number of 
pieces of information that would be very useful for the 
Congress to have so we can try and have our independent arm 
reach some conclusions about these costs.
    Now, Ms. Belasco, you in your testimony talk about at least 
four major items of information that would be useful to get 
from the Defense Department. I guess my first question to you, 
have you requested the Defense Department provide you with this 
information?
    Ms. Belasco. Well, periodically over the years I have 
asked, for example, for troop levels, but in general it is very 
hard to get information out of the Department of Defense, so I 
in many cases just resorted to sort of backing into estimates 
of my own or using published sources. I mean, I have gotten 
some information, some data base runs on troop levels, but when 
there are inconsistencies I can't resolve the inconsistencies. 
And as I think Dr. Marron said from CBO, part of the problem is 
in DOD's justification material for its supplementals there are 
basically no details about what drives the cost.
    Mr. Van Hollen. Let me stop you there, Mr. Roth, and just 
ask you: is DOD reluctant to provide the Congress with this 
information? Let me ask you some specifics. One of the 
categories, for example, that Ms. Belasco mentioned in her 
testimony, providing Congress we key planning assumptions that 
drive cost, including troop levels. Let me ask you, when you 
put together your budget projections for the past supplemental 
and other request, you make some estimate of troop levels, do 
you not?
    Mr. Roth. Yes, we do.
    Mr. Van Hollen. Are you opposed to providing Congress with 
that information?
    Mr. Roth. No, and we have in the past. We have discussed it 
with our oversight committees on many occasions.
    Mr. Van Hollen. All right. You provide that in advance for 
the purposes of budget projections, or just the current troop 
levels?
    Mr. Roth. Just the current troop levels.
    Mr. Van Hollen. We are talking about budgeting now. I mean, 
the whole purpose of this hearing is to try and get a handle on 
what future costs are going to be, so my question to, and this 
is--you know, I understand, thanks for telling us how many 
troops the United States has on the ground in Iraq, but when it 
comes to budgeting, which is what this hearing is all about, we 
need to get the best estimates. I guess my question to you is: 
are you opposed to providing Congress with your estimates of 
troop levels going forward?
    Mr. Roth. Certainly not, Congressman. Let me amend--
misconstrue what I meant by current. We provide the basis for 
the cost estimates. When we send a budget up, whether it is a 
supplemental, baseline budget, or any other kind of a budget, 
we will, in fact, engage in a dialog, as we always do, with the 
oversight committees in what drives those cost estimates, and 
so we do, in fact, provide the data that is requested of is in 
terms of what was the basis of the cost estimate and anything 
else that drives the cost estimate that we have provided.
    Mr. Van Hollen. Do you have an opportunity to hear the 
testimony of Ms. Belasco with respect to the specific items 
that would be helpful?
    Mr. Roth. Yes.
    Mr. Van Hollen. Are you opposed going forward then with 
making sure that CRS has that information in a timely manner?
    Mr. Roth. Certainly, we are not opposed to providing the 
information for people to understand where our cost estimates 
come from.
    Mr. Van Hollen. OK. And when you put together, for example, 
the current supplemental, you made certain assumptions about 
troop levels going forward, did you not?
    Mr. Roth. We made certain assumptions concerning the cost 
within that supplemental, yes.
    Mr. Van Hollen. OK. Well, I mean, did you have any 
assumptions regarding the number of troops on the ground which 
would be a variable, cost variable, right?
    Mr. Roth. Yes, it would.
    Mr. Van Hollen. OK. Let me just go back, because I think 
that part of this is trying to get a sense of cost going 
forward, and there is also an accountability piece to this. I 
do want to get some sense of the assumptions that were made at 
the very beginning going forward. Are you aware of the fact 
that Mitch Daniels, the former head of OMB, estimated the cost 
of the war at the outset to be between $50 billion and $60 
billion?
    Mr. Roth. I am not conversant with that estimate.
    Mr. Van Hollen. OK. Are you aware of any Pentagon 
estimates--and there was a Wall Street Journal article from 
back in September 2002. There were numerous articles leading up 
to the war where people were trying to get a handle on the 
cost. It was said in those articles that $50 billion was the 
number coming out of the Pentagon. Can you confirm that was a 
working number in the Pentagon?
    Mr. Roth. No, I cannot.
    Mr. Van Hollen. So you are in charge of putting together 
the budgets at the Pentagon; is that right?
    Mr. Roth. Yes.
    Mr. Van Hollen. OK. But you have no idea where that number 
came from; is that correct?
    Mr. Roth. No, sir. No, I do not.
    Mr. Van Hollen. All right. But in your capacity as the 
person who puts together budgets, you did have to make some 
assumptions about the cost of the war, did you not?
    Mr. Roth. Yes, we did.
    Mr. Van Hollen. OK.
    Mr. Roth. Let me explain, if I could just take 1 minute 
real quick to explain.
    Mr. Van Hollen. OK.
    Mr. Roth. When we build the budget estimate for the 
contingency operations, we work very closely with combatant 
commanders, with the joint staff, with the war fighters, with 
the services who actually incur cost to develop these cost 
estimates, and those include assumptions concerning logistics 
support, obviously troops on the ground, that is a major driver 
of it, rotations, troops going in, troops coming out, these 
kinds of things.
    And so these are long, iterative processes. We get a lot of 
criticism sometimes within the building how long and painful 
the process is, but we work very carefully with all the 
stakeholders, all those who have some interest and would incur 
some of those costs and try to get the subject matter experts, 
whether they be personnel people, logisticians, medical people, 
whoever, all the kinds of costs that go into this.
    And so the cost estimate you ultimately see in a 
supplemental budget request reflects the result of this 
iterative process in terms of developing a cost estimate for a 
given time period to say over the next 12 months this is what 
we forecast to be the cost of supporting the contingency 
operation for the year.
    Mr. Van Hollen. All right. Well, let me ask you, were you a 
part of the budgeting process at the time we went into Iraq?
    Mr. Roth. Yes, I was.
    Mr. Van Hollen. OK. What was your cost estimate at that 
time for that year? In other words, the year ahead. In other 
words, when you said we are going in, here are the assumptions 
we are making, because, as you have said, you have obviously 
got to make certain assumptions. I think everyone understands 
that there is no absolute certainty here, but people putting 
together budgets usually put together sort of a range in terms 
of their projections. So my question to you is: when we went to 
war in Iraq what was the cost range that you at the Pentagon 
put together for purposes of budget?
    Mr. Roth. The first budget I recall--and if it is different 
I will correct you for the record--the first budget I recall 
that we explicitly asked for money for Iraq, the total 
supplemental in that fiscal year was fiscal year 2003, and the 
total supplemental request for that year was $62.5 billion.
    Mr. Van Hollen. But I think I am asking you a little 
different question, and maybe nobody did it. I understand what 
your supplemental request was. My question is different. My 
question is: was there any estimate ever put together as to 
what the cost of going to war in Iraq would be? And if so, I am 
trying to find out what assumptions were made.
    And if you are going to tell me there was no estimate, I 
mean, we know Lawrence Lindsay had an estimate. His was $100 
billion to $200 billion. We know that people in the 
administration like the Deputy Secretary said that is off the 
mark, that is too high. We know Mitch Daniels said that is 
``very, very high.'' So obviously Mitch Daniels had an idea of 
what the war would cost. Obviously, Lawrence Lindsay had an 
idea of what the war would cost.
    What is confusing is how the President's chief economic 
officer, chief economic advisor, and the head of OMB could have 
ranges of what the war would cost, but the people who were 
going to bear the primary cost in terms of budget, the Defense 
Department, didn't have a similar figure. If you did have a 
figure, I am interested in knowing what it was.
    Mr. Roth. My office did not make any attempt to do a multi-
year estimate of what the cost of the war might be. Again, we 
focused on providing the supporting material for the given 
supplemental at the time.
    Mr. Van Hollen. Did you make any assumptions about----
    Mr. Shays. Would the gentleman just yield a second?
    Mr. Van Hollen. Yes.
    Mr. Shays. It is just because it is the term, and I want to 
make sure we are on record. When you say ``your office,'' did 
any other office----
    Mr. Roth. I am not aware of any. My point is I am not aware 
of any, sir.
    Mr. Van Hollen. Just for clarification, so you are not 
aware of any estimates put together in the Department of 
Defense with respect to the cost of the war in Iraq; is that 
right?
    Mr. Roth. For a ``total cost of the war?''
    Mr. Van Hollen. At the outset.
    Mr. Roth. No, sir.
    Mr. Van Hollen. So, again, that $50 billion, you have no 
idea where that came from?
    Mr. Roth. No, sir, I do not.
    Mr. Van Hollen. When you did your budgeting, you are saying 
you just assumed, what, that the war would go on indefinitely, 
or that it would just go on for the period of the supplemental? 
I mean, here's the issue. I think the chairman has been very 
diplomatic here, because what we are saying, as I understand 
it, is the best way to get a sense of the cost going forward is 
to do some analysis, No. 1, of what the cost actually has been 
to date, but also to get some sense about how good and reliable 
our cost estimates have been to date and our projections so we 
can make any corrections in how we are projecting cost going 
forward. And what we are hearing really is that when it comes 
to sort of the long-term costs, or when it came to trying to 
put together a number at the outset about what the total cost 
would be, there wasn't anything done. Is that right?
    Mr. Roth. Again, not that I am familiar with. No, sir. I 
mean, again, what we did is cost out the plan for a certain 
period of time as it was outlined to us by the commands and by 
the war fighting staff, and that is what we did.
    Mr. Van Hollen. Mr. Chairman, so they just said here are 
our troop levels, here's how long we want you to budget these 
troop levels for, here's the expenditure equipment, here's the 
munitions we are going to use, you guys just tell us what the 
cost is?
    Mr. Roth. Again, for a set period of time, yes, sir.
    Mr. Van Hollen. For a set period of time, and that was the 
period of time in your testimony just for the supplemental?
    Mr. Roth. Yes, sir.
    Mr. Van Hollen. OK. Well, Mr. Chairman, I know----
    Mr. Shays. We are going to do a second round. There are not 
many of us, so we will come back.
    Mr. Van Hollen. I appreciate that. Thank you, Mr. Chairman.
    Mr. Shays. I would like to take my time and say to you I 
don't want to end this hearing until we have a better handle on 
this. I know we haven't asked State and USAID questions yet, 
and we may get to you in the second round, but I at least want 
to feel like we have a better sense of what the heck is going 
on here, and I am going to ask the GAO and the CBO and 
Congressional Research to listen to the answers and then help 
me out in trying to understand what I should rightfully expect.
    Mr. Roth, what I need to do in terms of how you respond to 
questions, I assumed you were a policy person, not a scribe 
under orders, and so that you recommend the best procedures 
that DOD should move forward with. Is that an accurate 
assumption? These aren't trick questions. These are just trying 
to understand.
    Mr. Roth. Yes, sir. I mean, I try to provide the best 
advice I can.
    Mr. Shays. Well, have you been requested not to make 
estimates of future costs of the war by either the Secretary or 
anyone under the Secretary or anyone from OMB, anyone from the 
White House, anyone? Have you been requested not to make 
estimates of future costs?
    Mr. Roth. No one has directed me not to make estimates. No, 
sir. I mean, I am not----
    Mr. Shays. Or your office or anything.
    Mr. Roth. No.
    Mr. Shays. OK. I don't want to have to feel like I have to 
be----
    Mr. Roth. I am not trying to be. No, sir.
    Mr. Shays. I don't know how we can project future manpower 
needs if we are not thinking about different scenarios. I, 
there is a scenario--I just came back from Iraq--that says we 
need 50,000 more people to really gain control of Baghdad, the 
1-to-20 ratio which we talked about in the last hearing. I went 
in thinking, OK, we will need some more folks. Then I am 
leaving believing that has to be Iraqis with an Iraqi face, but 
I still had to wrestle with it.
    Are we going to be asking for more people? It just seems to 
me that if I were a Secretary I would have directed you to say, 
OK, if we need to send in more troops this is what it is going 
to cost. I want to know. If we are going to bring down 10,000 
troops every other month, this is what it is going to cost. I 
would want to know those numbers. And no one has asked you to 
even project that kind of scenario?
    Mr. Roth. We have certainly done analysis when requested to 
say what does it cost to field 10,000, what is the cost to 
field 20,000 people, and these kinds of things, but we have 
been given--what I am hearing here is have we been given a 
scenario over a multi-year period of time to price out to say 
what would it cost with X thousand of people over a 2 to 5-year 
period. We have not done that, No, sir.
    Mr. Shays. OK.
    Mr. Roth. But we have, we are asked for information about 
what does it cost to field certain number of soldiers, these 
kinds of things, we have responded to those kinds of specific 
requests. Absolutely.
    Mr. Shays. Let me ask just CBO and just GAO this question. 
Is it unreasonable? Am I thinking not logically that we would 
want to expect that DOD would make those kinds of analyses? And 
let me ask you, are they not doing that in the Budget 
Committee? Has no one in the Budget Committee, Dr. Marron, 
asked for these kinds of estimates?
    Dr. Marron. Sir, certainly in our line of business we get 
requests from various people, including the budget committees, 
as you emphasize, who bring to us, in essence, their scenarios, 
what might possibly happen, say, over the next 10 years in 
terms of personnel in Iraq, and then they come to us and they 
ask us to try to estimate what the potential cost implications 
of that would be.
    Obviously, CBO was typically not in a position to make our 
own projections about what force levels would need to be. That 
is not our sort of core competence, but conditional on the 
scenario we can cost it out.
    Mr. Shays. Is it considered bad business practices to want 
those projections or good business practices to want those 
projections?
    Dr. Marron. I would say we consider that to be a perfectly 
reasonable request from our clients at the budget committees.
    Mr. Shays. Is it reasonable to expect the administration 
would do that?
    Dr. Marron. I guess I would be hesitant to say what is 
reasonable or not reasonable for the administration. Again, I 
think it is perfectly reasonable for our congressional clients.
    Mr. Shays. What would----
    Mr. Walker. Mr. Chairman, it is my understanding the 
administration has taken the tack it is one supplemental at a 
time approach. In other words, they will come up with estimates 
for troop levels and other types of expenditures and they will 
provide that each time they submit a supplemental, but they 
generally have not gone beyond that. They have said 
consistently that they can't because of the uncertainty of what 
the conditions will be on the ground.
    It is my understanding they haven't done it. We believe 
that they should be doing it for a reasonable period of time. 
We believe that it is prudent to do it. We believe that 
historically, if you look back at prior conflicts, after a 
period of time it has been done. You know, obviously there is a 
great degree of uncertainty, but we believe it is possible and 
prudent to have some estimate beyond the current approach.
    Mr. Shays. And I will tell you why I would say it is 
prudent. I mean, if I look back on anything I regret over the 
past 4 years, I don't regret going into Iraq based on what I 
believe, but I do regret not nailing down what projected costs 
would be. And I actually was somebody who believed it would be 
paid first out of oil money and the administration said we are 
not going to do it. Then I believed it would be paid by us and 
whatever we could get from contributions from others. Because 
we were so off, I feel that we have even a greater obligation 
to try to nail down costs because we were so off. I, frankly, 
would have expected that DOD would have done that.
    Mr. Roth, this is above your pay grade, but I will tell you 
what I suspect. What I suspect is that nobody is doing it 
because you don't want to know, because if you know then you 
have to share it with Congress, and that somehow we are not 
going to like what those numbers are.
    Strongly believing that what we are doing in Iraq is a 
noble effort, bringing democracy to this part of the world, 
having been there where Iraqis say to me, when I ask their 
biggest fear, it is not the bombing. Their biggest fear is that 
we will leave them, giving them the taste of democracy. I don't 
wrestle with whether this is a noble effort worth the dollars 
or even the lives, and I don't wrestle with the issue with the 
issue of whether or not this is a ``war of choice'' or whether 
we waited until we get the heck bombed out of us, because, 
frankly, I don't wrestle with the failure that we had in World 
War II.
    Had we listened to FDR, had we acted sooner, maybe Russia 
wouldn't have lost 25 million people and maybe we wouldn't have 
had the killing fields that existed there and maybe we wouldn't 
have had the extermination had we stepped forward. And then 
would people have said, if we had done something before we were 
attacked in Pearl Harbor it was a war of choice? I don't think 
so. It would have been a more logical thing to have done. Japan 
went into China in 1928 and we seemed deaf to it. So I don't 
wrestle with that, but I do wrestle with my failure to come to 
grips with costs.
    Mr. Higgins, when I get to your round I am going to be 
asking you about understanding why it is difficult to divide 
the war costs for State Department. It may be that you don't 
have that much incremental cost, but maybe you could explain it 
to me. I guess if you have a secretary or Ambassador they are 
going to be there, but clearly have more State Department folks 
in Iraq than elsewhere.
    I would suspect that one of the answers that you are going 
to tell me is that a lot at State Department aren't State 
Department folks. There might be more CIA agents, intelligence 
agents. It might be more FBI. But I would love you to be able 
to kind of sort that out and think about it before I ask, 
because your cost--the thing that is challenging, it seems to 
me, for State Department is that half of the State Department 
is filled by people that aren't State Department. I would like 
that to be dealt with.
    With the remainder of the time, I would like to start where 
I can't yet get to. I want to know the cost elements of 
determining the global war on terror. In other words, what are 
the elements that we then say are attributed to the war on 
terror? I would like to get from the panel definitions of what 
those elements are. I would like the kinds of things that we 
would call incremental, and I would like to know what we have 
left out of the equation.
    I mean, you have all given us numbers, but one of them is a 
term, I think it is called reset, and reset is a term about 
what we then have to do to get our equipment back into shape, 
so I am going to want to know those answers. I will want to 
know before we leave what is a logical process for determining 
the war cost, how close are we to actually doing that? That is 
what I would like to do.
    With this, I am going to go to you, Mr. Kucinich, for the 
second round.
    Mr. Kucinich. Thank you very much, Mr. Chairman.
    I share your concern about a lack of information, reliable 
information that this Congress needs in order to have 
accountability to the American people. I also would suggest 
that the scope of this hearing is so important that it may be 
possible that we are not going to get all the answers today and 
we may have to invite some of these individuals back in the not 
too distant future as a followup.
    I want to go back to Mr. Roth. You answered the Chair that 
no one has directed you not to provide information on the cost 
of the war. Did you ever have in-house talk about what the war 
costs?
    Mr. Roth. Clearly we talk about it every day, sir, but 
mostly in terms of this since we are, in fact, a budget shop. I 
mean, we deal in terms of today's cost, what is it costing me 
today. Is it funding that has been made available to us through 
the supplemental sufficient to cover today's costs, and these 
types of things. I will have to say, quite honestly, the vast 
majority of our conversations inside our office have to do with 
today's cost.
    Mr. Kucinich. All right. Now, have you ever had a 
discussion with the Secretary relative to the costs of the war?
    Mr. Roth. I personally have not, other than to brief him, 
obviously, on what the costs are in the supplemental, itself, 
and these kinds of things.
    Mr. Kucinich. So you have spoken to the Secretary?
    Mr. Roth. We have briefed him on the costs.
    Mr. Kucinich. You?
    Mr. Roth. My staff.
    Mr. Kucinich. Have you ever met Mr. Rumsfeld?
    Mr. Roth. Yes, I have.
    Mr. Kucinich. OK. Thank you. Have you talked to Mr. 
Rumsfeld about the budget?
    Mr. Roth. I have, yes, sir. I have briefed him on what the 
costs are in the budget, yes, sir, as I have said before.
    Mr. Kucinich. OK. You are the Deputy Comptroller from the 
Office of the Undersecretary of Defense, Comptroller, 
Department of Defense, and you deal with the program and the 
budget and you have talked to Mr. Rumsfeld. Has Mr. Rumsfeld 
ever asked you, gee, John, how much is this war going to cost?
    Mr. Roth. We haven't had that kind of a conversation. No, 
sir.
    Mr. Kucinich. Wow. Have you had that kind of a conversation 
with anybody in the rank between your office and Mr. Rumsfeld?
    Mr. Roth. Are you alluding to, again, trying to forecast 
the cost of war?
    Mr. Kucinich. Just how much is the war going to cost.
    Mr. Roth. Again, we talk every day about the costs that are 
being incurred, taking a look and seeing how that will affect--
--
    Mr. Kucinich. How much will it cost? How much will this war 
cost? Has anybody ever asked you?
    Mr. Roth. No one has provided me an estimate on when this 
war will be over, so, again, due to the uncertainty and due to 
the unpredictability of it, I don't have any basis to cost it 
out.
    Mr. Kucinich. If the war ended today, how much will it 
cost? Do you know?
    Mr. Roth. If the war ended today, I would have a cost 
estimate. I could come up with a number in terms of the cost. 
There would be, obviously, a tail in terms of bringing people 
home. There would be the reset bill, as the chairman has 
alluded to.
    Mr. Kucinich. And if the war ends in 5 years could you 
estimate the cost?
    Mr. Roth. I would have to do so. I haven't done so to date.
    Mr. Kucinich. If the war ends in 10 years, would you be 
able to estimate the cost?
    Mr. Roth. But, again, I would have to be given some 
parameters and some estimate of what kind of operating tempo we 
are talking about, the kinds of troops we are talking about, 
those kinds of things.
    Mr. Kucinich. Now, are the elements in your cost estimates, 
you use how much money has been spent to a given date, right? 
Would that be----
    Mr. Roth. Yes, sir.
    Mr. Kucinich. In your cost estimates, would you use future 
spending and operations?
    Mr. Roth. Yes, sir. I mean----
    Mr. Kucinich. Would you include in your cost estimates the 
cost for the VA?
    Mr. Roth. No, sir.
    Mr. Kucinich. Would you include in your cost estimate the 
cost of brain injuries?
    Mr. Roth. I don't have a way of costing out future costs 
being incurred outside of the Defense Department for things 
like medical conditions and the like. Again----
    Mr. Kucinich. What about veterans' disability payments?
    Mr. Roth. Again, sir, that is not under my purview. That is 
under the Veterans Administration.
    Mr. Kucinich. Demobilization costs?
    Mr. Roth. Well, demobilization in terms of the military 
force coming home and bringing folks home and the logistic 
support and that kind of stuff which, in fact----
    Mr. Kucinich. Would you include that?
    Mr. Roth. Yes, sir.
    Mr. Kucinich. Would you include increased Defense spending, 
forecast for increased Defense spending, how much it is going 
to cost for certain operations?
    Mr. Roth. Again, if there are incremental costs associated 
with a military operation, I would, in fact, attempt to cost 
that out. Yes, sir.
    Mr. Kucinich. Would you cost out the interest on the debt 
for the cost of the war?
    Mr. Roth. Again, sir, that is not under my purview.
    Mr. Kucinich. Well, what we have established here briefly, 
Mr. Chairman, is that there are certain elements of budgetary 
cost which are not being built into the assumptions that come 
from the Department of Defense. They are not taking into 
account the cost of the VA, the cost for brain injuries, 
veterans' disability payments, and the interest on the debt. Is 
that correct, Mr. Roth?
    Mr. Roth. Yes, sir.
    Mr. Kucinich. We are speaking about the cost of the war 
here, yet we are only speaking about a fraction of the cost 
because there are other elements of cost which Mr. Roth cannot 
address because they are not under his purview but they are 
certainly related to the cost of the war.
    I mentioned earlier the study on the economic cost of the 
Iraq war by Linda Vilmus and Joseph Stieglitz. Their report is 
as follows: December 30, 2005, total spending for combat and 
support operations in Iraq, $251 billion, and the CGO's 
estimates put the projected total cost at around $500 billion. 
They go on to say that these figures greatly underestimate the 
war's true cost. ``We estimate a range of present and future 
costs by including expenditures not in the $500 billion CBO 
projection, such as--'' talking the cost of the war--``lifetime 
health care and disability payments to returning veterans, 
replenishment of military hardware, increased recruitment 
costs.''
    They make adjustments to reflect the social cost of 
resources deployed, that is, reserve pay is less than the 
opportunity wage and disability pay is less than foregone 
wages. And then they estimate the effects of the war on the 
overall performance of the economy, something that we never get 
into discussing in Washington. And they took a conservative 
approach and assumed that all U.S. troops returned by 2010, and 
by taking that conservative approach, building on all the other 
cost estimates, they are saying that the true cost would exceed 
a trillion dollars.
    Using CBO's projection of maintaining troops in Iraq 
through 2015--2015 is why I asked 5 years, 10 years--they are 
saying the true cost of the war could exceed $2 trillion, 
reflecting back on the administration's cost, which was 
estimated at $50 billion to $60 billion. Then they go on with 
some other costs.
    I point this out because Mr. Roth, with all of his 
experience in the Department of Defense, and while I might 
challenge the fidelity of the figures that you provide, we are 
not--Mr. Chairman, the true picture here is not going to be 
presented by the Department of Defense, alone. There are so 
many other things related to the war that are off the books. 
And so the American people really don't have an idea of the 
true cost, and I think that is unfortunate.
    It is more than unfortunate. It is a tragedy, because what 
is happening is that these costs are off the books, or off your 
books, Mr. Roth. They are still going to have to be paid for. 
We established earlier with Mr. Walker they are being paid for 
by borrowing, and when you borrow money you pay for a war you 
are going to pay back that money at an interest rate. The 
interest rate in this Stieglitz report, just so you know--it is 
very interesting to look at the interesting rate--in billions 
of dollars the conservative estimate for the interest on the 
debt is $98 billion. The moderate estimate is $386 billion.
    We are borrowing money to pay for a war, and when you 
borrow that money there is also another social cost that is 
factored in that we can't quantify, and that is a commensurate 
reduction in funds for education, for health care, for elderly 
programs veterans, which really has more to do with the reason 
why I came to this Congress, frankly.
    So Mr. Chairman, I think it would be helpful at some point 
if we could invite in the authors, Linda Vilmus and Joseph 
Stieglitz, to talk about the true economic cost of the war and 
get all the elements in there, because we are only getting part 
of the picture here. As well intended as the gentleman from the 
Department of Defense is and as honorable as his service is to 
our country, he cannot give us the total picture.
    I thank the gentleman.
    Mr. Shays. I thank the gentleman, as well.
    Mr. Van Hollen, you have the floor.
    Mr. Van Hollen. I thank you, Mr. Chairman.
    Just to underscore Mr. Kucinich's request, I think it would 
be useful to have that, because, as many people do in 
budgeting, they put together different scenarios and have 
different cost figures with respect to different scenarios, 
best case, worst case, medium case, and it seems to me that if 
we want to get a handle on this going forward we are going to 
have to do that as a Federal Government, so I think that would 
be very useful.
    I think you all understand the concern here from the 
perspective of trying to hold people accountable in the past so 
that we make sure that going forward we have the best 
information, and we had a situation where claims were made 
about the existence of weapons of mass destruction. They 
weren't there. Claims were made about collaboration between Al 
Qaeda and Saddam Hussein. Turned out not to be true.
    And then we had claims about cost estimates that were 
clearly low-balled, either low-balled on the one hand or people 
had a really rosy assessment of how things were going to go, 
and yet people today won't come forward and tell us what their 
assessment was and what went wrong, what part about what they 
predicted failed to come true.
    Obviously, when you have an estimate of about $50 billion 
for the total cost of the war, you are expecting a pretty short 
time in Iraq. Yet, no one will say, well, yes, that is what we 
expected and we were wrong and here's where we messed up or 
here is why it was inevitable that what has happened happened.
    People are unwilling to come up with figures now, but they 
were pretty confident then. Let me just quote from Secretary of 
Defense Rumsfeld, who quickly latched on to that OMB estimate. 
He was asked what the total cost would be back in January 2003, 
just 2 months before we went to war. Well, this is his 
response: ``Well, the Office of Management and Budget has come 
up with a number that is something under $15 [sic] billion for 
the cost.''
    Now, I guess, Mr. Roth, my question to you is: when you 
heard this number out there, you had to have heard the $50 
billion number floating around, right? I mean, it was in all 
the newspapers. And you heard Mitch Daniels over at OMB saying, 
you know, when Lawrence Lindsay said $100 billion to $200 
billion, that is very, very high. You had to have heard it.
    My question is: did you get on the phone and go to OMB and 
say hey guys, where did you come up with this estimate? I mean, 
you must have been a little bit curious. After all, the primary 
costs were coming out of DOD. Did you ever pick up the phone or 
talk to them or communicate with them in any way and say where 
are you guys coming up with these numbers?
    Mr. Roth. Again, as I said before, I will be real honest 
with you, I don't actually recall that number. I may have been 
involved or seen it. I understand your point it was perhaps in 
all the papers. So the short answer is I don't recall any 
conversations concerning that specific number. No, sir.
    Mr. Van Hollen. Because it clearly was so far off, and yet 
clearly a signal was intended to be sent.
    Let me, if I could, ask you, Mr. Kunder, because there were 
also estimates about the reconstruction component of it, and I 
remember actually watching either Nightline or it was a sort of 
redo of Nightline, rerun of this component of Nightline. Ted 
Koppel was asking Andrew Natsios, who was a former AID, and I 
must say overall did a terrific job as head of AID and I 
respect his public service, as well.
    But here's what he was asked. Ted Koppel, ``All right, this 
is the first. I mean, when you talk about 1.7, you are not 
suggesting that the rebuilding of Iraq is going to be done for 
1.7 billion?'' Natsios: ``Well, in terms of the American 
taxpayers' contribution I do. This is it for the United States. 
The rest of the rebuilding of Iraq will be done by other 
countries who have already made pledges,'' and then he lists 
some of those other countries. Are you familiar with this 
quote? It has also been widely distributed?
    Mr. Kunder. Of course I am very familiar with it.
    Mr. Van Hollen. Now, what was Mr. Natsios basing this on? 
Let's first put on the record what was--I believe it is about 
$30 billion appropriated for reconstruction; is that right?
    Mr. Kunder. That is what was testified. The USAID portion 
of it is about $5.1 billion, but I believe that was the number 
we testified to earlier, yes, sir.
    Mr. Van Hollen. But the total number is around $30 billion. 
So can you tell me--maybe you are not aware. I don't know if 
you are in a position to know at the time where Mr. Natsios got 
this number which he said to the American public that the total 
cost of the American taxpayer reconstruction is $1.7 billion, 
and even when Ted Koppel said, are you sure, he said yeah, by 
God, I am sure.
    Mr. Kunder. Well, as Mr. Natsios said at that point, I 
think he was basing that on the assumption that other donors, 
multilateral and bilateral, would be coming in soon afterwards. 
Most of the initial USAID estimates were based on emergency 
humanitarian needs. If nobody else says it, I will be the first 
one to say I made some mistakes in estimates.
    I mean, we made some estimates based on movements of 
population. It is very difficult to predict how populations are 
going to move in a conflict, but we made our best estimates 
based on previous crises on what sorts of internal displacement 
would take place, and we made some estimates based on food 
shortages, for example, and the need to bring emergency food 
aid to displaced populations. I know those were major 
components of Mr. Natsios' thinking at that time.
    But, as he stated--so I think the $1.7 billion was built on 
a number of emergency needs estimates. As he stated, he 
expected other bilateral and multilateral donors to be coming 
in soon after that. As it turned out, as we all know now, there 
were relatively few major population movements at the time of 
U.S. forces going into Iraq and there were not massive food 
shortages or outbreaks of epidemic disease, which we also had 
planned for.
    Some of the elements were quite accurate. We had planned on 
doing immediate measles immunization and other immunizations so 
that there would not be massive outbreaks of epidemic diseases, 
and those turned out to be precisely the correct interventions 
because we have not had any such outbreaks in Iraq.
    But yes, we made some estimates based on humanitarian needs 
that turned out to be wrong.
    Mr. Van Hollen. I guess my question is the predictions you 
made that were wrong would have actually added to the cost, 
right? In other words, if all those population migrations 
happened, it would have been a bigger number, right?
    Mr. Kunder. Yes, sir.
    Mr. Van Hollen. I mean, this is not just off. This is way 
off for the American taxpayer contribution, and it is just 
unbelievable in terms of forward-looking budgeting, that we 
would have--was there an assumption as to how long the United 
States would be involved in reconstruction in Iraq in that 
figure?
    Mr. Kunder. As you have stated, sir, he really did 
anticipate that there would be multilateral and bilateral 
donors lined up to contribute after that point. That is why the 
estimate was as limited as it was.
    Certainly, if you had asked him what is the total cost 
going to be, at that point, as I think the subcommittee members 
well know, the World Bank was estimating the total 
reconstruction cost in Iraq would be $56 billion. That is 
probably still, given the fact that it was an early estimate, 
not a bad estimate if you are looking at reconstruction costs, 
non-military reconstruction costs. So Mr. Natsios would have 
been perfectly aware of that element, but he was asked a 
question what the U.S. contribution was going to be and that is 
what he answered.
    Mr. Van Hollen. Can you for the record provide us the 
number? What is the total amount actually spent by foreign 
partners in Iraq?
    Mr. Kunder. Yes, sir, we have that number. For example, the 
British government has contributed mightily to the 
reconstruction. We could get those numbers.
    Mr. Van Hollen. I sure would appreciate it.
    Mr. Kunder. We will do that.
    Mr. Van Hollen. And, you know, just going back, Mr. 
Chairman, the first Gulf war under the first President Bush, I 
believe the total cost has been estimated about $58 billion, 
and a large share of that, over $40 billion, I think $48 
billion was, in fact, picked up by allies. It sounds to me like 
whoever was making assumptions about this time in Iraq picked 
up the same numbers, $58 billion. They were estimating between 
$50 billion and $60 billion.
    It is obviously a very different enterprise. I mean, first 
President Bush made a very calculated decision not to go into 
Baghdad and occupy Iraq, and how the people planning for this 
venture in Iraq figured that the cost of occupying Iraq would 
be similar to the cost of simply forcing Iraqi troops out of 
Kuwait is beyond me. I think it is something the American 
people have just got to be scratching their heads about, and 
the failure of accountability, no one has been held accountable 
for these huge, constantly wrong projections in very many 
different areas.
    Thank you.
    Mr. Shays. I thank the gentleman.
    This is a bit heart-wrenching for me because I couldn't 
believe more strongly that what we are doing in Iraq is a noble 
effort and that we have the extraordinary need to confront 
terrorism at home and abroad, and whether or not people think 
terrorists were in Iraq before, this is where they are now. We 
have no choice. We cannot allow the terrorists to win in Iraq.
    So I am at the opposite end of my colleagues who have 
spoken. They think we shouldn't have been there, they don't 
think this is an effort we should have done, they think we have 
basically lost the lives of men and women for nothing, that we 
have spent, in their view, billions of dollars for nothing. I 
take the exact opposite view. But where we agree is that we 
should be trying to get a handle on the cost and that we should 
be trying to project what the cost will be in the future.
    If I have two regrets out of the hundreds that I could 
regret, because I don't have lots of regrets, one, I believed 
he had weapons of mass destruction, he did not. Second, I wish 
early on I had asked about the cost of this war, so I wouldn't 
have said to my own constituents it will cost less than what it 
absolutely costs.
    Now, I know why it has cost a lot more. We made some 
fateful decisions. We decided to not guard the depots so that 
we let the insurgents get literally hundreds of thousands of 
explosions. We proceeded to allow the looting, which was a huge 
message to the Iraqis that security was not our concern and, 
frankly, we didn't care about them. We didn't care about the 
fact that their country was being ravished.
    But the biggest mistake is we disbanded their army, their 
police, and their border patrol. Every time I say it I am 
astounded by its impact. We basically said to 26 million people 
no army, no police, no border patrol. No police. Imagine all of 
New England and all of New York without any police. Imagine all 
of California with no police. Admittedly, California's 38 
million people, we are talking 26, but Iraq is about the size 
of California. No police in all of California. Big surprise 
that we would have problems. That was a fateful and horrific 
mistake to which we are digging ourselves out.
    So I don't fault Mr. Roth or anyone else for not 
anticipating what people ultimately did that caused that. What 
I want to do is get a handle on the cost. If we can't get the 
exact numbers, I would at least like to leave with basic 
principles. Can we agree on basic principles? Can you all agree 
or disagree on them?
    I will start out with you, Mr. Walker. Is it better to have 
no estimates than to have estimates that may be wrong that at 
least are estimates?
    Mr. Walker. We should have estimates and recognize that 
there may be a variance from those estimates.
    Mr. Shays. Mr. Higgins.
    Mr. Higgins. I think yes, we do need estimates, but I also 
think we have to develop scenarios. This is all based on a 
transition to a self-reliant Iraq, so the speed in which we are 
able to get the job done correctly and get the foundation set 
up will have a direct impact. It will save billions, but it 
will also save many lives, so I think that the real focus 
should be on results. What are we trying to get to now?
    Mr. Shays. OK. I am asking you, Mr. Roth, not whether you 
have them, but doesn't it make sense to attempt to have 
estimates, even if they are wrong?
    Mr. Roth. I think it is important to have some basic 
assumptions in place before you do the estimates, because 
otherwise you get into the same sort of dialog here about where 
the numbers came from years down the road.
    Mr. Shays. I would agree with that. But let's just say you 
have to make assumptions to make estimates, but does it make 
sense to make assumptions and to make estimates?
    Mr. Roth. It makes sense to make estimates where you have 
some degree of confidence that you can come up with a good 
estimate.
    Mr. Shays. Fair enough. Mr. Kunder.
    Mr. Kunder. Mr. Chairman, I want to be intellectually 
honest with you. As I try to grapple with the very profound 
question you are raising, I think about in our own 
circumstances. It seems to me that it is defining the realm 
that you are trying to ask for the estimate about that is 
hanging up the question, at least in my mind, because if you 
asked me what does it take to make Bangladesh a decent place to 
live, you know, I don't have an estimate for that.
    Now, I have thought through very carefully what the 
components are of making Bangladesh, for example, a better 
place to live, and that has to do with some----
    Mr. Shays. Let me interrupt you. I will make it very 
simple. Is it better to have no estimates or to have estimates 
that may be wrong?
    Mr. Kunder. I have estimates. It is better to have 
estimates, and I have estimates of all the components----
    Mr. Shays. And I am going to ask you to explain why, 
because I think I know the answer, but I want it on the record. 
Dr. Marron.
    Dr. Marron. Short answer, yes.
    Mr. Shays. Ms. Belasco.
    Ms. Belasco. I would agree that it is useful to have 
estimates, but I would also like to point out that the 
services, in fact, do make estimates a couple of years out. The 
Army makes estimates based on some sort of rotation plan for 
their troops. They have to make it beyond fiscal year 2007 and 
fiscal year 2008 for planning purposes, and they have to do 
that for other elements of war cost. It is just inevitable. It 
is inevitable.
    Mr. Shays. And that is why it is somewhat stunning that in 
some cases we are avoiding making estimates.
    Isn't it true, Mr. Walker, that by making estimates, if 
they are wrong we can go back and analyze what was wrong with 
our assumptions?
    Mr. Walker. That is correct, which means it would provide 
more accountability.
    Mr. Shays. OK. Which is, I think, a very important element 
to this. In other words, what are estimates? Were they 
accurate? Why were they or why weren't they? And then who made 
the estimates and why did they make them? It may be they made 
wrong estimates but they are very talented people, but then in 
the future they will have learned from their faulty estimates 
and make better estimates.
    Isn't it logical, Mr. Higgins, that if we make estimates 
and they are wrong and we learn why they are wrong we can make 
better estimates in the future?
    Mr. Higgins. Just following up on what Mr. Roth was talking 
about was to set up correct assumptions, recognizing that we 
are in a war zone, but the practical matter, everything we have 
been doing for the last few years at the State Department is 
lessons learned. How do we get better? Certainly estimates 
going forward is something we have to work from. But I also 
think we have to be dealing in the now and project what do we 
think, particularly what do we think the Iraqis are going to be 
able to do and what do we think the international players will 
do.
    It seems logical, what I am hearing you say, and you are 
speaking basically from the State Department's side of this 
equation. Every time I go there I try to leave saying well, are 
they ready yet. I have a sense, you know, they are getting 
darned close, so maybe we only have 30 to 40 percent of Iraq 
that is controlled by the Iraqis, but it means we don't need 
our military there, which has meant that we can then bring our 
military to places we need them more. I can't imagine. I am 
trying to anticipate as I go there what does this mean for the 
future, and I try to come back with some findings of fact and 
then recommendations. I have to do that. I don't know why DOD 
wouldn't do that, and it would seem to me it would be logical.
    Mr. Kunder, wouldn't you be making--let me just make you 
respond whether you agree or not with Mr. Walker. I want to 
know if I can have consensus here or not. Do you agree with Mr. 
Walker's comment about learning from mistakes, wrong estimates, 
and also accountability.
    Mr. Kunder. We have components of the reconstruction plan 
fully costed out. As I said in my testimony, anticipating the 
elections we costed out every item, ballots, town hall 
meetings, and so we can give detailed--I guess I don't want to 
leave you with the impression we are not doing any costing out, 
because, in fact, for components we have a major component of 
the reconstruction that has to do with building capacity in the 
ministries so that we have oil production and electric 
production up. The elements are things like building an 
Inspector General function, building a budgeting function, 
computerization, training of the civil servants. Each one of 
these items are detailed, costed out. We can provide you those 
cost estimates.
    Mr. Shays. But you have to make assumptions in every case. 
In every case you have to make assumptions, correct?
    Mr. Kunder. Yes, sir.
    Mr. Shays. I mean, to say that you can't do it because you 
can't make assumptions because you don't know how it is going 
to turn out to me is a faulty way to think. You have to make 
assumptions.
    So let's just take one element that I think is under your 
territory, reconstruction of Iraq. Now, what is the biggest 
assumption we made that was wrong, in your judgment? I will 
give you a clue. It has something to do with security.
    Mr. Kunder. We did not anticipate the level of violence. 
That is correct.
    Mr. Shays. Right. And so how much of what we intended to go 
for reconstruction went for security?
    Mr. Kunder. The easiest way to say that is that 
approximately--we have testified several times that 
approximately 22 percent of our total reconstruction costs--
this is within USAID--has gone into providing security so the 
construction effort can go forward, so my best estimate would 
be that we have probably accomplished 80 percent of the bricks 
and mortar or schools or teacher training that we intended to 
do, because our estimate is 22 percent.
    Mr. Shays. Now, some people look at that as a horrible 
thing that we had to set aside so much for security, but it 
explains to me why we aren't as far ahead in reconstruction, 
because there is a reason. We made an estimate that was wrong. 
I learned from that as a Member of Congress. I would think you 
would learn from that.
    That is why I would think we would project and then we 
would determine whether or not our projections were accurate or 
not. Our projections were wrong based on a good chunk of the 
dollars having to go to security, which then gets us back to 
asking, well, what mistakes did we make with security. It gets 
us to focus, in my judgment, on what is the biggest cost.
    Dr. Marron, would you weigh in on this?
    Dr. Marron. Absolutely. Since, as you know, sort of CBO's 
No. 1 business line is providing estimates of all sorts of 
policy proposals that the Congress is considering, and I would 
say going through the estimation process has at least three 
benefits. The first is the estimates, themselves, are valuable 
for decisionmaking. The second is, as you have emphasized, is 
that over time you can learn from your estimates and make them 
better so you can make better decisions in the future. And then 
the third that I want to emphasize is that going through the 
estimation process, itself, is a way to learn about the policy 
choices that you face.
    I can't tell you how many times there are that we will 
evaluate an estimate of a bill that has been proposed by some 
Member of Congress, we will come back to them with our score, 
and they will say oh, no, that is not what we intended. They 
learn by the process it is not what they intended. So in sort 
of in the development of policy at the time it lets you iterate 
and figure out what it is that you want to do.
    Mr. Shays. Mr. Roth, I am not throwing stones at you on 
this. I think you are basically caught in the middle of 
decisions made by higher authorities, but it strikes me that by 
not having estimates, by not trying to anticipate, by not 
trying to forecast, it almost has a sense of fly by night. We 
are just going to do whatever we do.
    I just think what I have learned mostly from this is if we 
are not making these kinds of estimates we are depriving 
ourselves of extraordinary information, we are depriving 
ourselves of some real accountability because, frankly, it will 
enable us to know who is really sharp in anticipating and was 
closer to the estimate. To me it is like an economist where you 
look at their track record and you say maybe the next time 
around, if I am a policymaker, I want to listen to that person 
as opposed to that one. It doesn't mean the other one is a bad 
person; it just means, you know, they didn't get it right. I 
have to live with that as a Member of Congress.
    Ms. Belasco, did you want to weigh in on this?
    Ms. Belasco. You know, I just wanted to mention, even 
though Defense typically, from John's description, you know, 
each of the estimates for war are as they come up, I mean, if 
there is any agency in Government that does long-term budget 
planning it is the Pentagon, because they are the ones who have 
had a future years defense plan and they routinely estimate at 
least 5 years out.
    So in one sense the Defense Department should have the 
greatest skill at doing this kind of thing. And the other thing 
is that there is a very real stake in making sure that 
estimates are accurate, because if you don't learn from your 
mistakes you will include costs that are the wrong costs, and 
in order to do that you have to go through this kind of 
evaluation and then another estimate in the exercise.
    Mr. Shays. Are you saying----
    Ms. Belasco. And there is nothing wrong with a range. I 
think that is the other thing.
    Mr. Shays. And that is the reason, Mr. Roth, why I am so 
surprised, because I really believe DOD has been one of the 
most effective at trying to anticipate costs in the future. And 
I realize your comment would be you have dealt with greater 
certainties when it is not the war in Iraq, and you are on 
record with that.
    Mr. Higgins, we do need to assist, pay a little attention 
in the State Department, give Mr. Roth a little bit of a rest 
here.
    I need to understand the answers to the questions I asked 
before, which is basically your comment that you don't separate 
cost, you don't look at the incremental cost, so explain to me 
why the war in Iraq? Is it because the increment is so tiny, or 
is it because--why not?
    Mr. Higgins. Well, as a practical matter, sir, we look at 
the global war on terror as our top priority. It is embedded in 
everything we do, from our consular affairs to our weapons of 
mass destruction efforts, but the way we have looked at Iraq 
and Afghanistan, it has been very much done by supplementals. 
We are a little different because our appropriations are done 
by program, so we are able to track it pretty effectively. So I 
think that a practical matter is we are not really looking at 
this incremental; we are looking at what is the specific cost 
in Iraq to run our operations and to run our foreign assistance 
programs.
    Mr. Shays. So you are in Afghanistan, you are in Iraq, in 
particular, so those costs you just basically attribute to the 
war?
    Mr. Higgins. That is right.
    Mr. Shays. OK. And you attribute all the agency costs? I 
mean, let me just say we would have Treasury there, we would 
have Commerce there. Do you attribute that as part of the cost 
of the war, or does Commerce do it and does the agency do it 
and does Justice do it?
    Mr. Higgins. At this point, as you know, the way we do our 
normal billings at the various missions is done by we bill all 
the agencies who happen to be there. In Iraq and Afghanistan at 
this point we pay for the life support and we put it into our 
budget.
    Mr. Shays. So you only incorporate their life support? You 
don't incorporate their other costs?
    Mr. Higgins. That is right, their particular salaries, 
things like that. No, that is picked up by the respective 
agency.
    Mr. Shays. Yes. Mr. Walker, just walk me through what Mr. 
Higgins said. Translate what he said to me in a way that I 
maybe can understand a little better. I am pretty close. Not 
your fault, sir.
    Mr. Walker. Well, you are right, Mr. Chairman, in saying 
that the amounts of money involved here are a lot less 
significant than for the Department of Defense, and it is a 
little bit more difficult to differentiate between what is 
incremental and what is not, but let me give you an example of 
something that is incremental.
    In order to get an adequate number of people to go to Iraq, 
the State Department is having to pay significant financial 
incentives to get people to go to Iraq. They may be having to 
do the same thing in Afghanistan. I am not sure. I would argue 
that is an incremental cost. That is a cost that otherwise they 
may not have incurred.
    Mr. Higgins. I should also add that when we talked about 
incremental, I think what I am really looking at is the 
specific cost of operating in Iraq, and I think the clear cost 
driver is security. That is by far and away our largest 
particular cost of securing the embassy at the various regional 
sites. That is an incremental cost and General Walker is 
correct that there are other additional costs in terms of the 
people going over there, what we need to pay them in terms of 
hazard pay. For the record, they work 7 days a week, so we pay 
them for that.
    Mr. Shays. For the record, you don't go out and play 
tennis.
    Mr. Higgins. That is for sure.
    Mr. Shays. You don't play golf, you don't go have a stroll 
through the city, you don't go to movie theaters, you don't go 
to night clubs, you don't go anywhere except to eat, to work 
out, and to work.
    Mr. Higgins. That is right.
    Mr. Shays. That is your three options. It is remarkable.
    Let me ask you, then I am going to have the professional 
staff ask a few questions in a second, but when Mr. Bremmer was 
there for the first year was he under DOD, State, or both?
    Mr. Higgins. Ambassador Bremmer?
    Mr. Shays. Yes.
    Mr. Higgins. CPA was a DOD operation.
    Mr. Shays. OK. There has been speculation that Mr. Bremmer 
was paid a very sizable salary. What was Mr. Bremmer paid?
    Mr. Higgins. I have absolutely no idea, sir.
    Mr. Shays. Mr. Roth, what was he paid?
    Mr. Roth. I will have to take that for the record.
    Mr. Shays. Was he paid as an employee or was he paid as a 
consultant?
    Mr. Roth. Again, I don't have that fact at my fingertips 
here.
    Mr. Shays. OK. This is a very serious question to which I 
would like an answer by tomorrow. I would like to know what Mr. 
Bremmer was paid. I would like to know who controlled his 
operation. Did it go under your budget in DOD, Mr. Roth?
    Mr. Roth. Yes. I mean, he reported to the Secretary of 
Defense.
    Mr. Shays. So when we sent over literally billions of 
dollars in crates, whose control was it? Who was supposed to 
control those dollars?
    Mr. Roth. When we sent the money--are you talking about the 
cash that came from----
    Mr. Shays. Yes.
    Mr. Roth [continuing]. The seized assets and the like?
    Mr. Shays. Well, were those the only cash that went?
    Mr. Roth. The answer to your question was it was a Defense 
Department operation.
    Mr. Shays. OK.
    Mr. Roth. It was done under the auspices of financial 
officers of the Defense Department.
    Mr. Shays. OK. Did you have control over that or was that a 
separate organization?
    Mr. Roth. I personally didn't have control over it, but the 
comptroller organization worked with--essentially it was the 
Department of the Army. Department of the Army and their 
financial officers did the hand-off from hand to hand until it 
was in the theater.
    Mr. Shays. During my 13 trips, on occasion there were 
allegations that dollars were left in drawers, in closets, and 
so on. When I was there I literally saw stacks of dollars 
literally in crates, not locked up, not under any supervision. 
Is that a fact or not?
    Mr. Roth. I will have to take that for the record, sir. I 
don't recall all the circumstances.
    Mr. Shays. Can GAO speak to that issue?
    Mr. Walker. There were inadequate controls over cash 
resources, no doubt, and I can provide more for the record if 
you would like.
    Mr. Shays. OK.
    Just in terms of the $9 billion, not to leave it hanging 
here, and it was not confronted, I want to make sure we are 
clear as to the $9 billion. The $9 billion number I believe 
includes a lot of different parts. This was not $9 billion 
lost, correct, Mr. Walker?
    Mr. Walker. That is correct, and most if not all that 
money, it is my understanding but I want to check for the 
record, was Iraqi money.
    Mr. Shays. Right. But it was money that was given to pay 
salaries for Iraqis. For instance--and this is where the dicey 
part comes--Mr. Roth, if you were one of the generals in their 
military you were given a--I won't use you, Mr. Roth. That is 
not fair. I am sorry. Ms. Belasco, if you were a general in the 
army you were given and you said you had 1,500 troops, we 
allocated the salary for 1,500 troops, but it is my 
understanding that you may have only had 1,200 troops, and part 
of the problem of recordkeeping was the fact they had no 
checking system; is that correct, Mr. Walker?
    Mr. Walker. Correct. There is still a problem today with 
regard to not knowing how many employees they have, even with 
regard to their civilian ministries.
    Mr. Shays. So they are paid in cash?
    Mr. Walker. At the time that you are speaking of they were 
paid in cash, correct.
    Mr. Shays. Well, how would they be paid now?
    Mr. Walker. I can't state for the record how they are paid 
now. I will find out and provide it for the record.
    Mr. Shays. Right.
    But they don't have a checking system?
    Mr. Walker. In all likelihood they are paid in cash now. 
That is my understanding, but I am under oath. I want to make 
sure.
    Mr. Shays. Fair enough. So can any of you just speak to 
that issue? We are going to end pretty soon here. The issue is 
of the $9 billion. We can let it hang out there. Mr. Roth, do 
you want to let the $9 billion hang or do you want to put a 
little clarity? I am not saying that it is a pretty story, but 
it is not $9 billion that just walked out. It went to pay 
soldiers, it went for other costs. The problem is we didn't 
have the accounting processes to document and certify that 
every penny was spent the way it was to be spent. That is my 
understanding. Is that correct or not, Mr. Roth?
    Mr. Roth. Sir, I don't know the fact about the $9 billion. 
I am not trying to dodge the question; I honestly do not have 
any first-hand knowledge of it.
    Mr. Higgins. Mr. Chairman, I spent 13 months over in Iraq 
in two tours, so I had the opportunity to be there at that 
time. I think Thegar, who reported that, has done a great job 
in terms of helping us give advice about how to fix some of the 
issues we have. I have always disagreed with that. The issue--
and you hit on it--was one of there is not an adequate audit 
trail based on U.S. standards, again reflecting on the fact 
that we were paying the salaries. The money went to the Central 
Bank of Iraq that was turned over to the Ministry of Finance 
who then, in turn----
    Mr. Shays. So we can document that it was turned over?
    Mr. Higgins. Yes. It was turned over to ministries. The 
question of how far--at least on the bulk, you know, there were 
a number of issues, but the bulk of the money--I think General 
Walker hit on it--was the Iraqi salaries. There was 1.1 million 
Iraqis being paid monthly, so that the ministries----
    Mr. Shays. That was 1.1 million?
    Mr. Higgins. Yes, 1.1 million Iraqis were getting paid, and 
so effectively what happened was that the money was turned over 
to the ministries and they would pay their salaries, as I am 
sure they continue to do today.
    Mr. Shays. Mr. Walker, any comment?
    Mr. Walker. My staff tells me they are still on a cash 
basis with regard to payment.
    Mr. Shays. Before professional staff, Dr. Marron or Ms. 
Belasco, do you care to add anything to this?
    Dr. Marron. I have nothing to add.
    Mr. Shays. OK.
    Mr. Chase. Mr. Higgins, what are the prospects for re-
engaging the international community to assist us in providing 
additional resources for the reconstruction of Iraq?
    Mr. Higgins. I think last week when Ambassador Jeffries and 
Ambassador Khalilzad spoke they pointed out the discussions 
that Prime Minister Malaki and the U.N. are moving forward with 
the compact. The international community is a key player in the 
financial plan or the future of Iraq, Iraq's ability to help 
pay for its own reconstruction. But, again, the $13.5 billion 
that has been pledged, we are now getting to that stage where 
we anticipate seeing more of that as the U.N. has set up and 
the World Bank has set up operations in Iraq.
    Mr. Walker. At some point, Mr. Chairman, I would like to 
answer your earlier question which I thought was an excellent 
one, and that is what represented incremental cost and what, if 
any, recommendations do we have.
    Mr. Shays. That is how we are going to end up. And the 
elements. I would like if maybe you would start that, Mr. 
Walker.
    Mr. Walker. Thank you, Mr. Chairman. I think those are both 
excellent questions. Keep in mind we are talking about 
incremental costs here; therefore, they represent costs that 
would not be incurred but for the global war on terrorism, and 
one has to have a solid definition of what that is.
    To me that would be such things as military and civilian 
personnel and support cost, additional capacity building, 
reconstruction cost, support of Iraqi security forces, reset 
cost. Reset cost would include repositioning as well as 
reconstitution of equipment. Also, other long-term costs that 
on a cash basis you don't see right away but undoubtedly will 
be there. That includes long-term disability and health care 
costs. So those would be direct, incremental cost.
    I would also respectfully suggest that since the country is 
running huge deficits, that we will have to debt finance this, 
so an additional direct cost would be the interest cost 
associated with these expenditures, although those don't just 
relate to the global war on terrorism, they relate to deficits 
that don't have anything to do with the global war on 
terrorism, and most of our deficit does not have anything to do 
with the global war on terrorism.
    Last, I think one could speculate as to how much of an 
impact this is likely to have on our long-term ability to 
recruit and retain individuals and the related costs that we 
might incur. There are likely to be some costs there, but I 
think it would be difficult to estimate that with any degree of 
reliability.
    As far as recommendations, Mr. Chairman, I will give you 
three for now. No. 1, that the respective departments and 
agencies be required to build into their normal budget request 
and appropriation request a reasonable estimate of the cost for 
the global war on terrorism; that they also be required to 
segment out by the major elements, meaning Iraqi Freedom, 
Enduring Freedom, and Noble Eagle, which are that three major 
components; and that we recognize that these will be good faith 
estimates based upon certain assumptions, and that if there are 
significant variances they may have to come forth with a 
supplemental, but that would be for the variances, not for the 
baseline request, which would be based on their good faith 
estimates.
    In addition I would suggest the that Congress needs to act 
quicker on appropriations bills, because there are costs, there 
is disruption, and there are increases that are incurred when 
the appropriations bills aren't enacted in a timely manner. CR 
should be a rare exception rather than the rule.
    Mr. Shays. Thank you.
    Dr. Marron, would you add, and Ms. Belasco? I would also 
like all of you to speak to this issue of the elements. You can 
just say you agree with Mr. Walker and would add to it or 
subtract from it, whatever you would like.
    Dr. Marron. I think Mr. Walker set out quite well the list 
of incremental costs to consider. The one element I would 
highlight, which raises some issue, is the interest burden that 
comes with financing these expenditures. Really, the issue 
there is what purpose are we going to put the cost estimate to.
    As you know, many of the cost estimates that are used in 
the usual course of the congressional budget process that CBO 
provides do not include interest in them. So if you want to do 
an apples to apples of a scenario for the Iraq war versus some 
other type of spending or tax program, apples to apples there 
would typically be no interest in either. If you wish to use 
interest in the Iraq war or the global war on terror estimates, 
it would be important that, whenever comparing that to some 
other source of financing or spending, that interest be added 
in in parallel there.
    Mr. Shays. I thank you for making that point. You recently 
announced that the deficit is anticipated to be how much lower? 
From what to what in this fiscal year?
    Dr. Marron. Several months ago, looking at the strong 
revenues, we suggested that the deficit this year might be 
somewhere in the neighborhood of $300 billion. The 
administration came out with $296 billion last week.
    Mr. Shays. As opposed to what is actually projected when we 
started out in the budget?
    Dr. Marron. When we started out including the 
administration's policy proposals, we were in the $370 billion 
range. I should emphasize we will come out with our formal 
estimate in August.
    Mr. Shays. When we adopted the budget we were at 370?
    Dr. Marron. Excuse me?
    Mr. Shays. Weren't we in the 400's?
    Dr. Marron. The administration, in their budget proposal 
with their estimates, had a number north of $400 billion.
    Mr. Shays. But when we adopted the budget we were at what 
number?
    Dr. Marron. I am sorry? Which number? I am sorry, the 
confusion is so the administration said 400, I believe it was 
412, in that neighborhood.
    Mr. Shays. And what did you all say?
    Dr. Marron. And then we re-estimated that exact set of 
policies and had an estimate of 371.
    Mr. Shays. So basically we are seeing, from CBO's 
projection, we are seeing a $71 billion reduction?
    Dr. Marron. As of where we were, that was the number we put 
out 2 months ago now. I would suggest that it may differ again 
when we come out with----
    Mr. Shays. OK. Fair enough.
    Dr. Marron [continuing]. Our formal estimate in August.
    Mr. Shays. Fair enough.
    Ms. Belasco.
    Ms. Belasco. I would like to make----
    Mr. Shays. This is about elements.
    Ms. Belasco. I think the elements are good elements. I 
think it is very important to make sure that we don't build 
into future estimates higher costs that are due to contracting 
problems, and nobody has brought that one up, so I just want to 
mention that.
    Mr. Shays. OK.
    Ms. Belasco. Because the models tend to be updated with the 
latest actual costs, but if the actual costs build in inflated 
costs that is not a good idea.
    I think in terms of recommendations, even though this 
sounds like a sort of a budgeteer's recommendation, I think it 
would be worth looking seriously at setting up separate 
accounts for war appropriations, which now run more than a 
fifth of DOD's total appropriations. That would give you more 
visibility.
    Mr. Shays. When you say war, are you saying specifically 
the war in Iraq or the global war on terror?
    Ms. Belasco. In fiscal year 2006 the total amount for the 
global war on terror was about, I think, $117.6 billion.
    Mr. Shays. I am just asking you----
    Ms. Belasco. DOD's peacetime budget is about $444 billion.
    Mr. Shays. OK. Fair enough. Thank you.
    Mr. Kunder, Mr. Roth, and Mr. Higgins, I would like a 
response on this.
    Mr. Kunder. Sir, with profound respect for the Congress, I 
just would like to say that, as an operator, as somebody who 
has to make these programs happen on the ground, the comment 
about the delay in appropriations every year is really very 
significant.
    Mr. Shays. I will let you say that, but tell me elements 
first, about the elements. I am going to let you come back to 
that point. What about the elements? Mr. Walker was talking 
about the elements that you need to determine the true cost of 
the war. What are the elements? Do you disagree with anything 
Mr. Walker said? Do you care to add anything to it?
    Mr. Kunder. Yes, sir. I am sorry. I just wanted to 
emphasize that one first. We are trying to learn from our 
mistakes, what we did right and wrong with the earlier 
estimates, but I find those to be useful recommendations going 
forward.
    Mr. Shays. I will let you come back and make your point in 
full.
    Mr. Roth.
    Mr. Roth. Dealing with what I heard, I don't have anything 
really to contend with. Again, in our terminology the cost of 
the military operations, themselves, and all the costs that go 
along with that in terms of the additional logistics support, 
additional personnel costs, special pays, the mobilization of 
the Guard and Reserve, those kinds of things, we have pretty 
clearly a lot of experience in demarking the fact, the line 
between what our incremental costs and what our so-called 
peacetime or baseline costs.
    I would agree that the reset and reconstitution of 
equipment is a cost, an incremental cost of war. We also have 
costs in terms of additional force protection requirements and 
some additional initiatives in terms of dealing with the 
improvised explosive device threat and those kinds of things 
that we would also argue are incremental costs of the war, as 
well. So, in general, from what I heard from Mr. Walker, I 
don't have any problem as far as the DOD cost.
    Mr. Shays. Thank you.
    Mr. Higgins.
    Mr. Higgins. I would concur with General Walker, but I 
would probably be a little more expansive. I would probably add 
in the cost of when we start realizing that the global war on 
terror is just not a military or security cost, it is a 
development and diplomatic cost, building partnerships, helping 
develop some level of prosperity elsewhere to take away the 
reasons for terror, so I think when we look at the global war I 
think we really do need to look at all three of those and 
balance the funding in looking at it from that basis, that a 
diplomatic and a developmental solution is far less expensive 
if we get involved early on.
    Mr. Shays. That is an interesting point. You are speaking 
to a former Peace Corps volunteer. What I hear you saying is 
when we add up all these costs and we can say we can go this 
route or we can go this route or we can do a combination, maybe 
our long-term costs will be a lot less if we go in a different 
direction than just where some might think we need to go.
    Mr. Higgins. Absolutely. I think the lesson that we are 
taking from Iraq is that the need to be involved early on with 
a strong diplomatic and development focus will save a lot of 
money and save a lot of lives other on. There are a lot of 
other areas around the world that have problems right now, and 
I think we need to be very focused on that. It is not just a 
security approach, chasing down terrorists, but what are you 
doing to change that. I hate the term hearts and minds.
    Mr. Shays. OK. I am going to make some assumptions and just 
put them on the record and then I am going to ask each of you 
to just make whatever closing point you wanted so you, Mr. 
Kunder, can make the point you wanted to make.
    We have over 130,000 of troops, but we also have a lot of 
contractors who do the work that troops used to do. Frankly, I 
am happy those contractors are doing exactly what they are 
doing. It allows our military to be at the tip of the spear.
    If we don't allow or encourage the new Prime Minister to 
reach out and to provide amnesty, to have reconciliation, we 
will, in my judgment, see this war continue ad infinitum, and 
some of the greatest opponents of the war are opposed to 
reconciliation, opposed to amnesty, which is curious to me. 
That absolutely has to happen. If the Prime Minister chooses 
not to crack down on the gangs that are roaming Baghdad, allows 
for basically these militias to continue, he is basically, in 
my judgment, going to go the route of a civil war.
    And then I would say to you, Mr. Roth and DOD, that this 
very strong support of the war is going to say we need to get 
out, because what then is happening is that we would be having 
a government that says Shiites and Kurds want to dominate the 
Sunnis and we just want to battle it out with them. Well, if 
they are going to battle it out, then my recommendation is to 
go. But if this Prime Minister does what he says he wants to 
and empowers his own troops to crack down on the militia, and 
they would be some of his own people, or at least people who 
helped get him in his office, then I think that you will see a 
noticeable and meaningful reduction in our troops.
    But now, having said that, having been to Serbia and Bosnia 
and other places where they are 10 years later, if we do our 
job we are not getting all our troops home. They don't have the 
logistics, they don't have the medics, they don't have 
particularly the aircraft to do what they need to do. They have 
been trained to be insurgents and not to be an army that can 
defend its border with Iran, Turkey, or Syria, so we will have 
to have some presence there.
    Those are assumptions that I think are pretty logical, and 
they would steer me to make some assumptions. I don't think it 
is wrong for DOD to make some assumptions. They will know in a 
few weeks or months this new Prime Minister and the route he is 
going to go, and then I think they can make some very real 
assumptions.
    I guess, Mr. Roth, I would say to you I hope and pray that 
the mindset of DOD is to start to make estimates of the future, 
to be proud of those estimates, to share them with Congress, to 
go on record, and the worst thing that could happen is you are 
wrong, but at least we have estimates as opposed to no 
estimates. That would be the message I would like you to take 
back, and I appreciate it, and I realize that you are taking 
the position that DOD has sent you here and you are doing your 
job. All of you are patriots. All of you are good people. All 
of you I know want to see success in Iraq. I pray that we see 
it. But I think that we have our work cut out for us.
    It is a plea, as someone who is supportive of our being in 
Iraq, that we be more forthcoming about the cost of this war 
and that we make a greater effort to nail those numbers down.
    With that I would just invite each of you to make whatever 
closing comment. We will start with you, Ms. Belasco. Anything 
you want on the record, anything you want on the record, now is 
your shot.
    Ms. Belasco. Well, I think you are right in saying 
essentially that the stakes are very high in this, and I just 
like to say that I think it is an important option to look at 
budgeting for war earlier with the caveat that yes, indeed, you 
may be less accurate, but maybe it is still worth it. And I 
think it is also important, if Defense budgets for war at the 
same time as they budget for their regular operations, then 
there is a better chance that they can look at how the pieces 
connect, and that really hasn't happened much in the past.
    I think particularly with the reset issue, which is many 
billions of dollars, that is very important, because there may, 
in fact, be some offsets in the peacetime budget because of the 
earlier spending to meet war needs. Only if you look at things 
together as a whole is that likely to come out.
    Thank you very much.
    Mr. Shays. Thank you very much.
    Dr. Marron. I guess in concluding I would just echo some 
things from my original testimony about in order for CBO to 
serve the Congress and provide the best cost estimates for 
scenarios possible, it helps to have as good information as 
possible about where we have been historically, both in terms 
of spending obligations, et al., and to the drivers of that. To 
the extent it is possible to have more information that links 
what is happening on the spending side to what is happening on 
the ground, that strengthens our ability to cost out some areas 
that the Congress may want to consider.
    Mr. Shays. Thank you.
    Mr. Kunder, make your point now, sir.
    Mr. Kunder. I will save that one until later, sir.
    Mr. Shays. No, don't save it. I want you to make it. I 
interrupted it. You can make two points.
    Mr. Kunder. In order to keep our folks focused on the need 
to do good planning and budgeting, the appropriations do have 
to come in a timely fashion. We just got the appropriations 
from 2006 based on by the time you go through the OMB 
apportionment and so forth. And so the folks out in the field 
who are trying to run real problems in the Bangladeshes and 
Afghanistans of the world who have gone through detailed 
budgeting processes then find that all of their planning has 
gone out the window. So I just want to link the important issue 
you are raising about planning with the appropriation cycle, 
sir.
    Mr. Shays. Well, Mr. Kunder, I sleep with a woman who tells 
me the same thing. My wife happens to work in the Peace Corps 
and she says it does raise havoc, and she is not happy about 
it, and I take the heat for all of Congress.
    Any other point you want to put on the record?
    Mr. Kunder. Mr. Waxman is not here to defend himself, but 
he said at the end of his statement we have to stop the waste, 
fraud, and abuse in Iraq. With all due respect, the folks who 
are out there now are risking their lives, and this is--I will 
quote SEGIR, the Inspector General for Iraq reconstruction has 
said repeatedly in his quarterly reports that for the last 
couple of years for the appropriated funds that are out there I 
know there are huge policy debates but there has not been 
massive waste, fraud, and abuse. Those folks who are out there 
are working under careful accountability rules. There is not 
massive waste, fraud, and abuse by the U.S. Government 
employees, Defense, State, and AID who are out there working in 
Iraq.
    I am a Scythian creature, so I know there are big policy 
issues. That is different. But there is not massive waste, 
fraud, and abuse in Iraq.
    Thank you, sir.
    Mr. Shays. Fair enough. Thank you for making that point.
    Mr. Roth.
    Mr. Roth. The only comment I would make in conclusion, a 
number of comments that address the accuracy and reliability of 
Defense data. I really would like to emphasize that the data we 
provide both in the budget justification material, itself, and 
in the accounting reports and financial management systems is, 
in fact, accurate and reliable.
    And, going even further, we recognize room for improvement, 
as well, and we have very serious efforts that the senior 
leadership of the Department is very committed to, to improving 
the internal controls, improving reducing material weaknesses, 
and the like. So I just wanted to leave that as the 
Department's position.
    Mr. Shays. Thank you, sir. Thank you very much.
    Mr. Higgins.
    Mr. Higgins. I think I would like to leave with one point, 
and that is that when we analyze costs and budgets I think we 
need to recognize the fundamental fact, and I think we have 
talked about it today that this is not a post-war 
reconstruction, this is a wartime reconstruction, that it is 
the front line of the war. The insurgents, a primary focus is 
to destabilize and keep essential services from being set up 
and keep the government from taking hold. So when we talk about 
what we are doing on the developmental side, keep that in mind. 
It is a key part of the war on terror.
    I think also when you realize we have lost over 500 
contractors and 5,000 wounded and 2,000 attacks----
    Mr. Shays. That is 500 contractors have been killed?
    Mr. Higgins. Yes.
    Mr. Shays. It is pretty amazing. Percentage-wise, that must 
be a huge number.
    Mr. Higgins. Yes. And so I think Jim Kunder is absolutely 
right. We spend a lot of time criticizing, but nothing like 
this has ever happened in history. I was in Washington the 
weekend of the sniper and the place was empty. One sniper. This 
is a daily event for those people out there. So I think when we 
realize what they have been operating under, I think that, you 
know, rather than being too hard, we are very hard.
    And I think the last point I want to make is that, having 
been out in Iraq for the time I have, I have had a chance to 
see you and we have made some presentations. I think you and a 
number of the Members, but particularly you, sir, you have your 
13 trips. You have gone to places I don't think I would have 
the courage to go. We appreciate it.
    I am speaking as someone who has spent a good deal of time 
out there and expect to be going back there again. We have 
developed a great deal of admiration, because the trick is you 
are asking the hard questions and you are demanding the 
accountability. One of the commitments I made when I took this 
job was to ask the hard questions and to demand accountability, 
so personally I want to thank you for the example you have set 
for all of us.
    Mr. Shays. Mr. Higgins, you have made me a friend for life. 
Thank you. You are my friend for life. God bless you.
    Mr. Walker. Plus, he is a constituent and he can vote, too, 
Mr. Shays.
    Three comments, one of which is based on----
    Mr. Shays. See, I should be saying that about him.
    Mr. Walker.
    Mr. Walker. One of which is based on your comment, Mr. 
Chairman. Again, I want to compliment you again for holding 
these oversight hearings. Iraqis need to do more to build 
bridges between Shiite, Sunni, and Kurds domestically. We, the 
United States, need to do more to build bridges and partner for 
progress internationally. And both the United States and the 
international community needs to do more to provide civilian 
technical assistance to help the Iraqis deliver results that 
the people will care about, whether they are Shiite, Sunni, or 
Kurd. All three of those I think are critically important and I 
stand by my prior recommendation.
    Thank you, Mr. Chairman.
    Mr. Shays. Thank you very much. It is a wonderful way to 
end this hearing with all of your comments. It is nice, Mr. 
Walker, to end with yours, in particular.
    Thank you all very much. This hearing is now adjourned.
    [Whereupon, at 5:30 p.m., the subcommittee was adjourned.]
    [Additional information submitted for the hearing record 
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