[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]





                             BUDGETING FOR
                               WAR COSTS

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

                                HEARING

                               before the

                        COMMITTEE ON THE BUDGET
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

            HEARING HELD IN WASHINGTON, DC, JANUARY 18, 2007

                               __________

                            Serial No. 110-1

                               __________

           Printed for the use of the Committee on the Budget


                       Available on the Internet:
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                        COMMITTEE ON THE BUDGET

             JOHN M. SPRATT, Jr., South Carolina, Chairman
ROSA L. DeLAURO, Connecticut,        PAUL RYAN, Wisconsin,
CHET EDWARDS, Texas                    Ranking Minority Member
LOIS CAPPS, California               J. GRESHAM BARRETT, South Carolina
JIM COOPER, Tennessee                JO BONNER, Alabama
THOMAS H. ALLEN, Maine               SCOTT GARRETT, New Jersey
ALLYSON Y. SCHWARTZ, Pennsylvania    THADDEUS G. McCOTTER, Michigan
MARCY KAPTUR, Ohio                   MARIO DIAZ-BALART, Florida
XAVIER BECERRA, California           JEB HENSARLING, Texas
LLOYD DOGGETT, Texas                 DANIEL E. LUNGREN, California
EARL BLUMENAUER, Oregon              MICHAEL K. SIMPSON, Idaho
MARION BERRY, Arkansas               PATRICK T. McHENRY, North Carolina
ALLEN BOYD, Florida                  CONNIE MACK, Florida
JAMES P. McGOVERN, Massachusetts     K. MICHAEL CONAWAY, Texas
BETTY SUTTON, Ohio                   JOHN CAMPBELL, California
ROBERT E. ANDREWS, New Jersey        PATRICK J. TIBERI, Ohio
ROBERT C. ``BOBBY'' SCOTT, Virginia  JON C. PORTER, Nevada
BOB ETHERIDGE, North Carolina        RODNEY ALEXANDER, Louisiana
DARLENE HOOLEY, Oregon               ADRIAN SMITH, Nebraska
BRIAN BAIRD, Washington
DENNIS MOORE, Kansas
TIMOTHY H. BISHOP, New York

                           Professional Staff

            Thomas S. Kahn, Staff Director and Chief Counsel
                James T. Bates, Minority Chief of Staff

















                            C O N T E N T S

                                                                   Page
Hearing held in Washington, DC, January 18, 2007.................     1
Statement of:
    Hon. John M. Spratt, Jr., Chairman, House Committee on the 
      Budget.....................................................     1
    Hon. Paul Ryan, a Representative in Congress from the State 
      of Wisconsin...............................................     4
    Hon. Gordon England, Deputy Secretary of Defense, and Hon. 
      Tina W. Jonas, Under Secretary of Defense (Comptroller)....     5
    Robert A. Sunshine, Assistant Director, Congressional Budget 
      Office.....................................................    55
    Steven M. Kosiak, Director of Budget Studies, Center for 
      Strategic and Budgetary Assessments........................    61
Prepared statement of:
    Chairman Spratt..............................................     3
    Mr. England and Ms. Jonas....................................     7
    Mr. Sunshine.................................................    57
    Mr. Kosiak...................................................    64


































 
                        BUDGETING FOR WAR COSTS

                              ----------                              


                       THURSDAY, JANUARY 18, 2007

                          House of Representatives,
                                   Committee on the Budget,
                                                    Washington, DC.
    The committee met, pursuant to call, at 1:53 p.m., in room 
210, Cannon House Office Building, Hon. John M. Spratt, Jr. 
(Chairman of the committee) presiding.
    Present: Representatives Spratt, DeLauro, Cooper, Schwartz, 
Kaptur, Becerra, Doggett, Berry, Boyd, McGovern, Sutton, Scott, 
Etheridge, Baird, Moore, Bishop, Andrews, Edwards, Blumenauer, 
Hooley, Allen, Ryan, Barrett, Bonner, Garrett, Hensarling, 
Mack, Porter, Alexander, Smith, Conaway, Diaz-Balart, Lungren, 
Tiberi, and Simpson.
    Chairman Spratt. We now will proceed with our Hearing on 
Budgeting for War Costs.
    Our first panel consists of Secretary Gordon England. Is 
Secretary England here? Here he is.
    Secretary England, Admiral Giambastiani, Under Secretary 
Jonas, thanks for coming today, not only coming, but coming on 
fairly short notice and nearly two and a half weeks before the 
President's budget will arrive.
    It is a bit unusual to hold budget hearings before 
submission of the President's budget, but it is necessary in 
our case because we are on a tight schedule to bring a budget 
resolution to the floor with due diligence.
    I also want to thank our second panel, which is on deck 
following you, Steve Kosiak of the Center for Strategic and 
Budgetary Assessments and Robert Sunshine of the Congressional 
Budget Office.
    Defense spending is substantial and always topical, even 
more so this year because there will be three pieces of defense 
spending in the mill, totaling between six and seven hundred 
billion dollars.
    These include the regular the 2008 defense budget request 
at approximately $480 billion; a 2007 war supplemental reported 
to be nearly $100 billion; a 2008 war supplemental, which the 
Administration estimated last July in the mid-session review to 
be $50 billion.
    The size of these requests individually and together compel 
us to understand how expenditures of this kind, which are 
called emergency and are exempt from the usual budget 
strictures, should be treated in our base budget.
    The purpose of this hearing is not to press our witnesses 
for details of what will be in the 2007 supplemental or the 
budget request for 2008. We understand that the President's 
budget is not yet finalized, but we would like to get a better 
grasp of the cost of the Iraqi War, the Global War on 
Terrorism, a way of accounting for costs to date, and 
projecting costs to come.
    We want to explore ways to budget these costs to avoid, if 
we can, recurring supplementals and the usual dispensations 
that we accord emergency spending which complicate our efforts 
to balance the budget.
    We need to know how to project these costs over time, and 
we know that is difficult, but we typically run our budgets out 
five and ten years, and defense spending is a major element. So 
we need to know how our defense spending is likely to unfold 
over at least a five-year period of time.
    I would ask my colleagues, however, in accordance with our 
understanding with Secretary England, to avoid from asking 
details, programmatic details or dollar details about the 
supplementals and the budget still to come because, as I have 
said, it is still not officially released by OMB.
    Since 2001, by our calculation, we have provided more than 
$500 billion for military and reconstruction operations in Iraq 
and Afghanistan. Virtually all of that $500 billion was 
provided through supplemental and emergency funding measures.
    Using supplemental appropriations has been a problem for 
several reasons. One, it has required the military to divert 
funds from regular accounts to pay for war costs until a 
supplemental is enacted with adverse effects on revenues.
    And, two, it has allowed the Administration and the 
Congress to circumvent tough choices in the budget by keeping 
emergency spending effectively off budget. The result, larger 
deficits.
    During the past fiscal year, the federal government ran a 
deficit of $248 billion. The prospects of bringing that budget 
back to balance are bleak. But a first step is to better 
account for the cost of the wars in Iraq and Afghanistan by 
including those costs in the regular budget.
    The costs of our operations in Iraq and the Global War on 
Terrorism increased from $96 billion in 2004 to $122 billion in 
2006, and reports indicate that 2007 war costs could increase 
further to as high as $170 billion. We need to account for the 
impact of these operations on the budget's bottom line 
obviously.
    This Committee is not alone in advocating the inclusion of 
war costs in the regular budget. Congress enacted the 2007 
Defense Authorization Bill requiring the President to include 
war costs in his regular budget starting in fiscal 2008.
    Likewise, the Iraq study group stated that after six years, 
it is past time that we budget for war costs in the annual base 
budget.
    The cost of war beyond the budget year will also be 
significant and should be considered, we think, in the budget 
process because, as I said, we typically run out our budgets 
five to ten years.
    So far, the Administration has resisted cost projections 
because of the uncertainty of future deployments. Clearly there 
is some uncertainty about future deployments, but there is one 
thing we know and know with certainty, future costs will not be 
zero.
    For example, regardless of future deployments, even if the 
Iraq deployment would end next month, there will still be 
considerable costs to reset equipment, to fix, repair, 
refurbish, and replace equipment that has been damaged or 
destroyed in the harsh operating atmosphere of the Persian Gulf 
desert.
    Last year, the Army and Marine Corps estimated a need for 
fifteen to twenty billion dollars a year to repair, replace, 
refurbish equipment which is being worn out at the current rate 
of operations. And for two or three years after the operations 
cease, they still anticipate the same sort of outlay to return 
their equipment back to its operating status.
    There are also significant costs that need to be captured 
in any inclusive summary of the cost of the war. Thus far, over 
3,000 service men and women have died in Iraq. Twenty-three 
thousand have been injured or wounded in action. The cost 
summaries seldom include veterans' healthcare and disability 
benefits, but they are a directly related cost and they are 
substantial.
    Yesterday Rob Portman, the Director of OMB, indicated that 
the President's budget request will include the base budget for 
2008 along with supplementals for war funding in 2007 and 2008, 
plus, if I understood him correctly, projected war spending in 
2009, but not beyond.
    This is an encouraging sign, the first time that the 
President's regular budget will recognize costs beyond the 
budget year, but the Administration's budget, we believe, I 
believe, should go further and take into that our commitments 
are not likely to end in 2009 and the projections should go 
forward, further out.
    If the President's budget purports to bring the budget back 
to balance by 2012, and that is what he says, it has to include 
a realistic projection of our enormous efforts abroad which 
will not end after 2008 or, for that matter, 2009.
    Mr. Secretary, Admiral Giambastiani, Under Secretary Jonas, 
we thank you for coming to help us understand the past and 
current cost of wars in Iraq and Afghanistan and what future 
costs may be, and we look forward to your testimony.
    But, first, I yield to Mr. Ryan for a statement on his 
part.

    Prepared Statement of Hon. John M. Spratt, Jr., Chairman, House 
                        Committee on the Budget

    I open this hearing with a gavel given to me by our former 
chairman, Jim Nussle, and with a pledge to wield it with the same 
fairness and comity that he brought to the chair of this committee. In 
that spirit, I want to thank the Republican members of the Committee, 
particularly the Ranking Member, Mr. Ryan, for allowing us to hold this 
hearing without the customary seven-day notification.
    I also want to thank our witnesses, Secretary England, Admiral 
Giambastiani, and Under Secretary Jonas for coming today to discuss a 
highly topical subject--the cost of our military operations in Iraq, 
Afghanistan, and the global war on terrorism in general. Thank you for 
coming not only on short notice, but nearly two and a half weeks before 
the President's budget will arrive. While it is a bit unusual to hold 
budget hearings before submission of the President's budget, it is 
necessary because we are on a tight schedule to bring a budget 
resolution to the floor, with due diligence.
    I likewise want to thank our second panel, Steve Koziak of the 
Center for Strategic and Budgetary Assessments, and Robert Sunshine of 
the Congressional Budget Office.
    Defense spending is substantial and always topical, but more so 
this year, because there will be three pieces of defense spending in 
the mill, totaling between $600 and $700 billion. These include the 
regular 2008 defense budget, at approximately $480 billion; a 2007 war 
supplemental, reported to be nearly $100 billion; and a 2008 war 
supplemental, which the Administration estimated to be $50 billion in 
its Mid-Session Review last July. The size of these three requests 
compels us to understand how expenditures of this kind, which are 
called emergency and are exempt from the usual budget strictures, 
should be treated in our base budget.
    The purpose of this hearing is not to press our witnesses for 
details of what will be in the 2007 supplemental or the 
Administration's budget request for 2008. We understand that the 
President's budget is not yet finalized. But we would like to get a 
better grasp of the cost of the Iraq war and the global war on 
terrorism--a way of accounting of costs to date and projecting costs to 
come. We want to explore ways to budget these costs to avoid recurring 
supplementals and the usual dispensations for ``emergency spending'' 
that complicate our efforts to balance the budget. We also want to know 
how to project these costs over time, because we typically run our 
budgets out five and ten years, and defense spending is major element. 
I would ask my colleagues to keep their questions in this realm and to 
refrain from questions that probe into details of the upcoming 
supplemental and budget requests.
    Since 2001, Congress has provided more than $500 billion for 
military and reconstruction operations in Iraq and Afghanistan. 
Virtually all of that $500 billion was provided through supplemental 
and emergency funding measures. Using supplemental appropriations has 
been a problem for several reasons: one, it has required the military 
to divert funds from regular accounts to pay for war costs until a 
supplemental is enacted, with adverse effects on readiness; and two, it 
has allowed the Administration and Congress to circumvent tough choices 
in the budget by keeping emergency spending effectively ``off-budget.'' 
The result is larger deficits.
    During the past fiscal year, the federal government ran a deficit 
of $248 billion, and prospects are bleak for bringing the budget back 
to balance. A first step is to account for the costs of the wars in 
Iraq and Afghanistan by including those costs in the regular budget. 
The costs of our operations in Iraq and the global war on terrorism 
increased from $96 billion in 2004 to $122 billion in 2006. Reports 
indicate that 2007 war costs could increase further to as high as $170 
billion. We have to account for the impact of these operations on the 
budget's bottom line.
    This committee is not alone in advocating inclusion of war costs in 
the regular budget. Congress enacted the 2007 defense authorization 
bill, which requires the President to include war costs in its regular 
budget starting in 2008. Likewise, the non-partisan Iraq Study Group 
stated that after six years, it is past time that we budgeted for war 
costs in our annual base budget.
    The cost of war beyond the budget year will also be significant and 
should be considered during the budget process. So far, the 
Administration has resisted cost projections because of the uncertainty 
of future deployments. Clearly there is some uncertainty about future 
deployments. But there is one projection that we know with certainty: 
future costs will not be zero. For example, regardless of future 
deployments, there will be considerable costs to ``reset,'' to fix and 
replace worn-out Army and Marine Corps equipment. Last year, the Army 
and Marine Corps estimated a need for $15-20 billion a year to repair, 
replace, and refurbish equipment at the current rate of operations and 
for two to three years after war operations ended. In addition, we have 
maintained a steady deployment in Afghanistan over the last six years, 
at a cost of $1 billion or more per month, and that cost is likely to 
continue.
    There are also ancillary costs that need to be captured in any 
inclusive summary. Thus far, over 3,000 servicemen and women have died 
in Iraq. 23,000 have been injured or wounded in action. The cost 
summaries seldom include veterans health care and disability benefits, 
although they are a directly related cost.
    Yesterday, Rob Portman, the director of OMB, indicated that the 
President's budget request will include the base budget for 2008, along 
with supplementals for war funding in 2007 and 2008, plus projected war 
spending in 2009. This is an encouraging sign and the first time that 
the President's regular budget will recognize costs beyond the budget 
year. However, the Administration's budget should go further and take 
into account that our commitments are likely to extend well beyond 
2009.
    If the President's budget purports to bring the budget back to 
balance by 2012, it has to include a realistic cost projection of our 
enormous military efforts abroad, which will not end after 2008 or 
2009.
    Mr. Secretary, Admiral Giambastiani, Under Secretary Jonas, we 
thank you for coming to help us understand the past and current cost of 
the wars in Iraq and Afghanistan, and what future costs might be. We 
look forward to your testimony.

    Mr. Ryan. I thank the Chairman for yielding and for holding 
this hearing. I cannot think of a more appropriate way for this 
Committee to begin the 110th Congress than to take a good look 
at the way we have and the way we will budget for the Global 
War on Terror.
    Clearly we are at a turning point in Iraq. And when you 
give it some thought, as both Congress and the President have 
acknowledged, we have a lot to do.
    Last week, the President laid out his plan for proceeding 
in Iraq with increasing troop levels as one of the key 
components. Members from both sides have expressed strong 
opinions both for and against that plan. But whether or not you 
agree or disagree with the President, there are still large 
bills that need to be paid to support our troops both at war 
and here at home.
    And it is the responsibility of this Committee to help make 
the choices and determine the plan on how we are going to pay 
those bills. I hope we are at a turning point on this front.
    The attacks of September 11 are now more than five years 
behind us. The liberation of the Iraqi people from Saddam 
Hussein is nearly four years behind us. Yet, we still find 
ourselves largely funding the War on Terror through emergency 
supplementals.
    Several years ago, this Committee took the lead to correct 
this by including in our budget a funding place-holder for the 
war. To their credit, the Administration last year began to 
follow suit, a trend I fully expect to see repeated and 
hopefully built upon in the budget the President sends to 
Congress next month.
    This Committee is also taking the lead in cleaning up the 
emergency war supplementals. This is an issue I expect to go 
into more in questioning. I think the chart kind of speaks for 
itself. By including in our fiscal year 2007 budget language, a 
clear definition of what constitute an actual emergency and 
what must go through the regular checks of the budget process.
    The whole idea here is real emergencies ought to go in the 
supplemental and the things that should normally be in the base 
budget should be in the base budget.
    I understand that some members may want to choose to use 
this hearing as a forum to voice their thoughts on war policy. 
Clearly that is one of the most critical debates in Congress we 
are going to have this year. But funding this war piecemeal 
serves neither our soldiers nor the taxpayers. And it is the 
obligation of this Committee to build on the progress we have 
made in responsibly funding for the war. I hope we can take 
this opportunity today to work toward that end.
    And I thank the Chairman for yielding.
    Chairman Spratt. Mr. Secretary, thank you again for coming. 
The floor is yours. And any prepared statements you or Admiral 
Giambastiani or Secretary Jonas has will be made without 
objection part of the record.

STATEMENT OF HON. GORDON ENGLAND, DEPUTY SECRETARY OF DEFENSE, 
      AND HON. TINA W. JONAS, UNDER SECRETARY OF DEFENSE 
                         (COMPTROLLER)

    Mr. England. So, Mr. Chairman and Representative Ryan and 
members of the Committee, it is a pleasure to be here today. I 
appreciate the opportunity to be here early. As you commented, 
it is still a couple weeks before the budget is submitted, so 
this is highly unusual.
    And Admiral Ed Giambastiani and Tina Jonas, who is the 
Comptroller, are not in a position to talk detailed numbers of 
the budget because the budget is not approved yet and we will 
not know that for certain ourselves until the President ax the 
ax.
    But as the Chairman commented in his letter to me, he 
wanted to stage, so it would be helpful, frankly, not only to 
this Committee but also the Congress, that when you get the 
budget, it will be better understood how we have put the budget 
together, what the parameters are, what the theory is in terms 
of how we have proceeded. So hopefully this will be helpful to 
you today.
    And, of course, we are always pleased to come back when we 
have detailed numbers and talk about the detail, and we will be 
pleased to do that a later date after the President has 
submitted his budget.
    I will make just a comment or two about the base budget and 
supplemental, so at least you understand where we have been in 
terms of the base and the supplemental. And I appreciate 
everybody's views on this because there are some conflicting 
requirements in terms of the budgeting.
    First, the base budget. What we have in our base budget is 
the cost to ``man, organize, train, and equip.'' And that is 
what is in our base budget. We do that for all of our Armed 
Forces, so all the services, all of our agencies are in that 
budget. And we balance in that. We make the tradeoffs 
throughout the year of sustaining the force and the investment 
for the future. So that is what we do every day in the base 
budget.
    By the way, the base budget, we have working all of 2006 
preparing the 2008 budget. It gets turned in here early 
February of 2007. It then is debated in the Congress, hopefully 
is passed late in the year, and we spend that money then in 
2008. So it is prepared in 2006, debated and approved in 2007, 
and spent in 2008. So by definition, it is looking ahead 
somewhere between one and two years.
    So it is an estimate because we are looking ahead. But 
since we have been doing the base budget, we actually have a 
pretty good feel for what those costs are and we can project 
those reasonably well in the base budget.
    Regarding the size of the budget, the budget is very large. 
I mean, defense spends a lot of money. We understand that, and 
we also understand that we have a fiduciary responsibility, as 
you do, to spend it wisely. And all this money is earned by our 
fellow workers, all of you, all of us paying our taxes every 
day. And so we take that very, very seriously as you do.
    I do want to comment on defense as a percent of GDP. 
Defense is expensive, no question about it. It costs a lot to 
protect and defend our country and our way of life.
    In World War II, defense was about 35 percent of the 
budget. In Korea, it was about 12 percent of the budget. In 
Vietnam, approximately nine percent of the budget. Desert 
Storm, about four and a half percent of the budget. During the 
Reagan buildup, it was about six percent of GDP. And today, it 
is about 3.9 percent including the supplemental war cost.
    So as a percent of GDP, we are actually considerably lower 
than we have been in any other conflict of modern times in the 
country. So, fortunately, frankly, the economy has grown to the 
point that while defense is expensive, it is also more 
affordable in terms of our national capital.
    Now, supplementals. The supplementals are financed in the 
ongoing costs of the contingency operation and our Global War 
on Terror, and the vast majority is Iraq and Afghanistan. That 
is where most of the money goes, for those two war efforts.
    Now, this is fundamental question you raise, Mr. Chairman, 
is sort of the crux of this. That is, the supplementals have a 
much shorter time-line. So that is when we turn in the 
supplemental, it is more real-time. I mean, we actually know 
equipment damaged, equipment to be replaced. We know how many 
troops have been deployed. We know what our rate is every 
month.
    So when it comes to the war cost, we actually have a much 
higher degree of fidelity doing that in the supplemental than 
if we tried to project a year ahead. I mean, sort of by 
definition, we are always better projecting something nearer 
term than you are trying to look into the future, particularly 
a war. And that has always been the tradeoff.
    Now, frankly, that is not our decision. I mean, we do not 
make that decision at the DoD. That is a decision between the 
Congress and OMB in terms of how to package that. But it is 
always the question of greater fidelity in terms of supporting 
the numbers versus a projection of the numbers further into the 
future. So there is less fidelity the longer you go out, better 
fidelity closer in. And that is, frankly, the tradeoff between 
supplementals and what goes in the base budget.
    That said, all of our costs are transparent. I mean, the 
DoD is extraordinarily professional. We are open. We are 
transparent. We provide all the data to the Congress, and we 
are pleased to discuss it in all detail. And whatever detail 
anyone requires, the books are open and available, and we send 
reports regularly to the Congress. And I will let Tina Jonas 
address that in more detail.
    I do want to comment regarding the budget. We do have a lot 
of active programs within the Department of Defense to 
continuously improve our processes and methods within the 
Department. I mean, we do want a full accounting of costs. We 
do want to make sure money is spent wisely.
    Obviously, it is not a perfect process because this is an 
extraordinarily large and complex enterprise, but we do work 
every single day to make that better and we are making 
considerable progress within the Department of having better, 
more timely, more accurate data.
    So with that, we are pleased to take your questions. We do 
have a written statement, one written statement for the three 
of us, Mr. Chairman. But we are pleased to help you in any way 
we can to prepare your Committee for receipt of the President's 
budget here in early February.
    [The prepared statement of Gordon England follows:]

Prepared Statement of Hon. Gordon England, Deputy Secretary of Defense, 
    and Hon. Tina W. Jonas, Under Secretary of Defense (Comptroller)

    Chairman Spratt, Representative Ryan, Members of the House Budget 
Committee, good afternoon. I do thank you for the invitation to appear 
before you today. Hopefully today's hearing will help set the stage for 
the Congress's review of the President's Budget Request for the 
Department of Defense for Fiscal Year 2008 and the Supplemental Request 
for Fiscal Year 2007 that will be forwarded to Congress at the 
beginning of February.
    With me today are Vice Chairman of the Joint Chiefs of Staff 
Admiral Giambastiani, and Under Secretary of Defense (Comptroller) Ms. 
Jonas. We will be pleased to provide for you an accounting of war costs 
to date, and to discuss the approach, the processes, and the categories 
the Department has used in putting together both the FY 2007 
Supplemental Request and FY 2008 Budget Request.
    War costs do add another dimension of complexity to the budget, but 
be assured that this Department will continue to be professional, open, 
and transparent regarding our processes and detailed costs. We 
therefore appreciate having this early opportunity to clarify for you 
the rationale the Department has used in our budget work.
    Of course, as I commented to you in my letter dated January 11, 
2007, this hearing is being held unusually early, prior to the 
President's budget submittal to the Congress. Since the President has 
not yet approved a budget, the Department of Defense is not yet in a 
position to discuss specific budget numbers.
    Ever since the Department made the first supplemental request for 
the current war effort, shortly after 9/11, for Operation Enduring 
Freedom, there has been a fundamental debate about methodology. At the 
end of the day, there's a trade-off involved. The usual budget process 
is deliberate--it requires looking one to two years out into the 
future. Conversely, supplemental requests allow much greater fidelity. 
With the shorter supplemental timeline, the Department has much greater 
certainty about the changing situation on the ground and our own 
requirements.
    In the Department's view, the supplemental approach has been 
helpful because it provides clarity. Of course, the Department will 
follow whatever approach is agreed on by the Congress and OMB.
    By any measure, America's defense budget is large--about the size 
of the entire GDP of some of our close partners, like the Netherlands. 
So it is important and most appropriate that Congress and the American 
people seek a better understanding of how that money is spent. Since 
September 11th, 2001, when terrorists killed almost 3,000 innocent 
people of 60 different nationalities, including military personnel and 
civilian employees of the Department of Defense, America has been a 
nation at war. Since 2001, the Department of Defense--military and 
civilian--has been operating on a wartime footing, while simultaneously 
transforming the Department itself to meet the full array of 21st 
Century national security challenges. In practice, the Department has 
been carrying out military operations in Afghanistan and Iraq, 
prosecuting the global war against terrorist extremists around the 
world, working with partners to respond to major natural disasters in 
the United States and abroad, transforming the force to better engage 
in new types of warfare, and modernizing the force to deter and, if 
necessary, defeat future conventional threats.
    The Department's strong transformation agenda draws on the 
President's National Security Strategy, and is reflected in two key 
documents published by the Department since 2001, the National Defense 
Strategy, and the 2006 Quadrennial Defense Review.
    The Department's scope and pace of change since 2001, based on this 
strategic vision, have been extensive.
    For example, just considering Combatant Commands, the Department 
has updated and strengthened the command structure of the force. US 
Northern Command--charged with protecting and defending the homeland--
was created in 2002. The mission and responsibilities of Joint Forces 
Command, charged with leading the transformation of the force, have 
been strengthened. Strategic Command was merged with the former Space 
Command to create a new unified command that provides integrated 
protection against strategic threats of all kinds. Special Operations 
Command was assigned the mission to lead the war on terror effort, as 
well as a new Marine Corps component--MARSOC.
    Geographically, the Department is transforming America's global 
defense posture from one designed to fight the Cold War to one that 
enables our forces to respond quickly to meet unexpected threats, 
anywhere in the world. Practically--to give just a few examples--the 
Army, while continuing to be heavily engaged in new, irregular forms of 
warfare in Iraq and Afghanistan, is simultaneously undergoing the most 
significant modernization in a generation, transforming its garrisoned 
forces into agile, expeditionary Brigade Combat Teams. And, after 
decades of development, ballistic missile defense has moved from 
concept to reality--including fielding an integrated missile defense 
capability that continues to get stronger and more effective.
    At the end of the day, the defense budget is about deterring 
potential adversaries and, when necessary, winning the Nation's wars; 
preparing prudently for future challenges; helping bring our friends 
and allies into the fight; and supporting the brave men and women in 
uniform who protect and defend America and their families.
    Protecting and defending America's people, territory, and way of 
life is expensive--and more expensive than it used to be, since the 
array of threats we face is greater than ever before. The Department 
takes very seriously our fiduciary responsibility to spend every tax 
dollar wisely. The leadership is especially cognizant that all the 
dollars the Department spends have been earned by fellow, hard-working 
citizens.
    Because this nation is blessed with such a strong economy, defense 
expenditures are a relatively small part of the nation's GDP--indeed, 
today they constitute the smallest proportion of GDP ever spent on 
defense during war time.
    By way of comparison, in 1945, the Department's budget as a 
percentage of GDP was 34.5%. During the Korean conflict, it was 11.7%; 
in Vietnam--8.9%; and in Desert Storm--4.6%. Even during the Reagan 
build-up in the 1980's, the defense budget was 6% of GDP. In 2006, 
defense spending, including base budget and all supplementals, was 3.9% 
of GDP, and is projected to be about the same in 2007. That is not an 
unreasonable investment to make, to protect and defend our nation.
    By way of process, the base budget funds the Department's mission 
to ``man, organize, train and equip'' America's armed forces. The base 
budget captures and balances the costs of sustaining the force with 
investing in the capabilities needed to meet future security 
challenges. So today, for example, the base budget is supporting 
transformation toward a more expeditionary force, with greater 
irregular warfare capabilities. And it's supporting the procurement of 
joint warfighting capabilities. In broad terms, the breakout of 
expenditures in the base budget, for FY 2007, is as follows: military 
pay, healthcare and housing 34%; readiness and support 30%; investment 
in future warfighting capability 36%.
    One major challenge the Department faces, looking out into the 
future, is that the average age of equipment is rising. In FY 2006, the 
average age of nuclear attack submarines was about 18 years; of the Air 
Force's tactical fighters--20 years; of strategic airlift -15 years; of 
tactical airlift--26 years; and of tankers--44 years.
    It's important to recognize that the Department is at minimum 
replacement levels for much of its capital assets. For example, the 
Department is building one submarine per year, one new aircraft carrier 
every five years, and one destroyer each year, and it has only one 
multi-role fighter in development.
    Supplemental budgets are financing the ongoing costs of contingency 
operations and related costs of the global war on terror. Iraq and 
Afghanistan account for the vast majority of supplemental funding.
    In FY 2007, some war costs are being covered by the $70 billion 
provided by Congress in the FY 2007 DoD Appropriations Act. War costs 
for the remainder of FY 2007 will be addressed in a separate request 
from the Department, to be submitted along with the FY 2008 base budget 
and the FY 2008 war request. It is vitally important to the Department 
that the FY 2007 spring supplemental be approved by the Congress in a 
timely manner. By mid-April, the Department will need to begin 
reprogramming other funds, with associated disruptions, if the 
supplemental is not approved.
    Despite the difficulties of predicting the costs of the fight 
against terror, the Department has continued to make every effort to 
provide Congress with a transparent view of its stewardship of taxpayer 
dollars in this most critically important effort--particularly in our 
regular Cost of War Reports.
    In November 2006, the Department delivered to Congress its most 
recent Cost of War report, with a full accounting of war costs to date. 
That Report shows that, since September 11, 2001, Congress has 
appropriated $452 billion in supplemental funding for the global war on 
terror. As of the end of November 2006, the Department had obligated 
$372 billion--$276 billion for Operation Iraqi Freedom; $69 billion for 
Operation Enduring Freedom; and $27 billion for Operation Noble Eagle. 
The Report also includes, as required by Congress, detailed information 
by Component, appropriation or funding source, budget activity, and 
type of cost.
    Some have suggested that the Department cannot accurately account 
for the cost of the global war on terror because its financial books 
cannot be independently audited. While the Department is not undergoing 
an independent audit of the cost of the global war on terror, the 
reports are compiled and analyzed by a team of experienced accountants 
who carefully scrutinize the data, conduct variance analyses to 
identify and correct errors, and footnote sources.
    The results to date have been positive--in its most recent report 
on DoD war-related costs, the Government Accountability Office did not 
identify any duplicative or unnecessary war spending. There is, 
however, always room for improvement. Accordingly, in the cost reports, 
expenses are now being grouped into more easily understood categories, 
with an increased level of detail. Department efforts to clarify and 
further improve the process are ongoing.
    The Department's good stewardship of taxpayer dollars requires the 
soundest possible financial management procedures. While such internal 
reforms rarely make the headlines, improving the financial management 
and audit readiness of the Department has been a ``main effort'' since 
2001--with concrete results.
    These initiatives are part of a broader effort to reform the 
defense enterprise itself--to make the Department function as 
effectively, and thereby as efficiently, as possible. Reforming the 
enterprise has meant taking a hard look at, and updating, everything 
from decision-making processes to the full array of business practices 
used to run the Department.
    One major spur toward change is the Department's Financial 
Improvement and Audit Readiness (FIAR) Plan, which lays out an 
incremental approach to Department-wide audit readiness. The Plan is 
designed both to prepare the Department for audit, and to 
institutionalize the systems that get us there--in order to achieve 
clean audit opinions now and in the future. The Plan is working.
    As of December 2006, the Department had achieved 84% of all the key 
milestones in the FIAR Plan. As a result, 15% of all DoD assets ($215 
billion) and 49% of its liabilities ($967 billion), received a 
``clean''--independently-verified--audit opinion.
    By plan, 72% of the Department's assets and 79% of its liabilities 
will receive ``clean'' audit opinions by 2010. While that may seem like 
a long time, the DoD asset base is larger than those of IBM, Wal-Mart, 
Ford, and Exxon/Mobil combined. [DoD: over $1 trillion; Theirs: $746B. 
Source: their annual reports.]
    In addition, for the first time, the Army Corps of Engineers is 
undergoing an audit of its 2006 financial statement, and a favorable 
opinion is expected next month.
    To help institutionalize these improved approaches, the Department 
created, and is implementing, the Enterprise Transition Plan. As 
Chairman of the Defense Business Systems Modernization Committee, I 
monitor this crucial piece of our strategy, and I can tell you it is 
working. As of December 2006, the Department had achieved 77% of the 
Transition Plan's milestones.
    The Department also continues to improve financial operations--for 
example, the Defense Finance and Accounting Service (DFAS) has 
dramatically increased productivity and improved service while reducing 
costs.
    I do thank this Committee for the opportunity to engage in this 
important, clarifying discussion. I thank you for your close 
cooperation with the Department of Defense in our shared efforts to 
protect and defend America. And I thank each of you for your support 
for our brave men and women who wear the cloth of this nation.

    Chairman Spratt. Okay. Mr. Secretary, let me open up with 
some charts, if you will.



    Chairman Spratt. We have got electronics now. We are high 
tech in our Committee room now. The first chart is a chart of 
cost of defense spending over a ten-year period of time, namely 
2002 through 2011, which will be the budgetary period that was 
mostly determined by policy decisions made within the Bush 
Administration.
    As you can see from the top line, if you took the CBO 
baseline for defense spending, 050 as we call it, out ten years 
from 2002 through 2011, the baseline in 2001 when the Bush 
Administration came to office was about $3.6 trillion over that 
ten-year period of time.
    If you adjust it for policy increases, for war funding, for 
cost risk, and other things using the CBO analysis of what 
traditional cost risk has been, particularly on procurement and 
R&D, the total increment over that ten-year period of time is 
$1,708,000,000,000.
    So that makes defense spending, it is imperative, 
compulsory. We have got to defend the nation. That is the first 
responsibility of the government. But, still, a $1.7 trillion 
increase has to be of concern to those of us who put together 
budgets and try to make them balance.



    Chairman Spratt. The next chart is a layer chart, a layer 
graph which shows you the different components in a layered 
form of the budget we are talking about. And as you can see, 
the increased cost of defense over the period 2000 through 2011 
has gone from about $300 billion to about $600 billion. I 
believe those are in nominal dollars. It is a substantial 
increase to accommodate in our budget that you are trying to 
put back in balance.



    Chairman Spratt. Now, one of the factors, if you look at 
the next chart, accounting for that increase, it is shown here 
future war costs in the dark layer, the upper end of this 
particular chart, of the cost of Iraqi Freedom, Enduring 
Freedom, and Afghanistan, the Noble Eagle, which is North 
America, and enhanced security since 2001.
    As you can see, Iraqi Freedom, Operation Iraqi Freedom by 
our calculation--and one question I want to put to you is, does 
this comport with your calculation of what has been 
appropriated and provided--to date is $379 billion. We do not 
know for sure what the coming supplemental will be, but this 
includes the 70. It does not include the balance to come. We 
will guess then that Operation Iraqi Freedom at the end of next 
year will be well above $400 billion. It has been an expensive 
venture.



    Chairman Spratt. In addition to that, if we can have the 
next chart, the cost has gone up. In 2003, we were fighting a 
war. Not for a long time, but at least for a significant period 
of time, and at a high level of intensity. And, still, the cost 
in 2003 was $75 billion. It went up the next year, the next 
year, the next year, and could go up to $170 billion in 2007.
    We would like to ask why the big jump in apparent outlays 
between 2006 and 2007, and how do you account for the fact that 
the cost of the war keeps going up and up and up, even though 
the intensity of it has varied over time and even though we 
actually have fewer troops there than we did two years ago by 
about 20,000, I believe?
    And then finally, CBO, Congressional Budget Office, in 
projecting likely expenditures has typically in the past had to 
carry forward any supplemental as if it were being reenacted, 
reenacted, reenacted, which is unrealistic, but that is where 
the conventional rules call for them to extrapolate from their 
baseline.
    They finally said we need a better way to do it for the 
cost of the War in Iraq. And what they did was they came up 
with a set of assumptions that next year, the next fiscal year, 
2008, we will begin to reduce our troops such that over a five-
year period of time, we will go from where we are to 55,000 
troops in Iraq, the theater, and Afghanistan, the theater, not 
necessarily in country.
    They assumed a gradual build-down to that steady state of 
55,000 troops for the next five years. Over that ten-year 
period of time, they estimated future war costs at $413 
billion. And if we have to accommodate $413 billion in the next 
five years of our budget, the next ten years of our budget, it 
is going to be that much harder to bring it to balance.
    And what we are asking today is, would you take a look at 
these numbers and tell us if they comport with your experience, 
your accounting, your records, and, if so, are we basically on 
the right track in what we have estimated is the task before 
us?
    Would you care to comment upon any of these charts or these 
cost projections?
    Mr. England. Mr. Chairman, the chart where the costs are 
going up and why is the cost going up, I can just give you one 
input, and perhaps my associates can provide more clarity.
    But it was not until 2005, frankly, that we started putting 
in the supplemental what we call the reset cost. That is, until 
that period, I think it was just sort of agreement in the past 
that supplementals did not have procurement cost, procurement 
cost meaning to buy equipment to replace equipment that had 
been lost in combat.
    Chairman Spratt. Well, in your October the 25th memorandum, 
did you redefine and expand the definition of what is emergency 
then to include procurement even though the procurement items 
might not be directly related to the theater of operations?
    Mr. England. Two subjects, if I can.
    Chairman Spratt. Mr. Scott.
    Mr. Scott. These are the total costs, supplemental and 
regular.
    Chairman Spratt. That is supplemental.
    Mr. Scott. Just supplemental?
    Chairman Spratt. Yeah.
    Mr. England. Excuse me, sir. If I can address those, I 
believe there are two separate issues. If I could address them, 
I will for you, Mr. Chairman.
    Chairman Spratt. Please do.
    Mr. England. In this case on the cost, the war cost, until 
2005, we were not pricing in the supplemental. That is, war 
cost, the replacement of equipment damaged, worn out, 
accelerated wear was not showing up in the budget. So we were 
accumulating basically a cost.
    And, by the way, we were also accumulating equipment back 
then because it was not getting replaced and it was not getting 
repaired until the 2005 supplemental. So we literally have a 
backlog that we have been putting in the budget in terms of our 
repair and replacement.
    And so you are seeing an increase, and some of that 
increase is a reflection of the fact that it was not costed 
early on in the early cost of war. So it was not until 2005 we 
started. And you are still seeing, I believe, some of that in 
the cost.
    Chairman Spratt. The last appropriation bill supplemental, 
we put $23 billion for reset, and I think some of that was 
added by the Appropriation's Committee. It was not done just on 
your initiative. It was done on their initiative too.
    Mr. England. No. That is correct.
    Chairman Spratt. Do you expect that level of cost to be 
recurring for some period of time?
    Mr. England. Yes. There will still be costs for resetting 
equipment, worn out and destroyed equipment. You will continue 
to see that for some time.
    And as you commented, once the war ends, the expectation 
is, whenever that war ends, there will still be equipment that 
is on the battlefield to be replaced and/or repaired, either 
come back for repair or replacement, that is buy new assets to 
replace the old assets.
    So, yes, I expect that will continue. And when the war is 
over, there will be a residual tail of some amount of dollars 
to take care of that equipment.
    Chairman Spratt. There are others here who have questions 
to ask. I do not want to hog the time. Just one last question.
    Does the Department of Defense have models like the model 
that CBO did of what different scenarios would cost so that 
that could be factored into the decision-making processes, what 
is our next step and our final steps in dealing with Iraq? Do 
you have anything like the model, back-of-the-envelope model 
that CBO has developed of what different scenarios might cost?
    Mr. England. If I can have Tina address that, please, our 
Comptroller.
    Ms. Jonas. Okay. Thank you, Mr. Chairman.
    In order to project our war costs and what we are providing 
to our oversight committees and supplementals, et cetera, we do 
have a cost model that we use. We plug in the actual deployment 
orders, which is what the Deputy alluded to. They are more 
accurate.
    We are less sophisticated with respect to the types of 
scenario building that CBO might do. In fact, obviously we are 
going to have to do some projections for what we are going to 
present in 2008.
    Chairman Spratt. Well, I understand you have a system 
called COST, acronym, C-O-S-T.
    Ms. Jonas. Yes, sir. That is our system, sir, yes.
    Chairman Spratt. And there is some variation between DoD 
and CBO? Is CBO privy to COST? Does it have access to the 
software?
    Ms. Jonas. I am not sure, but I believe that we briefed 
many people on the COST modeling system. And so we have that 
available, yes, sir.
    Chairman Spratt. Thank you.
    Mr. Ryan.
    Mr. Ryan. I thank the Chair.
    


    
    Mr. Ryan. If I could go to chart number one among our 
charts. If you recall, last year in our budget resolution, our 
fiscal year 2007 budget resolution, House Con Resolution 376, 
for the first time, we put new emergency spending definitions 
and rules and processes in place.
    We refined the designation for any spending outside the 
regular budget, and we distinguished between defense emergency 
spending and nonemergency defense spending by stating that, 
``Contingency operations directly related to the Global War on 
Terrorism and other unanticipated defense operations are 
appropriate for overseas contingency operations.''
    Secretary England, take a look at the chart. As you can 
see, early 1990s, we had a couple supplementals and then we had 
sort of what I guess I would call the peace dividend and then 
we ramped up, especially, you know, after 9/11. But take a look 
at how big the supplementals grew, you know, particularly after 
the actual invasion of Iraq.
    And the Administration sent us a number of budgets that 
seemed to continue putting nonemergency items into the 
supplementals. And we saw a growing trend of nonemergency 
spending items creeping into these supplementals.
    It is obviously no way to run a railroad. It is no way to 
predict things. But now, you know, we are a number of years 
into this.




    Mr. Ryan. If you could go to chart number two, please, my 
question is basically this. We started to try and put plugs in 
our budget resolutions here in the House. I guess it takes a 
second for these charts to come up, but there we go.
    Take a look at in 2003. You know, we put aside in our 
budget $10 billion. The Administration put $10 billion. 
Supplemental was 62. Then we did nothing in 2004. Then in 2005, 
the Administration did nothing. We on the Budget Committee did 
50 and we kept doing 50. Last year for the first time, the OMB 
actually, you know, matched us and put 50, but our supplemental 
was $170 billion.
    The question I want to know is this. Did you look at our 
designation of emergencies or definition of what emergencies 
were in our last year budget resolution? This definition is 
now--I think you carried this rule over, number one.
    Number two, what controls and processes do you have in 
place to make sure that nonemergency stuff do not creep into 
these supplementals? For instance, you know, if a helicopter 
goes down in a combat environment, you need a new helicopter 
and that is probably unforeseen and you need that for an 
emergency. But if you were already planning on buying a bunch 
of helicopters, why would you put those in, you know, emergency 
supplementals?
    What assurances can we get and what controls do you have in 
place to prevent these things from creeping into these 
emergencies from now on prospectively? We pretty much know what 
we need. And what is the new budget going to look like in that 
regard?
    Mr. England. Mr. Ryan, what we do is the supplemental is 
the war cost. I mean, literally it is the war cost. That is 
what we put in the supplemental. I mean, that is the only 
differentiator we have is the cost of war is what goes in the 
supplemental.
    And in the cost of war, you are right, if a helicopter goes 
down and that is a combat loss, then that is paid for out of 
the war cost because our regular budget is based on normal 
usage and the normal sort of attrition and training and things 
of that sort.
    So if we have accelerated wear-out, damage, if our vehicles 
are blown up or whatever, then that becomes a war cost. It is a 
war cost to recycle them. So they have to be refurbished. 
Because they have been on the front lines, they get 
refurbished.
    Mr. Ryan. But a lot of these war costs, you know about 
already. You know what you are going to spend on the war next 
year in so many of these categories. You do not know what 
helicopters are going to go down, but you know how many 
helicopters you are going to need to begin with. You know a lot 
of these things ahead of time.
    So what is going to distinguish between unanticipated true 
emergency spending needs and anticipated war costs? Where do 
you draw that line and are you drawing that line?
    Mr. England. Again, I thought I was pretty clear. Whatever 
is a war cost is in the supplemental. I mean, if it is directly 
associated with the war, it is in the supplemental. That has 
been the practice the whole time to have those in the 
supplemental. And we provide with our supplemental all the 
supporting detail.
    Now, it can go into base budget, but here again is my 
comment.
    Mr. Ryan. Okay. The base budget.
    Mr. England. But here is my comment. Today when we turn in 
a supplemental, you get, the Congress gets very detailed 
supporting data because we actually know a helicopter went 
down. So we know that helicopter went down and that replacement 
cost is in the budget.
    If you look out a year, then we estimate what is going to 
happen. And, remember, we have been putting the budgets 
together, the base budget, during 2006, and we actually have 
expenditures in 2008. So we are really looking ahead by 
somewhere between one and two years to estimate what is going 
to happen in the future, and that has just been very hard to 
predict.
    Now, you can do that. But when we turn the numbers in, you 
will have less certainty and support for the numbers because it 
will be an estimate in the future as opposed to a war cost that 
we can quantify quite precisely. And that has been the 
tradeoff.
    And a decision has been made, by the way, between the 
Congress and OMB in the past to keep that in the supplemental, 
and that is how we have been doing it. So that is how we 
differentiate it.
    Mr. Ryan. I see my time is up. I have some follow-ups, but 
maybe second round.
    Chairman Spratt. Go ahead if you----
    Mr. Ryan. No. That is okay. I do not want to take up----
    Chairman Spratt. I will now go to Mr. Cooper and pass over 
Mr. Edwards because Mr. Edwards is having an operation on his 
voice. He is having some polyps removed from his vocal cord.
    Mr. England. That is an occupational hazard there.
    Chairman Spratt. Mr. Cooper.
    Mr. Cooper. Thank you, Mr. Chairman.
    In a bipartisan spirit, let me follow-up on my colleague, 
Mr. Ryan's excellent questions.
    Mr. Secretary, I think you put a very good face on a very 
murky situation. I do not know anyone in Congress, Democrat or 
Republican, who really feels that the Pentagon is a transparent 
institution, that we know where you stand financially.
    Take, for example, the head of the General Accounting 
Office. He repeatedly year after year points out that the 
Pentagon is the single biggest offender in not having auditable 
numbers. Being the largest federal agency, that is really 
opaque, untransparent.
    Now, I know in your testimony, you point out that you are 
large and that in a few years' time, you will do a better job. 
But those of us who have been around this institution for a 
long time have heard that for so many decades, we get tired of 
waiting. And I know you are as big as IBM, Wal-Mart, and Exxon 
put together. But the rest of the federal government is even 
bigger. And 18 of 24 agencies are auditable.
    Now, we want to give you slack during wartime. But even in 
peacetime, it seems like distressingly little progress is being 
made. So I do not want to hurt morale or slow Tina's wonderful 
efforts, but this really needs to get done so that we know 
where the numbers are.
    And Paul's question about what is an emergency expenditure 
or what is not, none of us knows what is going to be in this 
year's emergency supplemental, but the newspaper rumors are 
there are going to be two joint strike fighters, which are not 
even going to be fielded for years, so how is that an 
emergency?
    Sixty-two million for ballistic missiles, which are fine, 
but they are not going to be used in Afghanistan or Iraq. Three 
point four billion for new and repaired Navy aircraft when we 
really do not face an air threat, at least so far, in Iraq.
    It is amazing what gets added into these bills. And there 
is a great deal of bipartisan suspicion that the Pentagon has 
been playing fast and loose with the definition of emergency.
    So can you give us some reassurance?
    Mr. England. I would be pleased to. First of all, a clean 
balance sheet, I mean, it has been an issue. It has been an 
issue for a long time. And I can just tell you that this 
management team has been working very hard. We have teams in 
place and we are making progress. And we do have milestones and 
we measure against them, so we are making progress, and we will 
get to a clean balance sheet.
    It takes a long time, but we are working it and we are 
working aggressively and we take it seriously, so we will get 
there. And it is something you just cannot fix overnight, but 
there is a process and a methodology and people dedicated to 
the task and in my judgment are doing a good job, and we review 
it periodically with them to see where they are.
    In the meantime, however, that is a clean balance sheet. We 
do know how our money is spent every year, and we do send those 
reports regularly to the Congress. So all the money spent every 
year, that is open and is transparent. And if there are 
questions about them, we are pleased, more than pleased to 
discuss those with the members of Congress.
    Let us see. The last question. Oh, I know, about the 
airplanes. So here is again the theory of this, and I do not 
know if all those things you mentioned--there has been a lot of 
things in the press about all sorts of things, and I would 
rather wait until the budget comes out and then we can talk the 
particulars.
    But let me talk about the theory of the case. The theory of 
the case is if we lose an airplane, the airplane goes down in 
Iraq and we lose that airplane, then there is a value of money 
associated with that airplane that we recapture. I mean, it is 
a loss we recapture.
    Depending on the model of the airplane, we do not go back 
and buy an old airplane. We buy whatever airplane is then being 
bought for the military. It would make no sense to go buy 
something old.
    So, for example, in our combat vehicles and our Humvees 
that were not protected early, the old model Humvee, if we lose 
one today, we buy an up armor Humvee, one appropriate to the 
future fight, but we recapture that cost.
    So if you think about it as an accelerated depreciation, if 
we are wearing something out very quickly, we recover the cost, 
like an accelerated depreciation, we recover the cost and then 
we apply it to whatever it is that we are buying in the future.
    So it is not a question of what we are buying. It is a 
question of recovering the cost of equipment that is being worn 
out or damaged and then we apply it to whatever the future 
product is.
    But I do not think the issue, Congressman, is what we are 
buying. I think the issue is from a budgeting point of view, 
how do we recover the cost and are we doing that accurately. 
And I believe we are doing that accurately in terms of 
recovering the cost.
    So that is what we do. That is how we do it. And, again, it 
is very transparent, and we are pleased. When those numbers 
come out and all that detail is available, we will be happy to 
sit down and go through that with anyone on the Committee.
    Mr. Cooper. Mr. Secretary, again, you say it is 
transparent. The head of GAO says it is not auditable and 
almost offensively so. So if it is not auditable, it is not 
transparent.
    Mr. England. No. But, again, we do not have what I call a 
clean balance sheet. That is different than knowing what our 
expenditures are every year. So one is a balance sheet issue. 
The other is expenditures. And we do have reports of 
expenditures regularly to the Congress. So that is available 
and that is auditable. In fact, we audit it and I expect it is 
audited by the Congress.
    Tina, you want to comment?
    Ms. Jonas. Yeah.
    Thank you, Mr. Cooper.
    I think one of the more difficult points for people to 
understand, our accounting systems, which have been in place 
for many, many years, are based on the appropriation's account 
structure, which, of course, is based in law.
    And in 1990, the Congress passed through a ``Chief 
Financial Officer's Act'' which then required us to have clean 
statements according to the GAAP principles, the generally 
accepted accounting principles.
    So you have got two different types of reporting going on. 
But as the Deputy said, we do have accounting reports, they are 
known as 10-02 reports, that are tied to appropriation's 
account, expenditures according to them, commitments, 
obligations, expenditures. And so we do have those.
    But I appreciate your interest, Mr. Cooper, because we have 
been working very hard to try to do the work that is necessary 
both on process side and on systems side to be able to allow us 
to account for the expenditures of the Department of Defense 
according to GAAP.
    And I think we are making some progress. Right now we have 
a clean opinion on 15 percent of our assets and 49 percent of 
our liabilities, close to a trillion dollars. But it is 
important work and we appreciate the support and interest of 
the Congress.
    Mr. Barrett. Mr. Chairman.
    Chairman Spratt. Mr. Barrett.
    Mr. Barrett. Thank you, Mr. Chairman.
    Gentlemen and lady, thank you for being here today.
    And continuing to build on the bipartisanship with Mr. 
Cooper, I hope you can sense that there is a growing angst 
about these supplementals that are coming in.
    I specifically remember last year in one of them, there 
were base improvements, brick and mortar improvements for bases 
in the United States. Now, granted, somebody knew that a long 
time ago that we needed to do that. But to slip that into a 
supplemental or put it into a supplemental, either way you want 
to look at it, I think, is not keeping with the true spirit of 
a supplemental.
    So take a look at that and just know that there are some of 
us that are very concerned about that. I do not want to beat 
you up anymore about that.
    Accountability, Mr. Secretary. You talked about different 
ways that you are accountable. Name a couple of specific areas 
of what you are doing for oversight to make sure that you guys 
are spending the tax dollar wisely. That is question one.
    Question two, there has been a lot of talk about the troop 
surge, the troop increase, whatever you want to call it. And I 
think there is room for agreement and disagreement on the 
number, whether it is something we need, something we do not 
need. But I have heard a lot of my colleagues, Republicans and 
Democrats, talk about the overall force size. And I am talking 
about Army, Navy, Air Force, Marines, increasing the size of 
the active forces.
    We have been relying on our National Guard, Army Reservists 
and other areas also on our citizen soldiers, and I think we 
are almost to the stretching point.
    What would be the cost of increasing the size of the active 
forces and what would be the cost of not increasing the size of 
our active forces?
    Mr. England. Tina?
    Ms. Jonas. Sir, I will let the Deputy answer the second 
part of that question. The cost of increasing the forces is 
about $5.6 billion. Okay? And that breaks out into deployed 
forces, operations, fuel, spare parts, and supplies.
    Mr. Barrett. Okay. Now, that is the surge cost, correct?
    Ms. Jonas. Yes.
    Mr. Barrett. Okay. And maybe I did not quite make myself 
clear. Take that out. What I am talking about is the overall 
forces if you take the surge cost out. A lot of the experts are 
saying we do not have enough men and women under arms, active 
service men and women to carry out the missions we have 
worldwide.
    And my question is, you know, if that is true, what are the 
costs of increasing the size of the active Armed Forces and 
what are the costs of not increasing the size of the active 
Armed Forces?
    Mr. England. I do not understand the second half of the 
question. If this cost had not----
    Mr. Barrett. Yeah. I mean, you know, if we say we need 
more----
    Mr. Ryan. Will the gentleman yield?
    Mr. Barrett. Yes.
    Mr. Ryan. I think what we are getting at is, what is the 
cost of permanent higher number of volunteer forces versus 
calling more Guard and Reserves up over the years to fill what 
you think you need in more permanent voluntary forces? How do 
you juxtapose the two? What are the cost differences?
    Mr. Barrett. Thank you. Exactly.
    Mr. England. Okay. Part of it is cost. Part of it is just 
having forces available. When we bring up our Guard and 
Reserve, the Secretary just announced he wanted to go to a one 
in five. That is one year or one period, you serve five at home 
so that there is a recuperation period and so that people can 
count on a fixed rotation.
    So given that, there is a limited size in terms of how many 
people you can pull out of the Reserves and the Guard on that 
sort of rotation basis. And, in fact, you would have to grow 
the Guard and Reserve obviously by a reasonable amount because 
you only get them one out of every five as opposed to the 
active force, the policy is in theater one and home for two 
years, which, of course, we do not have today.
    So that was a policy that Secretary Gates has announced so 
that people can plan for a certain, you know, time at home and 
time in theater. And to do that based on the requirements of 
the combattant commanders going forward looking worldwide at 
all the future potential threats we have, the objective was to 
have a number of brigade combat teams, which is how we measure 
the combat force, adequate to that mission.
    And to do that, it would have required either a very large 
increase of the Reserve components or it would have required 
7,000 active-duty Army and, I believe, 5,000 active-duty 
buildup of the Marine Corps for a total increase of 92,000 
people including some of which are already in the supplemental.
    But you would have had basically a full-time equivalent 
growth of 92,000 people, and that was based on satisfying the 
projections of the combattant commanders for the troops. The 
decision was made based on the demand schedule and recruiting 
and all those to increase the active force by the seven and 
five thousand over the next five years.
    Mr. Barrett. And I know my time is up, Mr. Chairman.
    But with the 12,000, what is the discrepancy between the 12 
that you are talking about and the 92?
    Admiral Giambastiani. It is 7,000 a year for five years for 
the Army and 5,000 a year approximately for five years for the 
Marine Corps.
    Mr. Barrett. Got you.
    Admiral Giambastiani. This is over the all-volunteer force, 
and we think that we can add those numbers above the base that 
we are recruiting for the active component right now. And that 
is based on the Army and the Marine Corps coming in and telling 
us what they believe is doable on an annual basis for 
recruiting.
    Mr. Barrett. Thank you, Mr. Chairman.
    Chairman Spratt. And the incremental cost of that is about 
$10 billion at its peak?
    Admiral Giambastiani. The best way to estimate this is for 
about 10,000 troops in the active component, it is about $1.2 
billion per 10,000.
    Chairman Spratt. Ms. Schwartz.
    Admiral Giambastiani. Now, there is equipping costs above 
and beyond that, but those are for the troops, the salaries, 
and the rest of it.
    Chairman Spratt. Ms. Schwartz.
    Ms. Schwartz. Thank you, and appreciate this hearing. I was 
interested that both sides of the aisle are being pretty 
articulate, I think, about the fact that we are all deeply 
concerned about transparency, about the way the war funding has 
been requested in supplementals and continue to be.
    You said a few things, so I would like to have short 
answers, if you could, because I have a couple things I would 
like to get through.
    But one thing you said is that there will be transparency 
as there always has been. Now, I had heard from the 
Administration just recently--I will not mention who said it--I 
am not sure it was in a public situation--is that the 
Administration has heard that we are concerned about the lack 
of transparency and that this next supplemental will actually 
have more specifics in it in helping us understand and be more 
public about the cost of this war, how the money is anticipated 
to be spent.
    Your testimony and answers have suggested that you are not 
going to do it any differently than you have done it for the 
last four years, that you believe there is full transparency 
and there is no need for more specificity.
    So is what I heard from someone fairly high up in the 
Administration that we will see greater specificity, in fact, 
not true, that we will see just the general kind of information 
we have seen before in this new supplemental?
    Mr. England. I mean, there is always room for improvement. 
I mean, I am not being defensive about this and I do not think 
anybody should be. Look, it is open and transparent and there 
is always more and more detail that can be provided. And so as 
people want more and more detail, we will take the time and 
energy to do that if it is useful. I mean, at some point, it 
does not become useful.
    But the information is there. I mean, we do turn in 
extensive reports. I do not know how many pages, but, you know, 
huge numbers. Maybe Tina knows. But to the extent that people 
require more information, we will provide to whatever depth 
anyone requests.
    Ms. Schwartz. All right. Well, I am sure the Chairman may 
be helpful then in communicating requests for more information.
    I think there is also some concern, following up on the 
previous question, about the need for oversight after the fact. 
So it is not only when you make the request. It is afterwards.
    I think many of us feel we have not gotten the kind of 
information about how the money was spent other than the fact 
savings from some of the previous supplementals because, again, 
``it is emergency funding.'' You cannot anticipate exactly.
    Have you actually not spent all of the money in the 
previous supplementals and, therefore, there is some excess 
there we might be able to put going forward or have you used 
that in some other way?
    Mr. England. So, Tina, I will let you answer the question 
first about the report and what we do.
    Ms. Jonas. I appreciate your concerns. Let me just talk to 
the justification material. We requested $50 billion last year. 
Of course, the Congress added to that amount. We did provide to 
our oversight committees about 500 pages, a book of 500 pages 
of detail justification.
    I agree that for those who are in budgeting, unless those 
things are really designed for the Committee staffs, and so as 
a result of that, we are taking steps this year to make sure 
that it is more easily understood to the public and to the 
broader membership of the Congress as well. So we are taking 
steps there.
    And we do provide monthly cost reporting to the GAO and we 
provide quarterly reports to the Congress, and we will continue 
to do that.
    Ms. Schwartz. Okay. Just in the time remaining, you also 
said that some of the supplemental you anticipate, almost one 
for one replacements, that if you lose a helicopter, you put 
the cost in there. I guess that is understandable.
    But one of the questions I have is, going forward, we have 
heard and expect that there will be going forward when this war 
is concluded that there will be high cost in just replacement 
of what we have lost.
    Are you saying there will not be any need for additional 
cost for the Department of Defense because, in fact, you have 
already accounted for all of the replacement for equipment and 
for vehicles and for--so we will not anticipate any additional 
costs going forward? That is already built into the 
supplementals?
    Mr. England. No. I thought I said just the opposite. I said 
that when the war is over, there would be a tail for the reset 
cost. So there is a cost. Once the war ends, there will be a 
tail for probably two years because the equipment gets damaged 
right up to the very end of the war. I mean, there is obviously 
some lag of this whole system.
    Ms. Schwartz. So you are doing it as you go along? You are 
doing it also as you go along?
    Mr. England. As we go along, right. So every year, the cost 
shows up in terms of reset cost, operation cost, personnel 
cost, et cetera. And when the war is over, there would still be 
some reset cost. So I am sorry if I confused you on that, but I 
really meant to say the opposite.
    Ms. Schwartz. That is helpful to know, although I think we 
would all want to know how much that will be as soon as you can 
project it out. But some others questions, but obviously I will 
move on. My time is up. Thank you.
    Mr. England. Okay. Thank you.
    Chairman Spratt. Mr. Garrett.
    Mr. Garrett. Thank you, Mr. Chairman.
    And I thank the gentlemen, the gentle lady for your 
testimony today and also in the previous years as well that you 
came before this Committee.
    And I am going to follow on the line of questioning and the 
two areas that you have been questioned on today starting with 
Mr. Ryan's and Mr. Spratt's comments and also Mr. Cooper's 
comments.
    And these are comments that come not only as a member of 
the Budget Committee, quite candidly, but these are questions 
that originate for me back from my district when we have town 
hall meetings and what have you, from members of the service 
and what have you. They raise these questions in one framework 
or another.
    Specifically on the first area, on the supplemental, like 
Mr. Ryan indicated, I am pleased by the fact that we have at 
least begun the process of adding these dollars into the 
overall budget process. Back in, as he indicated, the 2007 
process, we had what we call a bridge fund to try to carry us 
over through that period.
    But the interesting thing during that period of time is 
even though as we were going through the regular order process 
of that here in this House and the Senate, there was already 
news reports out that the Administration was in the works of 
preparing their next supplemental to come down the line just a 
few months after we would be completed.
    Now, I understand what you are saying, the normal 
bureaucratic elements of things and the time, that you are 
looking at 2006 moving to 2007 or 2008 actually, the spending. 
And I understand also that you get a better feel for the matter 
as to how much money you are going to spend when it is right 
next to actually when the dollars are going out the door.
    But if we carry that to the next degree, I guess, we should 
do supplementals after the fact and then we would know exactly 
how much money we spent and now we just have to reimburse those 
accounts. That is not the way we want to do it. We want to do 
it like every other line of this government and also like every 
other business.
    I serve on the Financial Services Committee as well and we 
are just debating the entire SOX issue and what we require 
major public companies to have to go through. And I fear 
whether or not anyone in this Administration and the DoD would 
be willing to have to sign off with the same legal penalties 
that we require of our top CEOs and financial officers for what 
we are requiring them there.
    So I ask you to comment on that. And, secondly, and 
specifically as to whether as we go through this regular order 
of the budget cycle, what we should potentially anticipate as 
far as supplemental, when and where down the line.
    And, secondly, in following Mr. Cooper's question and the 
issue of the 1990 ``Chief Financial Officer's Act,'' which is 
what prompted the GAO to say that because of weak accounting 
controls and mismanagement, they had not as of last year been 
able to do a report for certified statements for over eight 
years.
    I sent a letter to the Secretary earlier last year, in 
2006, asking specifically what was going on as far as trying to 
expedite this matter and move things along.
    And as it says in your written testimony and as you 
testified here after the fact, you have made some progress. And 
you were looking at the numbers of accountability as around 16 
percent and 48 percent. The numbers were a little bit different 
from the Secretary. It was around 15 and 49 percent. But it is 
still in the ballpark there.
    But, again, the Secretary's comment was is it going to 
occur in 2009. Your comment it is going to be 2010. But even 
then, we are only at 69 and 80 some odd percent there.
    Now, 69 percent accountability, you know, if we were 
grading this on ``No Child Left Behind'' or any education 
format, that would not be a passing grade for anyone. Eighty 
percent is pretty good. And that is even going to be 20 years 
post 1990 ``Chief Financial Act.'' So 20 year post the law of 
the responsibility laid on maybe you and your predecessors, we 
are still not going to be up to 100 percent accountability.
    So my question is, why is it taking so long and when we 
will get actually to the point of full accountability that the 
law of 1990 that Congress passed required of the Department?
    Mr. England. So I guess my comment is I have been the 
Deputy for a year and a half and I cannot account for all those 
years before being the Deputy. I can only tell you that since I 
have been the Deputy, and I think before that, since at least 
Tina, there has been a concerted effort to have, you know, 
balance sheets, auditable balance sheets.
    So, look, I cannot comment on the past. I can only tell you 
what we are doing now. And we are working. We do have 
professional people working this as their full-time job. And it 
takes time to do it.
    So I guess we go through this. We do have regular meetings 
on this subject. We do review this progress, the people doing 
it. I will tell you they are highly professional. We have hired 
professional accountants. We have beefed up the staff.
    So my view is, you know, we have done all those things 
prudent to do as management of the Department, and we are doing 
that.
    I will ask Tina to comment that people actually work for 
the Comptroller. But I will tell you there are magnificent 
people working this. And I am very proud of what they are doing 
and they will get there, but I do not know how to shorten that 
time.
    Ms. Jonas. So thank you for the question.
    If you break down our problems, and I alluded to some of 
the problems with the systems, but if you took a look at the 
material weaknesses that we have, you would find that there are 
material weaknesses because of business process and there are 
material weaknesses because of systems.
    And we have an approach that has two plans, and these have 
been briefed to Congress, and we have specific milestones on 
each. But the plan that addresses the process issues of the 
material weakness is called the Financial Improvement and Audit 
Readiness Plan. It takes a very methodical approach.
    Rather than throwing an army of auditors at the Department 
and finding out that we could not pass an audit, what we have 
done is broken the problem down and have got a business set of 
rules that will make sure that we are actually ready for audit. 
And it involves senior-level management, and so I think that is 
good.
    On the system piece, there is a plan for the Department to 
improve its overall business systems implementation, which is a 
big problem for the financial community. And that is called the 
Enterprise Transition Plan.
    And as of last month, our FIAR Plan was 96 percent on 
milestone. We are a little bit lagging on the Enterprise 
Transition Plan. But that is all critical to get this done. It 
is an enormous job.
    Mr. Garrett. Thank you.
    Chairman Spratt. Ms. Kaptur.
    Ms. Kaptur. Thank you, Mr. Chairman.
    Welcome, Mr. Secretary. I imagine we will be seeing you in 
another subcommittee at some point along the way.
    I wanted to just go back to make sure I heard you 
correctly. On page three in your testimony, you state in fiscal 
year 2007 some war costs are being covered by the 70 billion 
provided by Congress in the fiscal year 2007 regular 
appropriation's act for DoD. But war costs for the remainder of 
2007 will be addressed in a separate request from the 
Department to be submitted along with the fiscal year 2008 base 
budget and the fiscal year 2008 war request.
    How do you describe that separate request? What are you 
going to call that separate request?
    Mr. England. I believe the name is the fiscal year 2007 
spring supplemental. I am not sure if that is exactly right, 
but there is a supplemental to distinguish it from what was 
last fall. So there is a spring supplemental.
    So the Congress this year, I think as the Chairman 
commented at the beginning, this year, the Congress will 
receive the fiscal year 2007 spring supplemental, the fiscal 
year 2008 budget, base budget itself, and the projection of the 
fiscal year 2008 full-year war cost.
    So in 2008, there is not a plan to have any other 
supplementals. In 2008, you will get the base budget. Along 
with the base budget, you will get the projection to the best 
we can project a year ahead of time. And then on February 5, in 
addition to those two, there is also the spring supplemental. 
So there are really three different requests coming to the 
Congress on February the 5th.
    Ms. Kaptur. All right. And what would be a part of that 
supplemental and why is it not in the base budget? Based on the 
supplementary funding you reference in here, or the 
supplementary funding we passed last year to cover the cost of 
the war, will that supplemental just be not in the base budget?
    Mr. England. The money that was allocated last fall will 
run out this spring. And so the remainder of the year for the 
conduct of the war will be included in the fiscal year 2007 
spring supplemental. So the money that was approved by the 
Congress last year, the $70 billion, does not get the 
Department of Defense through the year in terms of the cost of 
the war. And so on February 5, there will be another request to 
the Congress to carry the Department through until there is an 
appropriation fiscal year 2008 on October the 1st.
    Ms. Kaptur. Do you anticipate that the rate of increase of 
spending is greater than had been projected last year for or 
against your supplemental, I mean? Is that one of the reasons 
that you are requesting an additional supplemental? Has the 
rate increased beyond what was anticipated last year?
    Mr. England. Well, we are requesting it not because of any 
rate increase or decrease, just because we have run out of 
money. I mean, we will run out of money. This supplemental is 
very important that we have approval sometime in the April time 
period or, as the Chairman said, what happened to us last year 
when we ran out of money, and then we have to start 
reprogramming.
    When we start reprogramming, we have to start that early 
because we also cannot get in a deficit position because of the 
``Anti-Deficiency Act.'' So we are required early to start 
taking measures. And so about the April time period, things 
start getting very difficult.
    Ms. Kaptur. All right. Mr. Secretary, I only have one more 
minute, and I wanted to ask you, OMB gives each department a 
discretionary number that they can use in their budget 
development. OMB has given DoD a specific number upon, or has 
OMB given DoD a specific number upon which you base your Iraq, 
Afghanistan requests or do they make you absorb it within the 
total discretionary request and, if so, what are you giving up 
for that money?
    Mr. England. We generally go back to OMB and we tell them 
what our requests are. Obviously they scrub it with us and we 
come to an agreement on what our actual costs are, what we need 
to run the war.
    So the number starts with us. Then we provide that number 
to OMB in terms of here's what we feel our cost of war is. So 
it originates with us and then reviewed by OMB and reviewed by 
us, and that finding then becomes the number that we submit to 
the Congress.
    Ms. Kaptur. Thank you very much.
    Thanks, Mr. Chairman.
    Chairman Spratt. Mr. Hensarling.
    Mr. Hensarling. Thank you, Mr. Chairman.
    Mr. Secretary, I am not sure I heard you correctly. Would 
you please repeat for me what you said the Administration's 
intentions were as far as the fiscal year 2008 annual regular 
appropriation request? Did I understand you to say that it was 
the intent to now fund the war through that?
    Mr. England. No, sir. What I said was we would have a 
fiscal year 2008 regular budget and then we would have a fiscal 
year 2008 war cost. Now, I do not know how the Administration 
will package that. I can just tell you what the Department of 
Defense has.
    We have estimated for all of fiscal year 2008 what we feel 
the war costs will be. Now, I will have to say this. Since we 
do not know what the situation will be in 2008, and a few 
months ago, we did not know what the situation would today in 
Iraq, so basically not knowing if that is going to be up or 
down, we basically just straight-lined into 2008 because we do 
not know what it will be because, again, you have to estimate 
well into the future. But we do have a number in addition to 
the base budget for all of 2008.
    Mr. Hensarling. Mr. Secretary, I would like to harken back 
to an earlier question of Mr. Ryan because I do not think I 
heard an answer to his question. And I think if I understood 
the question properly, it was how do you draw the line of 
demarcation between what goes into the annual appropriation 
request and what is defined as something that goes into the 
emergency supplemental request. I think Mr. Ryan was using the 
example of helicopters.
    And, again, as history is our guide, we have funded 
previous wars with some combination through the annual 
appropriation process and supplementals. And I think your 
answer was consistently the supplemental is the cost of the 
war. But the question now is, what do you define is the cost of 
the war?
    Mr. England. How do we define the cost of war? It is all 
the costs associated with the conduct of the war. So it is the 
gas we burn. It is the equipment we use. It is the equipment 
that is destroyed. It is the cost to get our troops there. It 
is cost to bring them back. I mean, it is----
    Mr. Hensarling. Well, I do not mean to be flip, but is a 
sergeant ordering a pizza back at the Pentagon who is in 
communication with somebody on the front lines, is that a cost 
of the war?
    Mr. England. No, that is not a cost of the war. People 
deployed in the war is Iraq, Afghanistan. There is a cost in 
Somalia which is part of the war.
    So, Tina, I do not know. You want to explain that?
    Mr. Hensarling. I was hoping it would be a better 
definition than the cost of the war is the cost of the war.
    Ms. Jonas. If I could clarify a little bit, because I know 
there has been a little bit of conversation here about concern.
    My staff does a pretty significant scrub. When the services 
ask for supplemental requests, we throw out a good portion of 
money. And we do a pretty tough scrub on things that belong in 
the base. I mean, for example, we would not put the future 
combat system in the supplemental. I mean, we do have some real 
bright lines on it.
    Sometimes there are concerns and there is judgment involved 
on what is a cost of the war. And the Secretary was just 
discussing, and a big portion of our discussion internally has 
been what procurement would we ask the Congress to put into the 
supplemental.
    And our rule set has provided that if it is a documented 
combat loss or there is accelerated depreciation associated 
with that item being used in theater, then that is acceptable 
and the Congress then passes----
    Mr. Hensarling. I see I have a minute remaining of my time. 
I would like to slip in one more question, but perhaps greater 
detail could follow in writing.
    The next question I have is, we on this Committee and we in 
Congress have a number of responsibilities. We understand your 
responsibility, albeit the greatest responsibility that the 
republic has, and that is to make sure that the people are 
secure.
    But we have other responsibilities and what little budget 
discipline that we have around this place is evaded any time 
you stamp emergency onto a supplemental request.
    And so my question is this. How does it impact the 
Pentagon's war fighting ability if we were to do the majority 
of the war funding through the annual appropriation and 
budgeting process through supplementals? How does it adversely 
impact your war fighting capability?
    Mr. England. Okay. Let me let Admiral--but I would like to 
comment on it after Admiral Giambastiani comments, because it 
is a question of timing.
    But go ahead, Ed. I will let you.
    Admiral Giambastiani. I was just going to say, first of 
all, in the operations and maintenance area, let us just say 
fuel and maintenance costs, for example, we can estimate how 
many miles, for example, that vehicles are going to drive and 
how often maintenance can get done and how much fuel they will 
consume. We have to make an estimate in the annual budgeting 
process.
    If those estimates are wrong, then what happens is we start 
cash flowing from other programs and the budget stability of 
other programs changes substantially if we get those early 
future estimates when they are further out incorrect.
    For example, we may not understand exactly how many troops 
we have to support. So you wind up getting into a stability 
issue on the rest of your budget, what happens to procurement 
programs and then costs start spiraling and those types of 
things. You must stop work in other areas.
    So one of the reasons why if you cannot estimate because it 
is so far in advance accurately, you create a tremendous amount 
of churn in the rest of the budget. That is just in a very 
simple term. And for us, it creates quite a bit of problems 
with regard to how we do business.
    Mr. Hensarling. I am out of time. Thank you, Mr. Chairman.
    Mr. England. But, Mr. Congressman, if I can just comment. I 
mean, look, as long as there was adequate money, there is no 
problem. But if you estimate low, then it causes us a huge 
problem because we cannot pay our bills, you cannot--I mean, so 
what you would like to do is get the right number. The way you 
get the right number is the closer you are in time, the closer 
you can get to the right number.
    I mean, this is a dilemma. It is not an issue in my mind of 
emergency and base budget. It is a question of having greater 
precision with the numbers so that you know that you can indeed 
pay the bills. You actually do not want any overage, you do not 
want any under. The closer you are to the point in time.
    One Congressman said that after the fact, you know exactly, 
and that is true. But, of course, then you do not have money to 
pay the bills. So, look, this is the conundrum. And I mean, we 
can deal with whatever, you know, the Congress or everybody 
decides, but there is a tradeoff here.
    Chairman Spratt. But the Pentagon does do and has for years 
a FYDP, a Future Years' Defense Plan program, which is the 
current fiscal year and five more fiscal years. So your custom 
is to advance the cost, project the cost of all your systems 
out over a five-year period of time. That is sort of what we 
are seeking right now is a five-year projection of what the 
deployment in Iraq and Afghanistan is likely to be.
    Mr. England. But that is the difference, Mr. Chairman. In 
the base budget, there are pretty well predictable costs, 
whereas the war is much less predictable and much more dynamic. 
And so that is the only issue. I mean, look, you are absolutely 
right, but there is a different dynamic in the war than there 
is in the peacetime budget.
    Chairman Spratt. Mr. Ryan.
    Mr. Ryan. Let me just throw it out there one more time and 
try and give you an idea of what we are all trying to ask of 
you.
    We have the impression that you are putting regular base 
spending items in these emergency supplemental bills. And we 
can go back and set a whole bunch of examples. But the question 
is, are you demarking or are you defining what is really an 
emergency that is unforeseen, put that in the supplemental, and 
are you saying this is something we know is going to happen, we 
have been fighting this war for three or four years, we know we 
are going to need this next year, we know we are going to need 
this the last year, we are putting that in the base budget, or 
are you doing the opposite and putting stuff that ought to 
belong in the base budget in these emergency supplementals?
    Where do you define the differences? What is your protocol? 
Have you looked at the definition of an emergency that we 
adopted in the last Congress and that the new Democratic 
Majority continued which has a much clearer definition in 
statute, in our House rules, on what is and what is not an 
emergency? That is basically what we are trying to get from 
you.
    Mr. England. Okay. Congressman, we may have to have further 
discussion on this. I am not sure I am at that degree of 
precision.
    I am at the degree of precision to say that we do know that 
what we put in the supplemental is associated directly with the 
war and we have--at the Comptroller's level, we go through all 
of that and we make sure to the best of our ability that they 
are not items that should be in the base budget, that they are 
items that actually are associated with the war, something 
damaged, equipment worn out that we recapture the cost. It is 
reviewed again at my level. Then it is reviewed with Secretary 
Rumsfeld for this budget because it was on his watch. So we go 
through a successive series of reviews to make sure that we 
abide by that ground rule.
    So I can just tell you to the best of our ability, we are 
not doing what you indicate which is your belief that we have 
long-term base budget items in the supplemental. To the best of 
our ability and judgment, what is in the supplemental is war-
related costs separate from what we normally do in our base 
budget.
    Chairman Spratt. Mr. Becerra.
    Mr. Becerra. Mr. Chairman, thank you very much, and it is a 
pleasure to be able to serve on the Committee.
    To the witnesses, thank you very much for your testimony.
    Mr. England. You are welcome.
    Mr. Becerra. Mr. Secretary, let me pursue that a little bit 
more. You are saying that items must be directly associated 
with the war in order to be included in the supplemental.
    Would funding for two joint strike force fighters which 
will not be operational for several years be considered items 
associated with the Iraq War?
    Mr. England. Sir, again, let me try this. If we lose two 
airplanes in Iraq, we need to replace two airplanes, otherwise, 
at some point in the future, we are short, right? So when we 
would lose two airplanes, we recover the cost of those 
airplanes.
    Then we make a decision what should we buy to replace the 
airplanes. We do not go back and buy old model airplanes. I 
mean, it would make no sense to do that. We actually buy 
whatever is in development or production for our forces.
    Mr. Becerra. Does that mean that you are going to have that 
joint strike force fighter available next month?
    Mr. England. No. Well, it means that----
    Mr. Becerra. Will you have it available within a year?
    Mr. England. No. But what it means is we have to recover 
the cost of what was damaged----
    Mr. Becerra. Mr. Secretary, I understand that.
    Mr. England. Okay. And then----
    Mr. Becerra. But let me pursue this. How long do you expect 
this war in Iraq to last? My understanding is that the joint 
strike force fighter will not be available for several years.
    If you are putting money into the joint strike force 
fighter because you are trying to replace an aircraft, you are 
giving money to put in force or in operation an aircraft that 
we will not have for several years, and either you are telling 
us that we are still going to be in Iraq or Afghanistan 
fighting several years from now or you are telling me that you 
are putting money into a plane that we will need. Congress has 
already allocated funding for it, but it will not be available 
to help our troops who are fighting right now in Iraq or 
Afghanistan.
    Mr. England. So think about it this way, Congressman. When 
the war is over, there is a reset cost because equipment has 
been damaged on the battle field. By definition, when the war 
is over, I have equipment damaged on the battle field which I 
will replace. That replacement of equipment will not be used to 
fight in Iraq.
    Mr. Becerra. That is a great conversation to have when we 
are talking about your regular budgeting process, when you are 
asking us what the Pentagon needs in the future.
    Right now we are talking about a supplemental 
appropriation, which is an emergency appropriation, off budget, 
which does not have the typical oversight of Congress to go 
through in detail what you are doing with the money that you 
say you need now.
    I do not think that the men and women in uniform from my 
district who are in Iraq today will see anything out of the 
billions that you are putting into the joint strike force 
fighter through the supplemental. I think they would rather see 
a plane over their heads today or next month. But it is not 
going to help them to have money which may be well spent, but 
not through the supplemental.
    Let me ask on ballistic missiles, ballistic missiles, which 
are--unless you are telling me you are going to change the 
Pentagon's policy and you are going to start using ballistic 
missiles in Iraq. Do ballistic missiles have a role in the 
supplemental emergency appropriation for Iraq and Afghanistan 
activities?
    Mr. England. I do not know what you are talking about.
    Mr. Becerra. Well, would ballistic missiles, funding for 
ballistic missiles be something appropriate for this 
supplemental appropriations?
    Admiral Giambastiani. There are different types of 
ballistic missiles. If you are talking about submarine launched 
or ICBMs, the answer is no, they would not be in there. But if 
they are Army tackems, for example, which are short range, if 
they are MLRS ballistic weapons, which we use in Afghanistan 
and Iraq, then the answer is yes.
    Mr. Becerra. Admiral, good point. Let me ask you this. Can 
you tell us today that you are going to limit any request in 
this supplemental emergency appropriation which will not go 
through the regular oversight of this Congress to those types 
of ballistic missiles that are necessary and are being used 
today in Afghanistan or in Iraq?
    Admiral Giambastiani. The only purchases----
    Mr. Becerra. I think that only required a yes or no.
    Admiral Giambastiani. The answer is the only ballistic 
missiles that I am aware of that we would buy in a supplemental 
are the types I just described to you.
    Mr. England. But we have----
    Mr. Becerra. Wait. Let me make sure, Mr. Secretary. I want 
to make sure I hear the Admiral correct because we do not want 
to find that later on money was expended for ballistic missiles 
that you are not going to use in Iraq or Afghanistan that is 
necessary to protect our forces.
    You are saying, Admiral, that we will limit in this 
supplemental, the Administration will limit in this 
supplemental any request related to ballistic missiles that are 
related to the operations in Iraq and Afghanistan that you are 
in need now for the battle field to protect our troops?
    Mr. England. I have to answer this. No, I am going to 
answer. Since the Admiral works for me, I am going to preempt 
him. Okay?
    Mr. Becerra. Okay. It is above his pay grade, huh?
    Mr. England. The problem we have is a fundamental issue 
here about recovering costs of the war. Now, look, this is----
    Mr. Becerra. My time has expired and I know where you are 
going, and I agree with you. You have got to recoup your costs. 
But you do not do that through a supplemental emergency funding 
request. We cannot go through and ask you in detail about all 
these issues because in a supplemental, we have only a short 
amount of time to try to determine whether we are yea or nay on 
giving the troops money.
    Mr. England. Mr. Congressman, look----
    Mr. Becerra. Mr. Secretary, if I could finish. I know where 
you are heading. I do not disagree with what you are talking 
about in terms of long-term costs and long-term funding of our 
missions. But you are not talking about long term. You are 
talking about replacing equipment and soldiers today.
    Our troops are not interested in knowing what it will be in 
the horizon five years from now. They want to know what is 
going to be on the ground helping them today. And the joint 
strike force fighter may be a great aircraft, but it will not 
help the troops that are there serving their tour of duty 
today.
    And so I think what we are trying to figure out is why are 
some of these items in these emergency supplemental requests 
that do not go through the regular oversight process when we 
need to get back the fiscal discipline so we are not spending 
so much money? If it is legitimate, you will get it, but not 
through this emergency supplemental process.
    Mr. England. Mr. Congressman, listen. I mean, we are 
ambivalent. We do not write the rules about supplementals. I 
mean, that is Congress and OMB made agreements in the past. We 
have a methodology to recover cost.
    As long as we agree on some methodology to recover the war 
cost, we are completely satisfied. The rules to this point have 
been war costs are recovered in the supplemental. And so that 
is how we have costed this to recover the supplemental.
    Mr. Becerra. I hear you telling me----
    Mr. England. What is most important to our military, not 
just those fighting today, but those who will be in the future 
protecting our nation, is to be able to recover the cost, so we 
can replace equipment.
    Mr. Becerra. Mr. Secretary, I hear you sounding a red alert 
that you are going to be including things that are not 
appropriate to this emergency supplemental with that response.
    Thank you, Mr. Chairman.
    Chairman Spratt. Time to move on. Mr. Simpson.
    Mr. Simpson. Thank you, Mr. Chairman.
    Thank you all for the job you do. I appreciate you being 
here today. It is fun; is it not?
    Mr. England. It is delightful.
    Mr. Simpson. Let me see if I can get something straight 
because it seems to be I have heard one thing and then another 
thing.
    The question that we keep asking is whether we should be 
funding the war through supplementals or through the regular 
process obviously.
    I seem to have heard you say that in 2008, you are going to 
request the funding for the war effort up front instead of 
through supplementals and that you expect--I think your words 
were that you did not expect a supplemental to the 2008 budget, 
even though we all know there will be one because it is a 
prediction of how much is going to be spent.
    Mr. England. Thank you.
    Mr. Simpson. But you are going to request the funding up 
front, the majority of it?
    Mr. England. For the entire year recognizing, as you just 
said, and thank you, Mr. Congressman, you are absolutely right, 
we will estimate it the very best we can. But I can assure you 
a year from now we will know a lot better and the costs will be 
either up or down depending on what the circumstances are on 
the ground and what the situation of the war is.
    Mr. Simpson. And how good your estimates are and, you know, 
how true those follow through would depend on the size of a 
supplemental and that you may have overestimated and there may 
be money left over?
    Mr. England. I mean, we do not know what it will be. We do 
not know what it will be in 2008. But you are right. We are 
going to turn in our best--and as I said before, since you do 
not know if the number is up or down, which you normally do, my 
experience is you sort of straight line it because you do not 
know anything else to do. So you do your best estimate, you 
straight line.
    But I can assure you you are absolutely right. A year from 
now, we will know much more and it could be up or it could be 
down. And so it will have to be revised as we get closer to the 
2008 time period.
    Mr. Simpson. It seems the debate is over. I mean, that is 
what we really wanted, is to put the costs up front so that we 
have some--I mean, the estimated costs up front so it is in the 
budget base because one of the things you do not realize is 
that when you are doing it all through supplemental rather than 
through the regular appropriation process and putting it into 
the budget base is the effect that it has on the overall budget 
and consequently the budgets of every other agency that we have 
to deal with when we are looking at those types of 
supplementals instead of anticipating up front what those costs 
might be.
    Let me mention a memo and have you respond to it, if you 
would, that my good friend from Texas here just gave me, a memo 
of October 25th, 2006.
    Subject: Ground rules--just a second. I need to get my 
glasses on. Ground rules and process for fiscal year 2007 
spring supplemental. I like the fact that we now have seasonal 
supplementals. By this memo, the ground rules for the fiscal 
year 2007 spring supplemental are being expanded to include the 
Department's overall efforts to expand the Global War on Terror 
and not strictly limit it to Operation Enduring Freedom and 
Operation Iraqi Freedom.
    Are we expanding what the definition is in the 2007 budget 
to include everything under the sun that we consider in the 
Global War on Terrorism?
    Mr. England. There are a few costs, and I say a few costs, 
that will show up in the spring supplemental as specific needs 
identified by the combattant commanders that otherwise are not 
covered.
    So the vast majority is still Iraq and Afghanistan, but 
there are a few items that are in the 2007 spring supplemental 
identified by combattant commanders for the broader War on 
Terror because we do have expenses obviously in the broader War 
on Terror.
    We actually operate in places other than just Afghanistan 
and Iraq. So some of those costs as a way of again recouping 
those costs are included in the spring supplemental.
    Mr. Simpson. Could you tell me what some of those might be, 
where some of those might be occurring?
    Mr. England. I would rather have that discussion when we 
actually have the budget and details, and it will be better to 
do at that point, sir. If I can do that at that time, we can 
quantify and be much more precise.
    Mr. Simpson. Thank you. I appreciate again the job you all 
do.
    Mr. England. And by the way, I am pleased to come back and 
chat with you on that subject or any member of the Committee.
    Mr. Simpson. Okay. Thank you.
    Chairman Spratt. Mr. Doggett.
    Mr. Doggett. Thank you, Mr. Chairman.
    Mr. Secretary, we all know that the most important cost of 
this War in Iraq is paid in blood. But in looking at the 
dollars, I want to be sure that the figures that we have here 
and what is called the burn rate or the monthly spend-out rate 
are correct, that they begin at about $4.4 billion per month in 
Iraq in 2003. They were up to about $8 billion per month last 
year. And now that we have the first quarter in on this year, 
they have already soared to about $9.7 billion.
    Do those sound about right? I think they pretty much match 
what we saw on the board.
    Mr. England. Tina.
    Ms. Jonas. Yes, sir, that is right.
    Mr. Doggett. All right. You would expect that they would 
continue to grow at about the same rate that they have grown in 
past years?
    Mr. England. A proviso. Again, early on, we did not have 
reset costs in the budget, and so we have some deferred cost 
that has been in the budgets and eventually that catches up. 
And so you are looking at some prior cost that is in current 
budgets, and I expect that distorts it. I do not know how much 
it does, but that is the distortion.
    Mr. Doggett. Let us talk then about the President's new 
escalation plan and what it costs. We have had figures given of 
$5.6 billion for the cost of the troop increase of which 2.4 
billion is for the Navy.
    Does that sound about right?
    Mr. England. The Department of Navy, I believe that is 
right. So that is Navy and Marine Corps for Department of the 
Navy.
    And, Tina, I think that is the right number.
    Ms. Jonas. That is correct.
    Mr. Doggett. The escalation and widening of the war with 
the 21, 22,000 additional troops, we believe that the cost of 
that is about $3.2 billion for the year?
    Ms. Jonas. Sir, that is approximately correct, yes.
    Mr. Doggett. Thank you.
    Now, there has been some lack of clarity as to whether the 
Department thinks it already has the money to pay for those 
troops to be there for a year or that will be included in the 
supplemental or in some other form.
    What is the position of the Administration as to whether 
whatever the will of Congress and the American people it has 
the money to dispatch those 21,500 troops to Iraq and keep them 
there for a year? Do you have that money in the existing budget 
or do you need further action from Congress to do it?
    Mr. England. Well, we do have money in the budget, but 
obviously it runs out in the spring. So, the spring 
supplemental will include the cost of war including those costs 
through the rest of this fiscal year. So, those costs and those 
costs otherwise not covered in the fall will be in the spring 
supplemental.
    Mr. Doggett. All right. So another supplemental is coming?
    Mr. England. Yes. Again, the fiscal year 2007 spring 
supplemental. And, again, I think the Chairman said that at the 
very beginning.
    Mr. Doggett. I hope to get into that with you in a second, 
but I want to be sure I am clear. As far as the cost of 
maintaining these 21,500 troops for the President's escalation 
plan in Iraq, it is about $3.2 billion, and the Department 
feels that it needs that $3.2 billion in order to be able to 
have those troops added this next year?
    Mr. England. Well, we are already paying whatever the front 
end of that bill. I mean, as that goes on, we will pay that 
bill. I mean, we do not differentiate. Those dollars are not 
different from other dollars that are spent on other troops. I 
mean, those troops are not differentiated from troops, other 
troops that we have.
    So we are spending that money and we will continue to spend 
that money as part of the total war effort. And that money in 
total will run out sometime May or June.
    Mr. Doggett. Is further action from Congress necessary for 
you to fund this escalation?
    Mr. England. Further money, yes, but it will be required 
not just for this escalation, but just for the entire war cost. 
I mean, again, it is all part of just one category of cost.
    Mr. Doggett. With regard to the last appropriation's bill 
that this Congress passed, I know you are fully familiar with 
Section 1008 and the responsibilities that it imposes on the 
Pentagon to come forward with the justification to incorporate 
these war expenses into the budget.
    Is the Pentagon fully and completely compliant with Section 
1008 of the ``John Warner National Defense Authorization Act''?
    Ms. Jonas. Sir, we will comply with that, yes.
    Mr. Doggett. You will? So we will get that justification 
for all of the war spending in the budget we are about to get?
    Ms. Jonas. That's the intent. Yes, sir.
    Mr. Doggett. And as far as future costs of the war, in 
fiscal year 2009, you are unable to give us any projection at 
all on that?
    Mr. England. As far as I know, we have no projection for 
2009. Again, we have projected 2008 as just a straight line 
from 2007, but I do not believe we have done anything for 2009. 
I mean, that is a long way in the future to be predicting war 
costs.
    Mr. Doggett. Well, it is next year, right?
    Mr. England. Two thousand nine?
    Mr. Doggett. Yeah. The next time you will be coming here 
will be on the 2009 fiscal year after the current one.
    Mr. England. You are right, but again----
    Mr. Doggett. What we mark up this year, you will be back 
again next year, and you do not have any estimates internally 
of what the costs of the war are likely to be even a year from 
now?
    Mr. England. No, I do not. As far as I know, we have done 
no projection for 2009.
    Mr. Doggett. Thank you.
    Chairman Spratt. Mr. Conaway.
    Mr. Conaway. Thank you.
    Mr. Secretary, Admiral, Tina, thank you all for coming here 
today.
    This has already been discussed in my absence. I was over 
testifying on the House Resolution 6 Confiscation Bill. And if 
it has been covered, please, I apologize.
    We heard a presentation this morning from a very bright, 
intelligent young woman, who talked to us about Jihadists and 
that this is a Global War on Jihadists and that these elements 
could be all over the globe and that they are a threat and will 
continue to be a threat to Americans and American interests 
around the world.
    As we look at how we fight those folks, that is a small 
unit, a close hand-to-hand combat kind of thing, not the kind 
of a sweeping war that some of our other platforms are there.
    Then we have got an emerging nation 20 years down the road 
that we are going to have to protect this nation or nation 
from, so you have got--and I hesitate to mention any particular 
platform because it gets that contingent group all fired up and 
excited.
    But as an example, huge carriers are not necessary to fight 
hand to hand in the streets of Baghdad. And so you guys have 
this tension between how do you continue to fight this fight 
over the next four or five years, ten or whatever it is, as 
well as to prepare, continue to prepare and continue to bring 
on-line at an orderly pace those platforms that will be needed 
to protect this nation from another nation state of equivalent 
might or power.
    Can you talk to us a little bit about how you go about that 
kind of a 10,000 foot look at the tensions between the two, 
because there is not going to be enough money to do everything?
    In spite of the small percentage of GDP that is being spent 
currently, I do not know that that is--we are going to go back 
to the World War II era or even the Korean levels. Can you talk 
to us how you look at this conflict between a big iron and 
people on the ground?
    Mr. England. Well, it is the debate we have literally 
throughout the year, Congressman, because it is a tension we 
have. Your aircraft carrier, you mentioned. But, of course, we 
had three of them in the Gulf early in Afghanistan, you know. 
So you are right.
    I mean, once in a while, people say, gosh, we have this 
cold war, you know, we are still wedded to the old cold war. It 
turns out, of course, we use mostly all that equipment. And in 
addition, we do have an objective to deter threats against 
America, not just to fight enemies, but to deter future 
threats, which is really what we obviously all prefer to do.
    We do have that tension, and I will tell you sometimes that 
is very difficult. So I will give you a thought. The joint 
strike fighter was mentioned. It turns out, I mean, that is the 
only fighter airplane, multi-role fighter airplane we have 
under development in the United States of America. And there 
are some people who say, well, gosh, why do we need a new 
airplane.
    First of all, we use it for the future, but also it is the 
only industrial base we have, and I am not sure we want to shut 
down the only fighter industrial base in the entire nation.
    We build one submarine a year. We used to have 60 some and 
we are going down to 48 submarines, which is sort of the 
minimum level. We build one aircraft carrier every five years. 
And we have actually reduced our aircrafts the last couple 
years. So we keep coming down in sort of that long-range asset 
base. And, of course, what compounds it is as we come down, 
actually things get more expensive for us, right, because we 
buy less.
    By the way, we are buying one destroyer a year, half of one 
in each yard. So it is not that we are buying a lot in terms of 
long term. Everything is pretty much aging that we have. So 
that is a tough tradeoff we have. It is not easy, but that is 
how we make the money accomplish what we need to.
    Mr. Conaway. Do you as a department project those unmet 
needs? In other words, we in Congress ought to be able to help 
make that decision as to whether or not we are sacrificing 
future defense of this country, future deterrents for short-
term protections. Is there anything that you can help us with 
in that regard?
    Mr. England. Well, I will say this. I mean, since 2001, of 
course, the Administration and the Congress have been very 
generous in terms of increasing our base budget, which has at 
least helped us, you know, address some of those needs. So we 
have had increased dollars available.
    I will also tell you that with the help of Admiral 
Giambastiani and the joint staff and a lot of other people, we 
have gone back and rescrubbed requirements, so we have changed 
our processes so we can reduce our costs and be more effective 
and all those things.
    We have actually reduced the size of the Navy, as you know. 
We are now reducing the size of the Air Force while we are 
increasing the size of, you know, the Army and the Marine 
Corps.
    So these are tradeoffs we make every day between what are 
our current needs and what is the future including our research 
and development. There is no magic to this. This is people of 
good faith who have a lot of knowledge, background, and 
experience.
    We have a forum in the Pentagon where we debate and discuss 
openly with our military and civilians and we jointly together 
make all these decisions across the Department.
    Mr. Conaway. Thank you, Mr. Secretary.
    Chairman Spratt. Mr. Berry.
    Mr. Berry. Thank you, Mr. Chairman.
    And I thank all of you for being here today.
    I do not think there are any simple answers to this, and I 
am sure you concluded that a long time before I mentioned it.
    Mr. England. Thank you.
    Mr. Berry. My question is, we are told over and over again 
that our active military units in the states are not ready, 
that they do not have the equipment and the training that they 
need to be deployed if it was necessary for them to be 
deployed, and that our National Guard and Reserve units are not 
ready.
    And I know that a brigade that was deployed from my State, 
after they returned from Iraq, they still have not had their 
equipment replaced and they have got some significant needs 
that have not been met.
    Is this because of the lag time between the supplementals 
and the regular reset that is put in the budget or are we not 
putting enough money in there? Does it just take that long to 
get that equipment built and put back?
    Mr. England. It is both. And I will turn it over to the 
Admiral Giambastiani. But I would say, Congressman, it is 
really both. That is, we did not ask for the money, I think 
because there was sort of an understanding not to put that kind 
of money in the supplemental. So for a long time, we did not 
and we built up a backlog.
    Then once we started getting the funding, it took a while 
literally to fill the pipeline. So now we do have all the 
depots to sort of fill up and we have the funding and things, 
but there is a time lag now to get it out of the system.
    So part of it is, you know, shame on all of us who did not 
get the money early enough and then there is a time lag to get 
it, but it will come out the pipeline, and that will help the 
situation, I think, considerably.
    On the other side of this, and here is the question, we 
have all this equipment deployed to fight the war, so does 
everybody else get a full set of equipment while they are home? 
I mean, that is sort of a fundamental question because you can 
go over and fall in on the equipment.
    And also, frankly, as we have learned, the requirements 
have gone up on our military in terms of their needs, so their 
readiness has been a moving target because we learned and we 
equip them differently and more fully. And so that is also part 
of the issue.
    I mean, this is not a static environment. It is a very 
dynamic change in environment and we try to manage this in a 
dynamic way. And so you are right. There are no sort of simple 
answers to all this. Every one of them is a complex issue. And, 
again, I will tell you people of good faith do the best job 
they can with the best judgment and experience to arrive at 
those decisions.
    Admiral, if you would make a comment.
    Admiral Giambastiani. Sure.
    Congressman Berry, I think the Deputy said it pretty darn 
well. If you try to look at the replacement time for a Humvee, 
for example, just an up armor Humvee, it is not as short as we 
would like it to be, although we have ramped up production 
rates tremendously with the great support we are getting here.
    But if you look at also the time to replace a helicopter, 
we have lost some Chinooks, we have lost CH47 Sea Knights, you 
look at these types of things, it takes a while to get them.
    Now, some of these units that you are talking about simply 
did not have all of their equipment in the first place. Okay? 
They just simply did not have it all in the first place. And so 
we are, in fact, putting in--we have got the funding in for 
that equipment and it just takes a period of time to get it in 
there.
    We have also used preposition stocks. Some are afloat, some 
are ashore. We are now replacing those. So what I would say to 
you is that we are getting our training done because we know 
what type of equipment we need, but not every unit will be 
full-up and it is just going to take some time to get them 
replaced.
    Mr. Berry. But I can tell my Guardsmen that they are going 
to have it?
    Admiral Giambastiani. Yes, sir. Yes, sir. That is a fact.
    Mr. Berry. Thank you.
    Chairman Spratt. Mr. Campbell.
    Mr. Campbell. Thank you, Mr. Chairman, and thank you all 
for being here.
    This is just a little follow-up on Mr. Simpson's thing, but 
I think we talked about the rules. You talked about the rules, 
Mr. Secretary, for supplementals and otherwise. Supplementals 
are supposed to be for things that are unanticipated. I mean, 
that is one of the primary uses of a supplemental.
    I think a bunch of us on this side for fiscal reasons not 
just related to defense, but are worried about abuse of the 
supplemental process by using it for things which are not 
unanticipated.
    And clearly the last supplemental, defense supplemental had 
things in it which I think were not either urgent or 
unanticipated or both. And these should be things that are 
urgent and unanticipated.
    What I think I heard you say to Mr. Simpson is that in 
fiscal 2008, at least, because we anticipate that we will 
probably be in Iraq through fiscal 2008, we anticipate that we 
will have a presence in Afghanistan through fiscal 2008.
    The President has said that the War on Terror is likely to 
last for a period of time, so fighting the War on Terror at 
some level in various theaters is not unanticipated going 
through fiscal 2008.
    So just wanted to ask again and clarify that in fiscal 
2008, you are going to try and put in the budget all the costs 
for the War on Terror that are anticipated. Now, if a new 
theater opens up or something flares up that we do not expect 
or whatever, obviously that is appropriate use.
    But to basically continue the prosecution of hostilities in 
which we are currently engaged, I think, does not meet the 
thresholds of either unanticipated or urgent. Does that----
    Mr. England. Well, just one comment. I mean, the other 
year, the price of oil went up dramatically, $70.00 a barrel, 
and that cost us how many billion dollars, Tina?
    Ms. Jonas. At least a couple billion dollars.
    Mr. England. So you got a couple billion dollars just bang, 
right? I mean, it happened almost instantly to us. And so if I 
had tried to handle that a year ahead of time, I could not have 
operated ships, the military could not have flown our airplanes 
because we would not have had the money to buy fuel.
    So things actually happen over a period of time that 
changes those estimates, and that is my only point. Again, we 
can do it. Look, it is fine, however we can do it.
    The only thing I would caution is when we do that estimate 
a year in advance, when circumstances change, the war heats up 
or the war goes down or equipment gets damaged, whatever it is, 
there needs to be a mechanism. I mean, otherwise, it is not 
fair to our men and women that we are putting out there to 
defend our nation. That is all.
    So we just need a mechanism. If we estimate ahead, with 
certainty, some things will change in those estimates, and we 
need a mechanism to handle it as late in time as we can.
    Mr. Campbell. And I understand. I obviously understand the 
gravity. The example you gave, I am not sure is a real good one 
because arguably every department in government uses fuel and 
had to anticipate the same fuel costs. And I----
    Mr. England. But they are not operating combat airplanes 
with troops on the ground. I mean, we have an obligation to 
people we put in harm's way. So it is different than other 
departments, frankly. It is not just trucks running around the 
country. I mean, we actually use this to save lives and 
prosecute the war. Look, again, as long as there is a mechanism 
that we can adjust the estimates, it all works.
    Mr. Campbell. Thank you.
    I will yield back, Mr. Chairman.
    Chairman Spratt. Mr. Boyd.
    Mr. Boyd. Thank you, Mr. Chairman.
    Mr. Secretary.
    Mr. England. Mr. Boyd, how are you, sir?
    Mr. Boyd. Mr. Secretary, you said earlier you have been in 
your job one and a half years?
    Mr. England. As the Deputy. I believe it has been one and a 
half.
    Mr. Boyd. You obviously did not make the decision to fund 
the war through supplementals, did you?
    Mr. England. No, sir. I don't get to make that decision.
    Mr. Boyd. You tried today with mixed success, I suppose, to 
defend that decision. But I want to tell you I am a new member 
of this Committee and I am a little frustrated and I am shocked 
by what I have heard today.
    And I guess I should not be surprised that our Defense 
Department has so many accountability problems and issues based 
on the answers that I have heard today. And I want to express 
my feelings, if I could, Mr. Chairman, very briefly.
    In spite of the fact that we have a big, huge team in the 
Pentagon of deputy secretaries and under secretaries and 
comptrollers and accountants and war planners and field 
generals, you are telling us that we cannot, a $500 billion 
operation which has been doing the same thing for 200 years and 
many of the people in that have spent their whole careers in 
it, cannot plan their activities and what it will cost one year 
out. I am telling you, Mr. Secretary, it is----
    Mr. England. Well, that is not the case. Nobody said that, 
sir. We project five years out.
    Mr. Boyd. Well, I thought you said that you could not put 
the estimated costs of the war in an annual budget because it 
was a such moving target, you just could not do it.
    Mr. England. No. I said if you do it, you do it with less 
precision than if you do it nearer term. So anything in life 
that you estimate far in advance is not as good as something 
that you do nearer term.
    So you can certainly do it, but war is dynamic. It is 
actually not totally under our control. It turns out, you know, 
the people we fight have a say in that. So what they do does 
cause a dynamic environment and that tends to affect cost.
    Mr. Boyd. Mr. Secretary, I have got a very limited amount 
of time. I think most of these members here heard what you said 
about that, and the justification was that if you wait and ask 
for a supplemental putting zero in annual budget, you more 
likely hit the number closer.
    I do not follow that justification, but I want to ask you a 
specific question about some of the things you said.
    One of the charts that was shown earlier showed the number 
from 2003 to 2007 of the supplemental request or the 
supplemental appropriations. And in 2005, you saw a pretty 
large jump. And there was a question asked, I think by Mr. 
Ryan, about what caused that, or maybe it was the Chairman. And 
your answer was that it had to do with reset cost, that when 
you lost equipment in the war, that you had to replace it at 
some point in time.
    Why would you not plan for those reset costs ahead of time? 
You know it is going to happen, particularly given the fact 
that your generals now and your chiefs are telling us that that 
severely impacted readiness and the mission capability of our 
units with the number of our units moving from C1 to C3 or 4 
having increased significantly.
    Mr. England. So let me clarify. I did not mean to mislead 
you. First of all, I did not say zero in the future. I said we 
have taken a straight line of 2007 and estimated in 2008 
because that is the best we have. So we are estimating 2008. We 
are not zero estimating in 2008.
    And what I tried to explain, and I am sorry if I was not 
clear on this, 2005, prior to 2005, it was, at least my 
understanding, it was sort of accepted policy that you did not 
put reset cost into the supplemental, so no one did. And then 
that caused a backlog.
    Mr. Boyd. We did not put them in the regular budget either? 
We did not them in either?
    Mr. England. In either. So it did not show up. And so the 
first time that was actually addressed was in 2005. So in 2005, 
we started to address the reset cost and that then built a 
backlog, and we have been working off that backlog.
    And as we just had the conversation before with Congressman 
Berry, as that works off, then equipment becomes available and 
helps the troops who are here in the United States in terms of 
their training, et cetera.
    Mr. Boyd. Well, I do not know what the intent was, but the 
effect of that is that the cost of the war has been hidden from 
the public, and I think that is why many of us are very happy 
to know that now when you make your budget presentation for 
2008, you will include all of the costs for 2008. Now, it might 
be in a separate document, but nevertheless we will know at 
that time.
    And I assume from that then that your 2007 supplemental 
will only include 2007 costs, not any 2008 costs. Is that a 
fair assumption?
    Mr. England. That is correct. The 2007 supplemental will be 
the rest of year 2007 and then 2008 will cover the year fiscal 
year 2008. That is correct.
    Mr. Boyd. Thank you, Mr. Chairman.
    Thank you, Mr. England.
    Mr. England. You bet. You are welcome, sir.
    Chairman Spratt. Mr. Porter.
    Mr. Porter. Thank you, Mr. Chairman.
    And I thank you for your testimony. It is good to see you 
again, Mr. Secretary.
    I am a new member of the Committee, so bear with me as I 
ask some questions possibly in the past.
    I was looking at the chart that we had earlier. I think it 
was chart one. And it showed national defense discretionary and 
mandatory, and there was a period of seven or eight years, from 
1993 through early 2000, where there was a substantial 
reduction in the discretionary and mandatory spending.
    Having said that and looking at the substantial increase 
after 2001, because of, I am sure, 9/11, could we guesstimate 
how much of this budget from 2001 on was just to catch up in 
getting our equipment back to state-of-the-art?
    My understanding is during that era of time, if you were to 
take a hundred airplanes at Nellis Air Force Base, you would 
need fifty of them for parts and tires. And that may be 
folklore, but I did hear that periodically.
    So looking at that frame of time, again that eight years in 
the mid 1990s to catching up, how much of this budget through 
the last three or four years has been just to catch up to get 
us back in state-of-the-art?
    Mr. England. Mr. Congressman, I do not know if I can give 
you exact numbers, but I can tell you I am not sure we ever 
caught up and I am not sure we ever will with the budgets we 
have.
    You know, there was ``the procurement holiday.'' The Army's 
estimate, I know General Pete Schumaker has said that the Army 
was $100 billion short and when this war started, they were $56 
billion in the hole. And that is part of what the Admiral just 
said about, you know, the units were not equipped and so we had 
a lot of ``hollow'' particularly Guard and Reserve units when 
we went into this.
    So there is a major effort and major dollars to fill in 
those holes and to recover from, you know, the budgets of the 
1990s. So that has kept us in a significant deficit position.
    I am not sure we have ever caught up and I am not sure we 
ever will, but also I am not sure anybody can come out with 
detailed factual numbers, but the Army feels like they pretty 
much understand. I know that the General has testified that in 
his procurement accounts, he started in the hole by $56 
billion. It takes a long time to make up that kind of a 
deficit.
    Mr. Porter. I think it is important that that be a part of 
the discussions looking at the overall cost.
    My next question, of our budget, what percentage is 
salaries, benefits, and just taking care of the troops?
    Mr. England. Tina, I will let you answer that.
    Ms. Jonas. Sure.
    Probably about two-thirds, about 30 percent for readiness 
and support, another 30 percent for medical and pay, which, as 
this Committee has heard before, we are very concerned about 
the increasing cost of healthcare. We spend $39 billion 
annually, which is about the entire defense budget of Germany, 
on healthcare. So that is an important piece. And then we spend 
another four percent on housing and the balance, about 36 
percent on procurement and investment, R&D accounts.
    Mr. Porter. While we are on that subject, and I have a 
little bit of time left, are there some areas that we should be 
addressing in the budget for the families and our men and women 
in uniform? I know we have done an excellent job trying to 
catch up with some of our bases, with housing. But is there 
some other areas that we need to really concentrate on to help 
these families?
    Mr. England. My judgment at this point, we are in pretty 
good shape, and I think our people feel that they are being 
well treated. We have done a lot for our housing. We have done 
a lot for healthcare, a lot for salaries, a lot for retirement. 
So I think we have done a lot, and we are in a pretty good 
position at this point.
    I will just, if I can, add one comment, and I keep hearing 
this discussion about a continuing resolution. You know, we do 
have an appropriations for 2007. There is a companion bill to 
that which is our mil con and it is not just----
    Ms. Jonas. Quality of life.
    Mr. England. And quality of life, and there are hugely 
important dollars in that bill that if it is not passed as a 
2007 bill would be extraordinarily detrimental to our men and 
women in uniform. So we have been working very hard with the 
Congress in that regard because that is a case where it would 
be harmful to our military if we did not pass the 2007 bill 
for----
    Admiral Giambastiani. Mil con and quality of life.
    Mr. England [continuing]. For mil con and quality of life 
as a companion to our appropriations bill. So I will make a 
comment. That is one place that if anyone has influence in that 
regard, I would like to make that comment.
    Ms. Jonas. Could I just add, there will be about a billion 
dollar shortfall if we do not in the healthcare area and 
housing area, which if any of these members--many of you 
understand the no out-of-pocket costs which we have worked so 
hard with for the military families who are living off base. 
They would be affected by this. And another four billion, a big 
portion of that affecting the Army and troops coming home from 
overseas. So we would appreciate any help you can give us.
    Mr. Porter. Thank you very much, Gordon.
    Chairman Spratt. Mr. McGovern?
    Mr. McGovern. Thank you very much, Mr. Chairman. I want to 
thank you for being here today and I'm new, too. So you're now 
getting the rookies who are now going to ask questions. Let me 
say something that I haven't said in a long time and that is I 
agree with all my colleagues, Republicans too. And the other 
committee I serve on is the Rules Committee. We don't even 
agree on what the correct time is, so this is a new experience 
for me to actually be in agreement with everybody.
    And I think what you hear is unanimity in terms of our 
frustration over the way this process has been unfolding the 
last few years. And maybe this is not your impression, but I 
kind of get the impression that following kind of the regular 
budge process is being painted as something that is 
extraordinary or is almost impossible to do. Yet, it's not the 
first time that administrations or presidents have done that. I 
mean, Harry Truman included funds for the Korean War in the 
regular budget in the first year of that conflict. President 
Johnson did. President Clinton included Bosnia in the second 
year of that deployment. So I think for some of us it's a 
little difficult to figure out why Iraq and Afghanistan have to 
be so different. And it's difficult too because we're getting 
lots of questions about, you know, whether we're spending our 
money properly, how we're spending our money from our 
constituents. And under this kind of process it's very 
difficult to be able to have any input or to be able to say 
that we're holding people accountable.
    And so I will say this. My prediction is that things are 
going to dramatically change. Not just by appeals from this 
Committee but I think by other members of Congress on other 
committees I think are going to demand a change.
    Mr. England. Well, it is changed. I mean, fiscal year 
2008's----
    Mr. McGovern. Well, I know, but as you explained the fiscal 
year 2008 I'm not totally convinced that really things do 
change. I mean, what you kind of said is that we're basically 
going to make a request but, you know, we'll probably have 
another supplemental as a result of that.
    But I want to go back to a point that you alluded to in a 
response to a question by Mr. Barrett a while ago and that was 
with regard to the January 11 DOD announced several policy 
changes in the deployment rules for the National Guard and 
Reserves in the country. And you mentioned one of the most 
controversial changes, which seeks to circumvent existing 
limitations on deployments of the Guard. And under the current 
rules members of the Guard can be mobilized for one year and 
then demobilized for five years. The Pentagon says that this 
one to five ratio will continue to be it's ``policy 
objective.'' But, and I further quote, ``today's global demands 
will require a number of selective Guard/Reserve units to be 
remobilized sooner than the current policy goal.''
    But what you didn't mention were some of the kind of other 
deployment rules changes which I think have a budgetary impact. 
I mean, deploying reserve forces by unit rather than on a 
person to person basis; reducing the maximum mobilization time 
for reservists from the current eighteen months to one year; 
provide compensation to members of the active or reserve 
components who are required to mobilize or deploy ahead of 
their normal schedule, or whose service is extended beyond 
their normal rotation; and require a review of the hardship 
waiver programs for personnel facing deployments. My question 
is this: I mean, aren't you concerned, one that remobilizing 
our units will negatively affect the availability of members of 
the Guard and Reserve to respond to crises here at home like 
Hurricane Katrina? And then the other question is what will be 
the budgetary impact of these policy changes, especially the 
provision to compensate active or reserve units whose service 
is extended beyond their normal rotations?
    Admiral Giambastiani. I think I can take a couple of those. 
In each case, when we look at the active and reserve component 
we've got a balance here. Also in this policy set of 
announcements we've said that we'd like to have our active 
component deployed for one deployment, one unit, one year, six 
months, whatever it is, and then be home for at least twice 
that amount of time that they were deployed. Today, for 
example, most of our ground combat units are on a one to one 
deployment/home/deployment/home. In the Navy we call that port 
and starboard. Long term, that has a very detrimental effect. 
In fact, Mr. Barrett asked a question earlier, what is the cost 
when you balance these off on how you do it between active and 
reserve components and how often you do these? At some point 
when you put heavy deployments on folks, they tend to vote with 
their feet. Right now, fortunately, we have record enlistments 
and record reenlistments across all four services.
    So what we've tried to do is add in strength force 
structure in the active component side to get those deployment 
ratios into a better balance of one to two, for example, as 
opposed to one to one as it is right now.
    What we'd like to do on the Reserve component side, for 
those that deploy in units to be one to five. But we may have 
to take certain units, go down to one to four. We would like 
not to break that any further down than one to four. So we look 
at those deployments, if you will, in that type of balance. We 
make these judgments constantly.
    The rest of those incentives, for example, are to recognize 
that if we've told somebody, ``typically we want to deploy you 
for a certain set of time'' and we extend you for some period, 
we like to reimburse them to recognize their service.
    Mr. McGovern. No, and I'm not objecting. I'm just curious 
about what the budgetary impact is going to be. And my other 
question was about, you know, whether this change in policy, 
you know, is going to impact our ability to respond to crises 
here at home?
    Admiral Giambastiani. Well actually, I think that the 
change, for example, in the Reserve component side will 
actually make it better for us to respond. Because we are 
taking entire units as opposed to trying to form a unit out of 
thirty different states and maybe thirty different units. That 
is very difficult because it not only impacts the unit that 
you're trying to put together, but it impacts all of those 
other units, too. So then when you have to use them for either 
something in the United States or something overseas you have 
to wind up getting people from many other states. And that 
takes time to deploy those units. We'd rather do this in a unit 
basis.
    And this is one that, frankly, the Army and the Marine 
Corps have been very, very positive on. And frankly, talking to 
all our National Guard leaders, for example, Lieutenant General 
Steve Blum, the National Guard Director, went through a recent 
conference with governors, adjutant generals, and senior 
leadership throughout the National Guard. And they are 
uniformly, across the board, very, very positive on doing unit 
deployments for units as opposed to trying to do this mix and 
match across the board. So I think we're going to get some real 
positives out of this. And we've gotten good positive feedback.
    Mr. McGovern. My time is up. Thank you.
    Admiral Giambastiani. Yes, sir.
    Chairman Spratt. Mr. Smith?
    [No response.]
    Chairman Spratt. Mr. Scott?
    Mr. Scott. Thank you, thank you, Mr. Chairman. I think that 
a lot of the questions that I had have already been asked. And 
I think Mr. Campbell and Mr. Boyd kind of fleshed out the 
misunderstanding we had to begin with. Because it appeared at 
the beginning that we'd be doing the supplemental war thing 
kind of indefinitely. And I think what I'm hearing is you're 
going to take your best shot in getting all of the Defense 
Department expenditures in next year's budget, war and 
otherwise, and take your best shot at estimating them.
    Mr. England. That's correct. That's correct, Mr. Scott.
    Mr. Scott. So we won't have to have this----
    Mr. England [continuing]. Discussion again, hopefully.
    Mr. Scott. Now, one of the problems we had a couple of 
years ago when this thing started is that the estimates for the 
costs were so far off. I think where this Committee was 
instructed, in fact, not even to bother about budgeting the war 
because you didn't budget the revenues from the oil, so don't 
budget the costs. What have we done to try to get the estimates 
a little closer to reality?
    Mr. England. Well, Mr. Scott, right now, I mean, the 
estimates, everything to date is pretty much actual cost. I 
mean, we know how many troops are deployed. We know how many 
steaming hours, flying hours, operating hours of our vehicles, 
we know equipment damage, destroyed, replacement costs, 
etcetera. So at this point, you're pretty much real time in 
terms of actual cost. And so, again, supplementals pretty much 
capture the reality of warfare and that's what we try to do as 
we go along. And you'll see some more of that this spring. And 
then we'll project it for 2008. But at this point my best 
judgment is you're pretty close to what we know the costs to 
be. And if it was badly estimated in the beginning, I mean 
people just didn't, you know, capture this as part of the whole 
effort of trying to look way ahead during warfare.
    Mr. Scott. The 2008 budget, will that be, are we going to 
do a five-year budget or a ten-year budget this year?
    Mr. England. No, we do five-year.
    Mr. Scott. Just five?
    Mr. England. Five years.
    Mr. Scott. Do you have, and you didn't want to get into 
details, but will there be an assumption on troop levels for 
the entire five years?
    Mr. England. Mr. Scott, it is only, I believe, 2008. As far 
as I know, we do not have a projection 2009 and on. Right Tina? 
It's only 2008?
    Ms. Jonas. 2008, sir.
    Mr. England. And that is literally, as best I recall, it's 
a straight line for what we're doing in 2007.
    Mr. Scott. For the whole five years?
    Mr. England. No, just for 2008. I mean, we're only 
providing a 2008--at this point that is my understanding.
    Mr. Scott. Will the 2009 and 2010 budgets reflect the fact 
that we are going to still be there?
    Mr. England. I would feel that we would still be there. I 
mean, some degree. Certainly we'll have some presence I would 
expect in both of those countries during that period of time. 
But I don't know at this time of an estimate that we have for 
2009 and on. Now, there may be. I mean, I am just unclear about 
this. I do know 2008 we took a straight line out of 2007 to do 
2008. That was our input into the system.
    Mr. Scott. Well, you've got five years. I mean----
    Mr. England. I mean, like you we'll have to wait for the 
budget to come out. So you may be ahead of us in this 
discussion.
    Mr. Scott. Okay, well I would hope since you are not giving 
any details and we will see it when it comes that you are going 
to have adequate healthcare for your injured troops, including 
mental health?
    Mr. England. Yes.
    Mr. Scott. And an adequate ship building budget.
    Mr. England. We will let you talk to the Navy about that.
    Mr. Scott. Do what you can. I guess the other question I 
had, as you know some of us are not particular about this 
escalation. Is there anything that this Committee can do to 
affect, to disrupt the projected escalation in troop levels? Is 
there anything this Committee could do?
    Mr. England. I don't know how to answer that question. I 
mean, I don't know what you mean, ``what this Committee can 
do.'' So I----
    Mr. Scott. Well, is there anything that the administration 
would respond to that this Committee could do to let you know 
that we don't support the escalation?
    Mr. England. Mr. Scott, the plus up in the troops, we are 
funding that right now. I mean, it doesn't require special 
authorization. I mean, we can fund those troops. So this is 
just another added cost to the war. And it gets all mixed in 
with all the other costs of the war. So the 2007 supplemental 
will have money to cover this. But we are burning that money 
right now. I mean, we are actually burning that money. So it's 
all part of just a total war cost. There is no differentiation. 
I mean, these troops are no different from any other troops in 
terms of the budget itself. So 2007, I mean we will start to 
run out of money in terms of the total war effort and sometime 
in April we will need approval of the Congress of the spring 
supplemental to continue the total war effort. And so that's, I 
mean that's where we're going to be. And the reason it's the 
middle of April, because we have to have lead time away from, 
you know, if you think you are going to run out of money in 
June you actually have to start taking measures much earlier. 
So we would then have to reprogramming, moving money.
    Last year, I will tell you, we had to literally take all 
the salary money from the fourth quarter and move it forward. I 
mean, we took all the money forward out of the base budget to 
fund the war because the supplemental was late. And that was 
highly, highly disruptive and very costly to the Department of 
Defense to move all these monies, stop programs, etcetera, then 
get it all back on track again. So what I would encourage is 
the other side of this. Rather than thinking about how you may 
disrupt it, I would encourage this Committee and all the 
committees to timely, to have a timely approval of the spring 
supplemental so we don't have costly disruption as we go 
forward.
    Chairman Spratt. Ms. Hooley?
    Ms. Hooley. Thank you, Mr. Chair. I have some questions and 
I apologize because I was at another meeting, why I came in 
late. So if you have answered these please accept my apologies. 
I also used to serve on this Committee, I have been off of it 
for a couple of years. One of the issues earlier when I served 
on this before was auditing. And have we, the military, been 
about to make it through an audit yet? One question, I have got 
several. You talk about a spring supplemental. Are we expecting 
to see a fall supplemental and a winter supplemental? What has 
so far been the actual cost of the war? Can we break down into 
categories, for example, what has, what have we spent on trying 
to rebuild infrastructure there versus personnel and equipment, 
and cost for replacing equipment, housing? Can we break it down 
into categories? I have other questions, but you can start on 
those.
    Mr. England. So if you take the first one I'll take the 
second one because that is easiest.
    Ms. Jonas. Okay. You had a question about auditing?
    Mr. England. Audits.
    Ms. Hooley. Right.
    Ms. Jonas. The Army, for example, none of the services have 
been able to undergo a full independent audit. And so we are 
working with that. I explained earlier to the Committee we have 
a Financial Improvement and Audit Readiness Plan. We have, 
between our assets and our liabilities we have got about a 
trillion dollars that can receive a clean opinion. We are 
working on the systems that will make a Department-wide audit 
available to us, and so we work that. But as you know, the 
Department conducts a lot of audits in general. We have plenty 
of auditors. And for example, I have the Defense Contract Audit 
Agency. They do 35,610 audits they did last year, and they 
reviewed about $346 billion of the Department's funds, saved 
over $2.3 billion in cost recovery. So we do pay attention to 
that and we appreciate your interest in that area.
    With respect to the break down of the costs for the war, 
we've spent so far about $372 billion; $276 billion for Iraq 
and $69 billion for OEF, which is the Enduring Freedom or 
Afghanistan, and $27 billion for Operation Noble Eagle. As we 
submit our reports to the Congress, and we do that on a 
quarterly basis, we submit to GAO the cost reports monthly, 
those are all broken down by categories and so those are 
available.
    Mr. England. And the other question dealt with do we expect 
to have a fall and next winter supplemental, and the answer to 
that is no. That is not planned, although there is sort of this 
proviso, it would depend on how well we estimated. But the plan 
is to have that in the base budget next year.
    Ms. Hooley. I asked if we can break it down into 
categories, and you said yes, so we know how much we've spent 
for rebuilding costs, or trying to rebuild infrastructure 
there?
    Ms. Jonas. I don't have them off the top of my head, but 
they are available in our quarterly reports that the Congress 
receives. It's broken down into quite a bit of detail. It lists 
all that, yes, ma'am.
    Ms. Hooley. Do you further break it down, for example, as 
we are adding a surge of another 21,500 soldiers, can you break 
it down into what it costs per soldier?
    Ms. Jonas. We could certainly do that for you. I don't have 
that right now, but our average costs are about $121,000 in 
that. But we are having additional costs. The Admiral alluded 
to some of the equipment, etcetera.
    Ms. Hooley. Have we received any money, we talked about 
when we went into this war that some of the costs, the burden 
would be paid for by recouping some of the oil, and that they 
would repay us back money as they got their oil wells up and 
running. Has any of that happened?
    Mr. England. Well, perhaps indirectly, that is they 
actually fund some of their own operations. But, I mean we are 
basically funding the training and equipping of Iraqi and 
Afghan forces. So their money, as far as I know we will have 
to, again, verify with you, but I do not believe that they are 
actually paying our bills. I mean, they are paying their bills 
and in addition we are paying bills to help train and equip 
their forces which obviously we want to do as soon as we can 
because that is how our troops eventually leave, is to have 
their troops able to do the fight. But we have money in the 
budget to do that. So there is train and equip money in the 
budget to train and equip both Afghan forces and Iraqi forces.
    Ms. Hooley. You use the word ``reset'' for replacing the 
equipment that is broken down there. Is that the right word?
    Mr. England. Yes, it is either to replace or repair.
    Ms. Hooley. All right. And do we do that for the Iraqi Army 
as well? Or is it just for our troops?
    Admiral Giambastiani. Do we include some equipping costs?
    Ms. Hooley. Right. I mean, do we, for example, as we are 
involved with the Iraqi Army----
    Admiral Giambastiani. Yes, ma'am. If I could?
    Ms. Hooley. Okay.
    Admiral Giambastiani. The Iraqi Army, for example, and the 
Afghan Army fund, and Iraqi police forces, fund a lot of what 
they are doing. However, in the supplemental to accelerate, for 
example, their equipping so that they can be more independent, 
we have included dollars for purchase to assist them in 
becoming more capable. But the base funding comes out of the 
Iraqi budget, for example.
    Ms. Hooley. And when you talk about ``base funding,''what 
are we talking about? What percentage are we talking about that 
we pay for versus what they pay for?
    Admiral Giambastiani. I could not estimate. We could get 
back to you on that, but I could not estimate that for you off 
the top of my head.
    Ms. Hooley. Thank you very much. Thanks.
    Admiral Giambastiani. Yes, ma'am.
    Ms. Hooley. Thanks. Thank you, Mr. Chair.
    Chairman Spratt. Mr. Allen?
    Mr. Allen. Thank you, Mr. Chairman. And I may be hard to 
see but thank you all for being here through this process. I do 
have a couple of questions, Mr. Secretary, and you can kick 
them off to either of your colleagues if you wish. The 
President's proposal to increase the number of troops by 21,000 
is not the only policy option on the board, obviously. And 
therefore I am curious about alternatives in terms of the 
impending budget request. For example, could you provide to the 
Committee an estimate for what it would cost to fund the war in 
Iraq through the end of 2007 including an estimate for the cost 
of withdrawing our forces by the end of 2007?
    Mr. England. We do not have any such estimate in work, Mr. 
Allen. So, I mean, there is no effort underway. We have no 
planning to do that. As far as I know there are no operational 
plans to go fund, so to do that, I mean, there would have to be 
scenarios and everything laid out and I don't know of any of 
those that exist within the Department. I mean, there is no 
planning to do that within the Department of Defense.
    Mr. Allen. So, but let me put it this way. It is within the 
capacity of the Department to do that kind of planning and come 
up with that kind of number, I would assume?
    Mr. England. I am sure there is. But I do not know of any 
effort, again, because it takes the Joint Chiefs and everyone 
who are all sort of fighting the war, rather than deciding not 
to. So whether that is doable or not is a different question 
that does not fit within the framework.
    Mr. Allen. Well, let me make the request. I would like that 
information. I think it would be helpful to this Committee and 
to the Congress to have that information. We talk about 
withdrawing our forces. We know we are not going to be in Iraq, 
I believe, most of us believe we are not going to be there 
indefinitely. And therefore, in order to have a healthy fact-
based debate about leaving, it would seem to me helpful to have 
that information. So I would make the request.
    Mr. England. I have your request.
    Mr. Allen. Thank you. Thank you. Now, this may have been 
asked before but I do not, you know, unfortunately I have been 
in and out of here today so stop me if it has been asked. But I 
understand that information obtained from DOD has shown that 
through October, 2006 the Department has obligated only $362 
billion of the $471 billion appropriated to DOD by Congress. 
And those, I understand, are CRS numbers. If that is true that 
would mean there is more than $100 billion in unobligated 
balances still available to finance military operations and 
reset. So my question is, can you explain why this money has 
not yet been obligated, much less unspent, when there are 
obviously continuing needs? And secondly, if this number is 
right, doesn't that call into question the need for such a 
large supplemental request?
    Ms. Jonas. Sir, I can answer the question. The actual 
figure I just quoted to the Congresswoman is $372 billion. That 
is the more updated figure. Remember, included in defense 
budgets are things, including intelligence, that is not 
necessarily our own. So there are those pieces there. And there 
are other things that are included in some of these estimates. 
You know, the $70 billion that we have been talking about that 
was appropriated last year. There were things in it, including 
nine additional C-17s which we would not necessarily classify 
as cost of the war. So our understanding at this moment, my 
staff tells me that is about $50 billion that is unobligated so 
far. And that will get us, you know, four or five months down 
the road. I do not have the specific break out of the 
operations, but a good portion of that, of course, is going to 
be procurement funding.
    Mr. Allen. Okay, and when you drop the number from $100 
billion to $50 billion, are you taking out the C-17s and those 
kinds of----
    Ms. Jonas. Yes. Yes.
    Mr. Allen [continuing]. Things that really aren't related 
to Iraq directly?
    Ms. Jonas. Yes, sir.
    Mr. Allen. But still were part of the supplemental, or not?
    Ms. Jonas. They were part of the supplemental, the $70 
billion.
    Mr. Allen. Past supplementals?
    Ms. Jonas. Yes.
    Mr. Allen. As I recall, about two years ago the Special 
Inspector General for Iraq indicated that $8.8 billion that the 
Coalition Provisional Authority had given to Iraq ministries 
could not be accounted for and was not adequately tracked. 
Supposedly a lot of it went to ghost employees. I guess wealthy 
ghost employees, if that is true. What if anything did the 
Department do to account for that large discrepancy? And what 
steps did it take in response to ensure that such untracked 
spending would not occur again?
    Ms. Jonas. My understanding of the situation was that that 
was Iraqi money. That was no Department money. I do not have 
all the facts and figures, but I understand also that there 
were some, and I may be incorrect on this, I need to correct 
the record on it if I am not right, but there were 
prosecutions. I am sure that the auditors that did their work, 
and I know that there was some attention to that at the time, 
but it was Iraqi money as I recall.
    Mr. Allen. That is my recollection. Now that you mention 
that, that is my recollection as well. I see my time has 
expired. Thank you all.
    Chairman Spratt. Mr. Etheridge?
    Mr. Etheridge. Thank you, Mr. Chairman. Mr. Secretary, 
thank you for being here. Let me approach this a little 
different, a question that's probably already been asked in 
different ways. But I think you can appreciate, you know, we 
talk about supplementals and whether it is in or out, etcetera. 
But let me tell you what I hear from my constituents. And I 
come to it differently having been in the education side for a 
number of years as State Superintendent. And my guess is, if I 
had shown up with a supplemental without justifying the budget 
they would have given me my head and sent me back.
    Now, it's different and I recognize that because we are 
defending the country, etcetera. But for the average person on 
the street that doesn't have any insurance, and a host of the 
other needs of this country, they are, I think one of the 
problems we have, they're getting awfully weary of Congress 
not, as you have heard from my colleagues on both sides of the 
aisle today, trying to ask the question, you know, how do we 
get our arms around these supplementals that we do not have 
time to talk about.
    And that is really where we are. I think that is in a 
nutshell what we are talking about. We are just sort of sliding 
around it and not getting to it because all of these other 
needs are closing in on us. And every supplemental, and I think 
part of the reason we have not gotten them in the budget is it 
shows how much we are spending. And all of the supplementals 
are outside the budget so that we do not see the total cost of 
the budget all in one piece. You may not want to comment on 
that, but I think that is really the issue that we face as 
members of Congress when we talk with our constituents. So help 
me with that one, how do we explain that issue and what we have 
got to deal with?
    Mr. England. Well, Congressman it seems to me that, I mean 
I come down on the other side. I mean, all of the war cost is 
in the supplemental. We know exactly what the war cost is. By 
having a supplemental, you just total up the supplementals, 
that is the cost of the war. If it is in the budget then I 
think it is much harder to understand what the cost of the war 
is. So we have a base budget. Man, train, and equip our forces 
in the base budget and that is long term. And then we have 
another category called cost of war and that is----
    Mr. Etheridge. Yes. My point is, though, that you do not 
get to talk about it, and it has been talked about it in 
different ways here. Your point is, we get to talk about it 
after the fact.
    Mr. England. No, sir.
    Mr. Etheridge. But it does not go through the process.
    Mr. England. But it can. I mean, that is not our 
determination. That is the Congress that decides to do that. 
The Congress can do it. We turn in all the data. The fact is, 
there is more data, and the Congress can put it through their 
committees. I mean, they decide not to. But my understanding is 
that is a congressional determination, not our determination.
    Mr. Etheridge. Well, I was not on the Committee so please 
understand. But I think what they are trying to get to is it 
comes through the authorizing side then goes to the 
appropriating side. What is happening is, it is going straight 
to the appropriating side and a lot of folks on the authorizing 
side do not get a chance to get number one the understanding 
and number two the input.
    Mr. England. But understand, that is a rule of the 
Congress. I mean, the Congress decides that.
    Mr. Etheridge. I think they are in the process of trying to 
change that.
    Mr. England. Okay, and I mean I understand that. But, 
again, I do not get my----
    Mr. Etheridge. No, I understand where you come from out 
there. But I am trying to share with you what I think I see.
    Mr. England. Okay.
    Mr. Etheridge. From the frustration of the members today on 
this Committee, anyway.
    Mr. England. Okay, I understand. And again, Congressmen and 
Mr. Chairman, we literally came here to be helpful today and I 
hope we have been helpful. And we understand your issues and 
concerns. I mean at the end of the day it would seem to me that 
what is most important is that we do have correct numbers and 
everybody understands what the money is being spent for and we 
can account for it. And then, frankly, how you categorize it, 
that is sort of what I call what bucket you put it in, the base 
budget or the supplemental, I mean that is of interest and that 
is really your determination how we do that. My interest is to 
make sure we identify the costs, we capture the costs, so that 
we get reimbursed for the cost of war. And if we do that openly 
and as transparent as we can and as factually as we can, then I 
think we serve the country and frankly if it is in a 
supplemental or the base budget I mean that is not an issue 
with us. We just want to be able to capture the costs and 
recover the costs.
    Mr. Etheridge. Well, I see my time has expired, Mr. 
Chairman. I think part of that gets to the issue of what people 
read in the paper are the huge open ended contracts.
    Mr. England. I understand.
    Mr. Etheridge. And then we have to try and defend them, and 
we have not had a chance to look at them. And then I meet with 
my people at Fort Bragg and Pope and my National Guard and 
Reserve folks who do not have the equipment and necessary stuff 
they need. And we have not had a chance to go through the 
process and raise those issues. Now, hopefully that will come 
and I hope you understand.
    Mr. England. No, I understand. And sir, we will be as 
supportive as we can with you and with the Committee.
    Mr. Etheridge. Thank you, Mr. Chairman. I yield back.
    Chairman Spratt. Secretary England, Secretary Jonas, 
Admiral Giambastiani, thank you very much indeed for coming. 
Thanks for your patience and forbearance and your willingness 
to take on our questions. We will probably have some for the 
record which we will be sending to you, and we would appreciate 
your assistance with those.
    Mr. England. No, absolutely. And this has been very helpful 
and we appreciate the opportunity to have the dialogue, Mr. 
Chairman.
    Chairman Spratt. Thank you again for coming.
    Mr. England. Thank you.
    Admiral Giambastiani. Thank you, Mr. Chairman.
    Chairman Spratt. Our next panel, if they will come forward 
now? Robert Sunshine and Steve Kosiak. Gentlemen, thank you for 
your patience and your forbearance also. I think you have 
testified on the Hill before and you realize that the schedules 
slip like this. Number one, we appreciate your coming. Number 
two, we appreciate the quality of your work, your insights and 
observations. And number three, we open the floor to you. You 
can proceed in any manner you wish. If you have prepared 
statements that we make part of the record you can summarize 
them, or you can read them in their completion. I am told we 
have votes at 5:30 so we have a little time ahead of it. Thank 
you again for coming. Mr. Kosiak, thank you for coming. And 
Bob, let's start with you.

     STATEMENTS OF ROBERT A. SUNSHINE, ASSISTANT DIRECTOR, 
 CONGRESSIONAL BUDGET OFFICE; ACCOMPANIED BY STEVEN M. KOSIAK, 
DIRECTOR OF BUDGETS STUDIES, CENTER FOR STRATEGIC AND BUDGETARY 
                          ASSESSMENTS

                   STATEMENT OF MR. SUNSHINE

    Mr. Sunshine. I appreciate the opportunity to be here with 
you today and I will just summarize some of the important 
points in my statement. CBO estimates that since September, 
2001 the Congress has appropriated $503 billion for military 
operations and other activities related to the war on 
terrorism. We estimate that of these amounts, about $344 
billion has been appropriated specifically for operations in 
Iraq. And there are some other appropriations, for example for 
classified activities, some of which may be related to Iraq but 
that is not in the $344 billion number. Almost all of these 
appropriations have been exempted in one way or another from 
the normal constraints of the congressional budgeting process.
    We estimate that in fiscal year 2006, the U.S. spent about 
$100 billion, that is an outlay figure, about $100 billion for 
its operations in Iraq and elsewhere in the war on terrorism. 
In 2007 that figure will approach $120 billion, roughly $10 
billion a month. That means we are now spending on these 
activities more than twenty percent of the Defense Department's 
budget, and more than ten percent of all of the government's 
discretionary outlays. Those amounts obviously merit a great 
deal of attention and care in the budgeting process.
    CBO has been asked on a number of occasions to estimate the 
future costs of operations in Iraq and in the war on terrorism. 
Last year, for example, CBO prepared for Mr. Spratt an estimate 
of the costs of two scenarios that he specified. Those 
estimates were too low. When we release our baseline 
projections at various points in the year, we also offer some 
alternative scenarios that differ from the simple inflation 
numbers that appear in the baseline. And we will be releasing 
our annual outlook report next week and we will have some 
alternative scenarios in that report.
    But estimating the costs of war is always difficult because 
there is so much that is uncertain about the pace and scale of 
future military operations. And in this case it is much more 
difficult, because we really have very little information and 
data on which to base our estimates.
    Let me give a few examples. First, the DOD supplemental 
budget requests have typically been accompanied by much less 
data and much less justification than its regular requests. The 
$33 billion requested for operations and maintenance as part of 
the 2006 supplemental was accompanied by only five pages of 
justification. The 2007 request for a total of $50 billion had 
much more detail, but not enough and not in the form that would 
enable analysts to understand how DOD develops its budget 
requests.
    Second, DOD's monthly obligation reports provide limited 
information. About one-quarter of the amounts obligated in 
fiscal year 2006, about $23 billion, was allocated for purposes 
that the reports describe as ``other.'' With such little 
information it is difficult to estimate whether such costs 
would be incurred in future years. And those reports also do 
not include obligations for classified activities, which 
probably have cost at least $25 billion to date. The reports 
also would be much more useful if they contained information on 
operations along with the obligations: troop levels, flying 
hours, vehicle miles, in each month. And that would help us and 
others to understand the relationship between the costs that 
are being incurred and the nature of the military operations.
    Third, funds for Iraq and the war on terrorism are largely 
recorded in the same appropriations accounts that the regular 
non-war budget spending is recorded in. This makes it difficult 
to sort out how much is actually spent on war related 
activities. The use of separate appropriations accounts for war 
related spending might be helpful.
    Fourth, CBO frequently has difficulty obtaining the monthly 
reports on war obligations and other data. We often receive 
information months after data are officially approved for 
release. This could be addressed by establishing a standard and 
much more comprehensive distribution list for war obligation 
reports and other data. We would also like to have access to 
the COST model, the Contingency Operations and Support Tool 
that the Chairman referred to earlier, that DOD uses to 
formulate its supplemental requests, or at least the data and 
the methodology underlying it so we can better relate force 
levels, operation levels, to the costs.
    A final broader issue involves the timing of budget 
requests and the Committee has discussed that extensively 
today. Whether it would be worthwhile for DOD to include the 
entire fiscal year's cost of activities in Iraq and the war on 
terrorism in its regular budget request, and apparently they 
are taking some steps in that direction. That approach would 
have some positive and negative consequences. On the positive 
side, including war costs in the regular request would give the 
Congress more time to debate and discuss and evaluate those 
costs and to weigh them against other priorities. It would give 
the budget committees more time and better information to use 
in crafting a budget resolution. And it would avoid the problem 
of potential funding issues that arise if enactment of the 
supplemental is delayed during the course of the year. On the 
other hand, budgeting for activities in Iraq and the war on 
terrorism combined with the regular budget runs the risk of 
providing less clarity about which funds are for the war and 
which funds are for the regular activities. And as Mr. England 
pointed out, submitting the request with the regular budget 
could lead to less accurate cost projections given the long 
lead times involved. It would certainly necessitate 
modifications as the year went on, perhaps very significant 
ones, before or during the budget year as conditions change, as 
strategies evolved. And both the Department and the Congress 
would obviously have to be flexible as the situation evolved if 
the appropriations were provided for a full year in advance.
    Thank you, Mr. Chairman. That summarizes my main points and 
I would be happy to answer any questions.
    [The prepared statement of Robert A. Sunshine follows:]

     Prepared Statement of Robert A. Sunshine, Assistant Director, 
                      Congressional Budget Office

    Mr. Chairman, Congressman Ryan, and Members of the Committee, I 
appreciate the invitation to appear before you today to discuss 
budgeting for operations in Iraq and the war on terrorism. My statement 
is based on the Congressional Budget Office's (CBO's) analyses of and 
research on that issue over the past few years. CBO has been asked, on 
a number of occasions, to determine how much has been spent and how 
much might be spent in the future for those activities.
    This testimony will briefly discuss appropriations and obligations 
to date for operations in Iraq and the war on terrorism. It will also 
offer an overview of budgeting and reporting issues.
                 appropriations and obligations to date
    Since September 2001, by CBO's reckoning, the Congress has 
appropriated $503 billion for military operations and other activities 
related to Iraq and the war on terrorism (see Table 1). 1 
Little of the funding used to finance the war has been subject to the 
budgetary constraints imposed on regular appropriations. Rather, such 
funding has been exempted from normal budget procedures in several 
ways. One method has been to designate it as an emergency requirement, 
and a second has been to deem it for ``overseas contingency operations 
related to the global war on terrorism''--both of which have allowed 
for exemption under provisions of the budget resolutions in effect 
during that period. A third method has been to provide a specific 
allocation in the budget resolution and authorize an adjustment to that 
limit to accommodate additional spending if necessary.
---------------------------------------------------------------------------
    \1\ The $503 billion figure shown here differs slightly from 
amounts estimated by the Congressional Research Service and the 
Government Accountability Office, mainly because of differences in how 
to count certain transfers from DoD's budget for activities besides the 
war.
---------------------------------------------------------------------------
    About $463 billion of the $503 billion was allocated to the 
Department of Defense (DoD), including about $448 billion for U.S. 
military operations and other defense activities and about $15 billion 
for support of indigenous security forces. 2 Because some of 
those funds are designated for classified purposes, about which little 
information is publicly available, CBO cannot provide a precise 
estimate of how much has been obligated to date. However, of the funds 
appropriated through fiscal year 2006, about $393 billion, CBO 
estimates that at least 85 percent--$335 billion--had been obligated 
through November 2006. That judgment is based on an analysis of 
obligation reports provided by DoD. 3 For fiscal year 2007, 
$70 billion has been appropriated thus far, as part of the Department 
of Defense Appropriations Act, 2007 (Public Law 109-289). DoD 
obligation reports indicate that about $16 billion of that amount had 
been obligated as of November 2006, bringing the department's total 
obligations to more than $350 billion.
---------------------------------------------------------------------------
    \2\ Funding for indigenous security forces is used to train and 
equip local military and police units in Iraq and Afghanistan. Since 
2005, those funds have been appropriated to the Department of Defense, 
whereas before that, they were appropriated to the Executive Office of 
the President.
    \3\ The most recent reports provided by DoD cover obligations 
through November 2006.

    TABLE 1.--ESTIMATED APPROPRIATIONS PROVIDED FOR OPERATIONS IN IRAQ AND THE WAR ON TERRORISM, 2001 TO 2007
                                    [By fiscal year, in billions of dollars]
----------------------------------------------------------------------------------------------------------------
                                                                                                         Total,
                                                     2001   2002   2003   2004   2005   2006  2007\a\  2001-2007
----------------------------------------------------------------------------------------------------------------
Military Operations and Other Defense Activities:
    Iraq\b\.......................................      0      0     46     68     53     87      52        306
    Other\c\......................................     14     18     34     21     18     24      14        142
                                                   -------------------------------------------------------------
      Subtotal....................................     14     18     80     88     70    111      67        448
Indigenous Security Forces:\d\
    Iraq..........................................      0      0      0      5      6      3       2         16
    Afghanistan...................................      0      0      0      0      1      2       2          5
                                                   -------------------------------------------------------------
      Subtotal....................................      0      0      0      5      7      5       3         20
Diplomatic Operations and Foreign Aid:
    Iraq..........................................      0      0      3     15      1      3       0         22
    Other.........................................      *      2      5      2      2      1       0         12
                                                   -------------------------------------------------------------
      Subtotal....................................      *      2      8     17      3      4       0         34
                                                   -------------------------------------------------------------
        Total.....................................     14     19     88    111     81    120      70        503
----------------------------------------------------------------------------------------------------------------
Source: Congressional Budget Office.

Notes: Details may not add up to totals because of rounding.

* = between zero and $500 million.

\a\ At the current rate of military operations, the funding provided to date in 2007 will not be sufficient to
  pay for all costs that will be incurred this fiscal year. Consequently, additional appropriations will
  probably be provided in 2007.
\b\ The Congressional Budget Office estimated funding provided for Operation Iraqi Freedom by allocating funds
  on the basis of obligations reported by the Department of Defense (DoD). For more information about funding
  for Operation Iraqi Freedom, see Congressional Budget Office, Estimated Costs of U.S. Operations in Iraq Under
  Two Specified Scenarios (July 13, 2006).
\c\ Includes Operation Enduring Freedom (involving operations in and around Afghanistan), Operation Noble Eagle
  (for homeland security missions, such as combat air patrols, in the United States), the restructuring of Army
  and Marine Corps units, classified activities other than those funded by appropriations for the Iraq Freedom
  Fund, and other operations. (For fiscal years 2005 through 2007, funding for Operation Noble Eagle has been
  intermingled with regular appropriations for the Department of Defense; that funding is not included in this
  table because it cannot be identified separately.)
\d\ Funding for indigenous security forces, which was appropriated in accounts for diplomatic operations and
  foreign aid (budget function 150) in 2004 and in accounts for defense (budget function 050) since 2005, is
  used to train and equip local military and police units in Iraq and Afghanistan.

    Because most appropriations for operations in Iraq and the war on 
terrorism appear in the same budget accounts with appropriations for 
DoD's other activities, determining what has actually been spent is 
difficult. However, CBO estimates that appropriations to DoD for Iraq 
and the war on terrorism increased total federal outlays by about $310 
billion through fiscal year 2006. About $95 billion of those outlays 
occurred in fiscal year 2006, CBO estimates. For fiscal year 2007, CBO 
estimates that funding for operations in Iraq and the war on terrorism 
will add between $115 billion to $120 billion to total outlays, 
assuming that additional appropriations are provided during the course 
of the year.
    In addition to funding for military operations, the Congress has 
appropriated about $40 billion for diplomatic operations in and aid to 
Iraq, Afghanistan, and other countries assisting the United States in 
Iraq and in the war on terrorism, including about $5 billion in 2004 
for support to indigenous Iraqi security forces. About half of the $40 
billion total ($21 billion) has been appropriated for the Iraq Relief 
and Reconstruction Fund, almost all of which has been obligated to 
date. On the basis of information from the Department of State, CBO 
estimates that most of the remaining $19 billion has also been 
obligated.
    Of the funds appropriated to the Iraq Relief and Reconstruction 
Fund, CBO estimates that about $16 billion has been spent. But CBO does 
not have enough information to determine how much of the remaining $19 
billion has been expended.
              estimating the costs of military operations
    DoD estimates the future costs of the war using a combination of 
cost models, surveys of damaged and destroyed equipment, and analyses 
of actual costs incurred to date. The department's principal model for 
estimating war costs is the Contingency Operations Support Tool (COST), 
which was developed by the Institute for Defense Analyses. 4 
That model uses cost factors derived from actual expenditures for prior 
operations to estimate operation and support costs for deploying units. 
In addition to those estimates, each military service produces separate 
estimates of the cost of repairing or replacing damaged or destroyed 
equipment and the amounts necessary to restore units and materiel to 
predeployment conditions. The services also estimate costs associated 
with the reorganization and modernization of the armed forces. Those 
sums, when added together, have provided the basis for DoD's budget 
requests related to the war.
---------------------------------------------------------------------------
    \4\ According to 10 U.S.C. 101(a)(13), a ``contingency operation'' 
is one in which members of the armed forces are or may become involved 
in military actions, operations, or hostilities against an enemy of the 
United States. It can also be an operation in which reserve-component 
members are called to active status or any other national emergency 
declared by the President or the Congress.
---------------------------------------------------------------------------
    The actual obligations incurred for military operations in Iraq and 
the war on terrorism are tracked by the Defense Finance and Accounting 
Service, which issues monthly reports on financial obligations for each 
of the major ongoing operations (Iraqi Freedom, Enduring Freedom, and 
Noble Eagle). 5 The reports show obligations by the year in 
which the funds were appropriated and by military service.
---------------------------------------------------------------------------
    \5\ Operation Enduring Freedom includes military operations in and 
around Afghanistan and other overseas counterterrorism activities. 
Operation Noble Eagle refers to homeland security missions, such as 
combat air patrols over major metropolitan areas, undertaken by DoD in 
response to the terrorist attacks of September 11, 2001.
---------------------------------------------------------------------------
                     budgeting and reporting issues
    CBO has been asked by the Congress on several occasions to estimate 
the future costs of operations in Iraq and the war on terrorism. 
Estimating war costs 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 on the costs incurred to date. In particular, CBO has 
identified four main concerns regarding the current process of 
budgeting and cost reporting for operations in Iraq and the war on 
terrorism.
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 
appropriations (sometimes referred to as bridge appropriations), which 
are enacted near the beginning of the fiscal year, and midyear 
supplemental appropriations. If the bridge appropriations run out 
before enactment of the midyear appropriations, DoD can pay for war-
related expenses using funds meant for its regular activities, which 
are then reimbursed upon enactment of the midyear supplemental. In the 
event that the midyear appropriations are delayed and funds for DoD's 
regular activities begin to run out, the department has some options. 
One option is to use its authority to transfer funds among various 
appropriation accounts (for instance, from procurement accounts to 
operation and maintenance accounts), although that authority is 
limited. In addition, DoD can invoke the Feed and Forage Act (41 U.S.C. 
11), which allows the President to obligate funds without an 
appropriation for the purpose of sustaining troops in the field. That 
authority was invoked immediately after the terrorist attacks on 
September 11, 2001, although ultimately it was not used because the 
Congress quickly provided the necessary appropriations. 6
---------------------------------------------------------------------------
    \6\ The authority of the Feed and Forage Act is limited to 
obligations for items meant to sustain troops in the field, such as 
subsistence clothing, fuel, quarters, transportation, and medical 
supplies. It cannot be used to purchase additional weapons or to 
support military hardware.
---------------------------------------------------------------------------
    Some policymakers and analysts have suggested that, to better 
assist in planning future defense budgets, DoD should include the 
entire fiscal year's cost of operations 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. It would 
also give the budget committees more information about potential 
budgetary effects that they may wish to consider in crafting a budget 
resolution. Further, fully funding those operations at the beginning of 
the fiscal year would help DoD avoid any potential funding issues that 
might arise from a delay in enacting midyear supplemental 
appropriations. On the negative side, budgeting for activities in Iraq 
and the war on terrorism in combination with the regular request could 
result in less clarity about which funds would go to war-related 
operations and which were intended strictly for other activities, 
unless separate budget accounts were established to distinguish the two 
purposes. In addition, submitting the request at the beginning of the 
fiscal year could lead to less accurate cost projections because the 
budget must be submitted in February (eight months prior to the start 
of the fiscal year). 7
---------------------------------------------------------------------------
    \7\ Much of agencies' budget preparation occurs long before the 
February budget submission.
---------------------------------------------------------------------------
Supplemental Budget Requests
    DoD's supplemental budget requests often do not provide enough 
detail to determine how the department develops its budget requests. 
The amount of justification material that DoD provides in its regular 
budget for activities besides the war and the documentation that it 
submits for war-related operations differ substantially. The $440 
billion requested by DoD for its regular activities in fiscal year 2007 
was supported by very detailed justification documents. By contrast, 
DoD's funding requests related to the war have been accompanied by 
relatively little backup material. For instance, the backup material 
for the department's original 2006 supplemental request, which totaled 
about $68 billion, included only five pages on operation and 
maintenance costs, even though those costs constituted almost half 
(about $33 billion) of the request.
    In June 2006, DoD provided the appropriations committees a package 
of information on the $50 billion that the Administration had requested 
for war-related activities for fiscal year 2007. Compared with previous 
submissions, that material provided more detail on the request, 
although not enough to enable analysts to understand how the costs were 
estimated or to explain how the funding requirements compared with 
those of previous periods.
Tracking Actual War-Related Obligations and Outlays
    Regardless of when the funds for operations in Iraq and for the war 
on terrorism are provided, they are generally recorded in the same 
appropriation accounts that fund DoD's other activities, making it 
difficult to sort out how much is ultimately spent on the war.
    For fiscal year 2006, the Congress appropriated about $218 billion 
to DoD's operation and maintenance accounts. Of that amount, about $72 
billion was appropriated for war-related activities and about $146 
billion was appropriated for DoD's regular operating costs. But the 
standard budget execution reports submitted to the Office of Management 
and Budget do not distinguish between those war and nonwar 
expenditures, making it difficult to determine how much has actually 
been spent for activities related to Iraq and the war on terrorism.
    The Defense Finance and Accounting Service issues monthly reports 
that track war-related obligations, but they provide limited 
information. According to those reports, about $98 billion was 
obligated for military operations in Iraq and the war on terrorism in 
fiscal year 2006. Of that amount, almost 25 percent ($23 billion) was 
allocated for purposes described as ``other.'' Little information was 
provided to suggest how those ``other'' funds were obligated. Without a 
better understanding of those expenditures, determining whether such 
costs will be incurred in future years is difficult. Moreover, the 
extent to which the reports capture obligations for classified 
activities is not clear. Relying on conference reports for various 
supplemental appropriation acts, CBO estimates that at least $25 
billion has been appropriated for classified activities since 2001. In 
addition, the obligation reports have not contained information on the 
pace of operations--such as troop levels, flying hours, or vehicle 
miles--in each month. Such information would be useful in analyzing 
cost variations, which CBO and other government analysts could use to 
better estimate future spending on the war.
    Setting up separate budget accounts might help in tracking the 
obligations and outlays of war-related appropriations, but 
implementation of such an accounting structure might be difficult. For 
instance, it would necessitate distinguishing between the basic pay of 
troops (which is part of the regular defense budget) and their 
additional combat-related pay (which is attributable to the war).
The Distribution of Data and Information
    CBO frequently has difficulty obtaining monthly reports on war 
obligations and other data. Often the agency receives that information 
months after the data are officially approved for release. That problem 
could be addressed by establishing a standard, more-comprehensive 
distribution list for the war obligation reports and other data. Having 
access to the COST model that DoD uses to formulate its supplemental 
requests or to the data and methodology underlying the model would also 
be helpful. In November 2003, this Committee formally requested that 
DoD provide CBO access to the COST model, but the department has not 
yet done so.

    Chairman Spratt. Thank you very much. Mr. Kosiak?

                    STATEMENT OF MR. KOSIAK

    Mr. Kosiak. Well, first I want to thank Chairman Spratt and 
the rest of the Committee for inviting me to testify today on 
this important subject. I want to focus on the process used to 
fund military operations and to recommend three improvements in 
that process.
    My first recommendation is that the wars in Iraq and 
Afghanistan should be funded through a separate account or 
separate accounts attached to the annual Defense Appropriations 
Act. And that is something that I think the Department seems to 
be moving in that direction. Certainly many members of 
Congress, including the Chairman, have been pushing them in 
that direction. I think we are long past a point really now 
where we should be funding these operations as supplementals. 
At this point, you know, if you go to a similar point in the 
Vietnam and Korean Wars, which are the best other examples of 
fairly long wars for the U.S., we were already at this point 
paying for the vast majority of the costs through regular 
appropriations.
    One reason that I think we have to do this, one reason it 
is important, is that if you do not include projected costs for 
ongoing military operations in the regular annual budget 
request you are providing a misleading and overly optimistic 
picture, I think, for the coming fiscal year in terms of how 
much federal spending will be required. And that was not such a 
big deal a few years ago or in the 1990's at least when we were 
talking about $1 or $2 billion dollars a year, something like 
that, but now we are talking about annual war costs of over 
$100 billion, potentially approaching $200 billion a year. So 
this is a big gap in the budget not to include it.
    One of the most important things in good budgeting is to 
have a budgeting process that forces decision makers to 
recognize the true cost of the policy choices they are making. 
And I think continuing to rely on supplementals obscures those 
costs rather than highlighting them.
    The second problem which people have discussed a little bit 
already today here is the problem with, and I know the Congress 
and this Committee is concerned, what is a lack of oversight. 
Secretary England suggested that part of the problem is a 
congressional decision to have money in supplementals or 
supplemental requests go directly to appropriators and not go 
through the budget committees and the authorizers. But I think 
that really oversimplifies things because it is not just an 
arbitrary rule to have it go to the appropriators. The fact of 
the matter is, there is no time available. I mean, there is 
just not time enough when the authorizers and the appropriators 
and everyone else is trying to look at the regular annual 
budget. There is no real time to focus on supplementals. And 
again, that is not such a big deal when we are talking about $1 
or $2 or $5, $10 billion dollars a year in supplementals. But 
when we are talking about $100 billion or more it is a very big 
deal.
    I also, I guess, would add one other point in terms of the 
use of supplementals. I think, again, Secretary England 
suggested that there is a trade off between using 
supplementals, in which case you can get accurate information, 
and not using supplementals, in which case you would have more 
time to consider if the information is not as good. And that is 
certainly true. But I think it is really kind of a false choice 
because no one is suggesting that you cannot do supplementals 
later in the year if you have it. The fact of the matter is, 
for a lot of the costs associated with military operations they 
are actually quite well known and quite easy to estimate. We 
know roughly how many troops we are going to have there. We 
have had roughly the same number for quite a long time, now. 
There are a lot of costs in there that you can accurately 
estimate quite far in advance. So the question is not whether 
you have supplementals or do not have supplementals, because 
you may have to have supplementals because those estimates are 
not going to be perfectly accurate. You may later in the year 
have to have a supplemental. But if it is a $10 billion, $5 
billion supplemental that is going to be a lot easier for 
Congress to deal with than a $100 billion a year supplemental.
    My second recommendation is that the cost, whether it is 
funded through the supplementals or whether it is funded, as I 
would prefer and I think everyone would prefer, through the 
Annual Defense Appropriations Act, that those costs be limited 
pretty much to, with perhaps a few exceptions, to costs 
directly related to military operations which currently means 
operations in Iraq and Afghanistan. Over the past several years 
the administration has combined funding for Iraq and 
Afghanistan into supplementals under the name the Global War on 
Terror, or GWOT. Each of these supplementals has also included 
some amount of funding for activities and programs that are 
unrelated to ongoing military operations, like Army modularity 
and some other programs. But from what we can tell, and I think 
CBO's efforts to go through these costs supports this, from 
what we can tell the vast majority of the funding provided so 
far really has been related pretty directly to costs actually 
incurred in these military operations.
    Unfortunately there is reason to believe that this 
imperfect, but at least relatively disciplined approach, to 
generating GWOT appropriations requests is going to disappear. 
For 2007 currently the OMB is considering a $100 billion 
request by the services for supplemental for 2007. This comes 
on top of, of course, the $70 billion which Congress has 
already provided for 2007 so bringing the total to $170 
billion. Now that is a lot more than was anticipated by OMB 
only a few months ago. If you look at the mid-session review, 
they were anticipating total costs for 2007 for the GWOT of 
about $110 billion. It is also much higher than what was 
provided this year, which was about $117, $118 billion, was 
provided for 2006. So there is $50 or $60 billion more here 
than I think most people anticipated would be required as short 
a time as a few months ago.
    Chairman Spratt. Steve, where was $110 billion estimated?
    Mr. Kosiak. The $110 billion was when they, in their mid-
session review they said that they, obviously as a plug in the 
2007 request they included $50 billion for 2007. But in their 
mid-session review they said that they would need a 
supplemental and they anticipated that total funding for 2007 
would be about $110 billion.
    The best explanation for this, I think, why we see this 
jump, is because DOD has really expanded broadly its definition 
of what can be included in these supplementals, what can and 
should be included in GWOT supplementals, or GWOT 
appropriations, whether in supplementals or not perhaps, rather 
than through the services base line defense budgets. And this 
gets back to Secretary England's memo to the services in 
October where he said that the ground rules were being expanded 
for the 2007 spring supplemental to include the Department's 
efforts in the Global War on Terror and not just efforts 
related to operations in Iraq and Afghanistan. I think this 
really opened the floodgates for the services to ask for things 
in these GWOT appropriations.
    In the administration's eyes I think it is also important 
to understand that the GWOT, or long war as it is sometimes 
referred to, is really a very broad concept. It includes 
obviously the wars in Iraq and Afghanistan in their minds. But 
beyond that it represents a broad framework for organizing the 
U.S. military's strategy, planning and budgeting for really 
potentially decades to come. And in that sense it kind of 
reflects, it is similar to how the Cold War framework was used 
to help organize the plans and budgeting of the Pentagon in the 
second half of the twentieth century.
    Unfortunately, I think you have a serious problem when you 
provide such a broad definition of what the GWOT is and then 
tell the services that virtually anything related to the GWOT 
can be funded through these special GWOT appropriations. And 
this again is true whether you are funding the GWOT through 
supplemental appropriations or separated in the regular annual 
defense budget. In either case the Defense Department has 
basically removed any principal distinction between what should 
be funded through special GWOT appropriations and what should 
be funded in the rest of the defense budget. And I would argue 
it is roughly equivalent to telling the services in 1968 at the 
height of the Vietnam War that the requests for Vietnam War 
funding can include basically anything related to winning the 
Cold War competition with the Soviet Union. It also amounts to 
in effect telling the services that they no longer need to find 
room in the regular annual defense budget to cover the full 
cost of their long term plans. And the services already have a 
perennial problem with providing, developing and presenting 
long term plans that are affordable within projected funding 
levels. There is a lack of realism and making this change, 
enlarging the definition of GWOT and what can be funded through 
GWOT appropriations is only going to make that planning and 
budgeting less realistic over the long term.
    My third and last recommendation is that the Defense 
Department should provide better justification materials for 
many of the reasons that CBO has mentioned. And I would just 
mention one point in particular. I think it is especially 
difficult to tell from their justification materials to what 
extent reset costs are really being driven by the need to 
recover from costs incurred in the wars in Iraq and 
Afghanistan, and to what extent they are being driven by and 
reflect the Pentagon's long term modernization and 
transformation plans.
    I guess the last thing I would mention before closing is 
that I am encouraged by Deputy Secretary of Defense England's, 
the latest coming from the Department of Defense that we are 
moving towards funding these operations through the regular 
annual appropriations act and that the 2008, as I understand, 
the 2008 request will include funding for military operations 
next year. But I guess when he tells me also that basically the 
way they are developing those numbers is to straight-line from 
what it is in 2007, I wonder a little bit about how useful that 
information is going to be and how realistic that information 
is going to be. And I would also, I guess, wonder if their 
baseline is $170 billion for the GWOT, I am not sure that is 
really a good baseline to be projecting from. I am not sure how 
realistic that is in terms of what the actual costs for those 
military operations are.
    So with that, I will end my comments and again thank the 
Committee for inviting me to testify today.
    [The statement of Steven M. Kosiak follows:]

  Prepared Statement of Steven M. Kosiak, Director of Budget Studies, 
             Center for Strategic and Budgetary Assessments

    Mr. Chairman and members of the committee, it is a great honor to 
have the opportunity to appear before you today to discuss some of the 
issues surrounding the budgetary aspects of the Global War on Terror 
(GWOT) and, in particular, the wars in Iraq and Afghanistan. These two 
wars, and especially the war in Iraq, are currently at the center of US 
deliberations and debates over national security, almost to the 
exclusion of any other major issues.
    With over 3,000 American service members killed in these conflicts, 
and some 25,000 wounded, the financial costs of these wars and the 
mechanism used to fund them are, understandably, of secondary interest 
and importance to most Americans. That said, with the total amount of 
GWOT funding provided by Congress over the past seven fiscal years now 
totaling some $500 billion, and the Office of Management and Budget 
(OMB) considering a $100 billion GWOT supplemental for fiscal year 
2007, Congress would be acting irresponsibly if it did not closely 
examine the budgetary aspects and implications of the GWOT. Thus, I 
commend this committee on its decision to hold this hearing.
    There are a wide variety of different areas one could focus on in 
considering the budgetary aspects of the GWOT. I have chosen to focus 
on three essentially process oriented questions, and provide three 
recommendations for improving that process. I believe that instituting 
these changes would also lead to substantive improvements in 
policymaking.
    Briefly stated, my recommendations are as follows:
     The wars in Iraq and Afghanistan should be funded through 
special GWOT accounts attached to the annual defense appropriations 
act, rather than through supplemental appropriations.
     The costs covered by special GWOT appropriations should be 
limited, with perhaps a few exceptions, to those directly related to 
the military operations in Iraq and Afghanistan.
     The Defense Department should provide better and more 
detailed budget justification material for its estimates of the cost of 
military operations in Iraq and Afghanistan, and other costs related to 
the GWOT.
    I will spend the remainder of my time explaining and discussing in 
more detail my reasons for making these recommendations.
1. The wars in Iraq and Afghanistan should be funded through special 
        GWOT accounts attached to the annual defense appropriations 
        act, rather than through supplemental appropriations
    Funding required to cover the extra costs associated with 
conducting military operations in Iraq and Afghanistan should be 
provided as part of the Defense Department's regular annual 
appropriations act, rather than through supplemental appropriations. 
The funding should be included in a separate and distinct title in the 
annual appropriations act, as has the ``bridge'' funding, which 
Congress has, on its own initiative, added to the last three defense 
appropriations acts.
    The United States has been engaged in military operations for more 
than five years in Afghanistan and nearly four years in Iraq. We are 
long past the point where these operations should be financed primarily 
through supplementals, a mechanism intended to pay for unanticipated 
emergencies.
    Historically, after the initial, unanticipated, phase of major wars 
or other military operations, past administrations have relatively 
quickly shifted from supplementals to regular annual appropriations. 
The Truman Administration began to include funding to cover the cost of 
the Korean War in its regular annual budget request in the first year 
of that conflict, and by the second year such appropriations accounted 
for almost 98 percent of the total funding provided for the war. 
Likewise, the Johnson Administration began including funding to cover 
the cost of the Vietnam War in its regular annual budget request in 
January 1966, less than a year after the United States began to deploy 
combat troops in that country. By 1968, such appropriations accounted 
for 86 percent of war-related funding. Long-term funding was not, 
thankfully, an issue in the case of the 1991 Gulf war due to the short 
duration of that conflict. More recently, by the second year of the 
military's deployment in Bosnia, the Clinton Administration included 
funding for that operation in its regular annual budget request.
    Certainly, especially in the case of the Korean and Vietnam Wars, 
it was no easier to project costs for the upcoming year than it is, 
today, in Iraq and Afghanistan. But the Services made good faith 
efforts to do so, and generally appear to have succeeded.
    Congress in general, and this committee in particular, has made 
clear, over the past several years, that they recognize the 
inappropriateness of continuing to rely on supplementals to fund these 
military operations. Congress has done so, among other things, by 
including a bridge fund in the annual defense appropriations act that 
provides a down payment on war-related costs for the coming fiscal 
year. In addition, the fiscal year 2007 defense authorization act 
includes language directing the administration to include full funding 
for the cost of military operations in Iraq and Afghanistan in its 
fiscal year 2008 budget request. The bipartisan Iraq Study Group has 
also recommended that war costs be included in the president's annual 
budget request. Unfortunately, the administration has so far been 
unwilling to embrace this approach.
    Some might argue that it is of little consequence whether funding 
for the ongoing military operations in Iraq and Afghanistan is provided 
through regular annual appropriations or supplemental appropriations--
that it is the amount of funding required that is important, not the 
process used to provide it. But, in fact, in this case process does 
matter, as it often does in budgeting. There are at least two reasons 
for this.
    First, a budget that does not include a reasonable estimate of 
projected funding requirements for ongoing military operations is an 
incomplete budget. It is a budget that provides a misleading and overly 
optimistic picture of overall federal funding requirements and spending 
for the coming fiscal year. This would be a minor matter if we were 
spending only hundreds of millions or, at most, several billion dollars 
each year on military operations, as we were during most of the 1990s. 
But today, with war-related funding now surpassing $100 billion a year, 
this is a major gap.
    A sound budgeting process forces policymakers to recognize the true 
costs of their policy choices. By contrast, the administration's 
continued reliance on supplementals tends to mask and obscure the cost 
of ongoing military operations.
    Second, reliance on supplemental appropriations diminishes 
substantially the level of oversight Congress can exercise over war-
related funding. Unlike funding requests submitted through the regular 
annual budget process, which work their way through the House and 
Senate budget committees, armed services committees and, finally, 
appropriations committees, requests for supplemental appropriations are 
submitted directly to the appropriations committees.
    Moreover, because supplemental requests are submitted in the middle 
of the fiscal year, the amount of time available to consider these 
measures is greatly constrained. In addition, while the substantial 
expertise resident in the House and Senate Armed Services committees is 
effectively shut out of the process, members of Congress and staff on 
the appropriations committees are forced, year after year, to try to 
quickly work through extraordinarily large supplemental requests at the 
same time they are required to consider the administration's budget 
submission for the coming fiscal year. Taken together, these factors 
greatly reduce the effectiveness of Congress' oversight, over what is 
now a major element of the defense budget.
2. The costs covered by special GWOT appropriations should be limited, 
        with perhaps a few exceptions, to those directly related to the 
        military operations in Iraq and Afghanistan
    Although funding the ongoing military operations in Iraq and 
Afghanistan through the Defense Department's regular annual 
appropriations act, rather than through supplementals, would mark a 
significant process improvement, an additional process change may also 
be needed to ensure, or at least encourage, sound budgeting. That 
change involves, with perhaps a few exceptions, limiting the costs 
covered in special war related appropriations--whether those measures 
are supplementals or, preferably, separate and distinct accounts 
attached to the annual defense appropriations act--to programs and 
activities directly related to conducting military operations in Iraq 
and Afghanistan.
    When the United States began Operation Enduring Freedom (OEF) in 
Afghanistan at the end of 2001, the Defense Department leadership 
coined the term Global War on Terror (GWOT). The GWOT label was 
attached to the request for supplemental appropriations submitted to 
Congress at that time to pay for military operations in Afghanistan, as 
well as Operation Noble Eagle, the Defense Department's homeland 
security operation.
    When the United States invaded Iraq in 2003, the administration 
decided to subsume this operation within the rubric of the GWOT as 
well. Thus, beginning in fiscal year 2003, the GWOT supplemental 
request submitted to Congress included funding for both OEF and 
Operation Iraqi Freedom (OIF), as well as a relatively small amount of 
funding for Operation Noble Eagle and some other activities. Beginning 
with the fiscal year 2005 submission, funding for Operation Noble Eagle 
was removed from supplemental appropriations process, and funded 
instead through the regular annual defense appropriations act.
    Each of the GWOT supplementals submitted to Congress and enacted 
over the past few years have also included some amount of funding for 
programs and activities that are, at best, only indirectly related to 
the wars in Iraq and Afghanistan. The most obvious example of this is 
the inclusion of funding for the Army's modularity program in the 
fiscal year 2005 and 2006 supplemental requests. Whatever the merits of 
the Army's modularity program, it is an effort that Army officials 
acknowledge they would be pursuing whether or not the Service was 
currently engaged in Iraq and Afghanistan. As such, funding for this 
program should have been requested as part of the regular annual 
appropriations act--a view that the administration acknowledged to be 
correct, at least implicitly, when it stated in 2005 that for fiscal 
year 2007 and beyond funding for the Army's modularity program would be 
included the regular annual budget submission.
    As I will discuss in the last section of this testimony, there is 
considerable uncertainty concerning how much the wars in Iraq and 
Afghanistan are actually costing in budgetary terms, and how closely 
connected some of the programs and activities being funded through the 
GWOT appropriations are to either of those military operations. 
Nevertheless, it appears that, to date, the vast majority of costs 
covered in these measures have been incurred by the US military in 
their conduct of these operations.
    Unfortunately, there is reason to believe that this imperfect, but 
at least relatively disciplined, approach to generating GWOT 
supplemental requests is about to disappear. The Defense Department's 
proposal for fiscal year 2007 GWOT supplemental funding (PBD 711), 
which was sent to OMB for approval in December of last year, reportedly 
includes a request for $100 billion. Coming on top of the $70 billion 
bridge fund already provided by Congress as part of the fiscal year 
2007 defense appropriations act, a supplemental request of this 
magnitude would bring total GWOT funding this year to $170 billion.
    By contrast, in its 2006 midsession review, OMB estimated that 
total funding requirements for the GWOT would amount to about $110 
billion in fiscal year 2007--very close to the $117 billion provided 
for the GWOT in fiscal year 2006, and the Congressional Budget Office's 
(CBO's) most recent ($119 billion) estimate of GWOT funding 
requirements this year.\1\
---------------------------------------------------------------------------
    \1\ CBO, ``Additional Information About the Alternative Spending 
Path for Military Operations in Iraq and Afghanistan and for the War on 
Terrorism,'' September 22, 2006, p. 2.
---------------------------------------------------------------------------
    What explains this sudden jump of $50 billion in projected fiscal 
year 2007 GWOT funding requirements? The best explanation appears to be 
that the increase stems, at least primarily, from the Defense 
Department's decision to expand dramatically the notion of what can and 
should be funded through GWOT supplementals, rather than through the 
regular annual defense budget. In October 2006, Deputy Secretary of 
Defense Gordon England sent the Services new guidance to use in drawing 
up their respective requests to the Office of the Secretary of Defense 
(OSD) for 2007 supplemental funding. The most important element of this 
brief memo was the following instruction:
          By this memo, the ground rules for the FY'07 Spring 
        Supplemental are being expanded to include the [Defense] 
        Department's efforts related to the Global War on Terror and 
        not strictly limited to Operation Enduring Freedom (OEF) and 
        Operation Iraqi Freedom (OIF).
    With this guidance, the Defense Department essentially opened the 
floodgates in terms of what the Services could ask to have funded 
through GWOT supplementals. The administration has, since the invasion 
of Iraq if not earlier, embraced a very broad notion of what 
constitutes the GWOT. Although almost all observers would agree that 
military operations in Afghanistan appropriately fit within the concept 
of the GWOT, the idea that the US invasion of Iraq and subsequent 
military operations in that country should be considered part of the 
GWOT is more controversial. But the administration's concept of the 
GWOT is much broader than even this construction.
    In the administration's eyes, the GWOT or Long War, as it is 
referred to in the 2006 Quadrennial Defense Review (QDR), represents a 
broad framework for organizing the US military's strategy, planning, 
programming and budgeting over the coming decades. It is similar to how 
the concept of containing the Soviet Union was used to provide such a 
framework during the second half of the 20th century.
    Whether or not such a broad conceptualization is, in general, the 
most useful way to view the GWOT is debatable. However, whatever the 
merits of this nomenclature, a serious problem is created when such a 
broad definition of the GWOT is used and the Services are then told 
that virtually anything related to the GWOT can be funded through 
special GWOT appropriations. And this is true whether the special 
appropriations consist of supplementals or special war-related accounts 
attached to the regular annual defense appropriations act. In either 
case, the Defense Department has basically removed any principled 
distinction between what should be included in special GWOT 
appropriations and what should be included in the rest of the defense 
budget.
    It is roughly equivalent to telling the Services in 1968, at the 
height of the Vietnam War, that their requests for Vietnam War funding 
can include basically anything related to winning the Cold War 
competition with the Soviet Union. The most serious problem with this 
approach is that such guidance amounts to, in effect, telling the 
Services that they no longer need to find room in the regular annual 
defense budget to cover the full cost of their long-term plans.
    The Services already have a perennial problem with developing and 
presenting long-term readiness, force structure and modernization plans 
that are actually affordable within projected or likely funding levels. 
In October 2006, CBO estimated that unless the peacetime defense 
budget--i.e., the defense budget exclusive of funding for military 
operations--is increased well above current levels and even the 
(higher) levels projected for 2011 under the administration's current 
plan, the gap between available funding and the cost of implementing 
the Defense Department's long-term plans could average as much as some 
$65 billion over the next two decades. Opening up to the Services the 
option of shifting some of these funding requirements into special 
appropriations, which heretofore have been limited to covering the cost 
of military operations, will only further diminish the realism of their 
long-term planning and budgeting.
    Though far from perfect, the Defense Department's long-term 
planning and budgeting process is a valuable tool that, among other 
things, attempts to force the senior leadership to make hard decisions 
about competing programs and priorities. That process has already been 
stressed to some extent by the impact of more than five years of 
military operations. It is likely to be far more seriously undermined 
by the new guidance provided to the Services, which will significantly 
loosen the (already somewhat tenuous) budgetary discipline imposed on 
the Defense Department's planning and budgeting process.
    Moreover, in the end, the Services will inevitably suffer the most 
from the weakening of this process. At some point, the wars in Iraq and 
Afghanistan will wind down. And when that happens, the Services may 
well find the special GWOT appropriations drying up, and their baseline 
budgets--after years of relying on these special measures to cover a 
portion of their costs--well below the level of funding needed to 
actually carry out their long-term plans.
3. The Defense Department should provide better budget justification 
        material and backup for its estimates of the cost of military 
        operations in Iraq and Afghanistan, and other costs related to 
        the GWOT
    To date, the GWOT funding requests submitted to Congress by the 
Department of Defense have not generally been supported by 
justification materials of the caliber--in terms of detail, rigor and 
overall quality--that normally accompany requests included in the 
Defense Department's annual budget submission. During the initial 
phases of the wars in Afghanistan and Iraq, when these operations 
(especially the war in Afghanistan) truly represented unanticipated 
emergencies, it may have been unreasonable to expect the Defense 
Department and the Services to provide this kind of annual budget-
quality backup material. But after more than five years in Afghanistan 
and nearly four years in Iraq, and GWOT appropriations totaling some 
$500 billion, it is difficult to understand, or excuse, the poor 
quality of some GWOT justification material.
    The lack of clarity is perhaps most problematic in the case weapons 
procurement. As Amy Belasco of the Congressional Research Service (CRS) 
noted in her analysis of the fiscal year 2006 GWOT supplemental:
          Although DoD's request includes descriptions of individual 
        procurement items, it does not give any rationale or explain 
        whether funding requests for various items reflect battlefield 
        losses, washout rates for worn equipment, equipment provided 
        for state-side units whose equipment remains overseas or 
        additional gear for deployed units. This makes it very 
        difficult to assess whether funding levels are too high, too 
        low or about right.\2\
---------------------------------------------------------------------------
    \2\ Paul M. Irwin and Larry Nowels, ``FY 2006 Supplemental 
Appropriations: Iraq and Other International Activities; Additional 
Hurricane Katrina Relief,'' Congressional Research Service, June 9, 
2006, p. 33.
---------------------------------------------------------------------------
    The lack of clarity concerning weapons procurement requirements 
related to the wars in Iraq and Afghanistan makes it especially 
difficult to judge the reasonableness of Service requests related to 
``reseting'' their forces. Based on existing documentation it is 
unclear how much of the Services' reset costs are actually related to 
the ongoing wars in Iraq and Afghanistan, and to what extent, 
alternatively, those costs reflect and are driven by existing 
modernization and transformation plans.
    There is also reason to be concerned about the accuracy of the 
Services cost estimates for reset because, as noted earlier, the 
Services all face significant mismatches between the cost of executing 
their long-term readiness, force structure and modernization plans, and 
the amount of funding projected to be available to pay for those plans. 
Thus, to the extent possible, they have an incentive to fund items 
through the special GWOT appropriations, where funding is less 
constrained and oversight is less substantial.
    The Defense Department should also be required to do a better job 
of making clear how much funding in its GWOT requests is needed to 
cover the cost of military operations in Iraq versus operations in 
Afghanistan, and explaining its approach to allocating those costs. 
Although related in some ways, these are in, in important respects, 
separate and distinct military operations. Among other things, the 
ability of Congress and the American people to make sound decisions 
concerning the affordability and cost-effectiveness these two military 
operations depends, in part, on their having an accurate understanding 
of the cost of each of those efforts.
                              conclusions
    The United States has already provided $500 billion in GWOT funding 
over the past seven fiscal years, with the vast majority of this 
funding provided to the Department of Defense for military operations 
in Iraq and Afghanistan. And it is possible, if not likely, that 
hundreds of billions of dollars in additional funding will be provided 
over the next several years. We are long past the point when these wars 
should be funded primarily through supplemental appropriations, which 
are intended only to cover the cost of unanticipated emergencies.
    As such, Congress should insist that the administration include 
funding to cover the full cost of military operations in Iraq and 
Afghanistan in its regular annual budget request, beginning with the 
fiscal year 2008 budget request to be submitted next month. That 
funding should be provided in separate and distinct accounts attached 
to the annual defense appropriations act. Congress should also insist 
that the funding provided in these special GWOT appropriations be 
limited to costs incurred as a result of ongoing military operations, 
and not, generally, include funding for programs and activities related 
to waging the broader war on terror. If funding for such programs is 
included in the administration's GWOT request, it should either be 
deleted or transferred into the Defense Department's baseline budget. 
Finally, Congress should require that the Defense Department provide 
justification materials for GWOT funding that is of the same quality 
provided in the justification materials that accompany the regular 
annual defense budget request.

    Chairman Spratt. We will start on that side with Mr. 
Doggett.
    Mr. Doggett. Well, Mr. Kosiak if we could just pick up with 
that last point, then. Your concern is that they may include 
all of the figures in the regular Defense Appropriations Bill, 
but they may not be realistic projections?
    Mr. Kosiak. Well, I guess my concern is two fold. One is 
I'm not sure the $170 billion figure really reflects, I mean 
they have said they are using this expanded definition of GWOT. 
I do not think that is particularly helpful. I think it would 
be better, if there is stuff in there that is needed for the 
long war that could last a decade or more that sounds to me 
exactly like the kind of stuff that should be being funded in 
the baseline defense budget, and not in the supplemental. And 
so that concerns me. And then if they are providing 2008 budget 
numbers and justification materials I think that is all to the 
good. But again, it kind of concerns me if all that really is 
is straight-lining from, you know, in different budget 
categories from what it was in 2007. I'm not sure that is the 
best they can do in terms of providing information and a 
guesstimate as to what we are going to need in 2008.
    Mr. Doggett. Were you otherwise satisfied with their answer 
that they would be complying with Section 1008 of the Defense 
Authorization Act?
    Mr. Kosiak. Well I think the devil is in the details, sort 
of, to see what they actually come up with and how good the 
justification materials are. Because it really does depend on, 
you know, the ability to be able to make good estimates about 
what future costs are going to be depends not only on having 
good information as to what they are going to be requesting 
next year but having good historical information as well, and 
having good information on, you know, what the op tempo has 
been in some very kind of concrete ways so places like CBO can 
do good estimates on what future costs are going to be. And 
also be able to compare that with what they were getting in the 
past for those operations, so you can come to some judgment as 
to whether these are appropriate costs or not.
    Mr. Doggett. If they do include a joint strike fighter or 
two, ballistic missiles in this supplemental request, why 
should we cut them out?
    Mr. Kosiak. Well I think there are two separate issues. One 
is whether you should be funding the joint strike fighter or 
ballistic missiles. And another question is, should they funded 
in the supplemental? Or should you, I mean one option for 
Congress, obviously, is to decide to fund these things but to 
shift the funding into the regular Annual Appropriations Act. 
So that, that would be one possible way of doing it.
    Mr. Doggett. Mr. Sunshine, what portion of our 
discretionary spending are we devoting to defense at present, 
of total discretionary spending if you include all the 
supplementals?
    Mr. Sunshine. More than half. Let's see if I have a----
    Mr. Doggett. So more than--you can give me the precise 
figure later. But more than fifty cents on the dollar of every 
tax dollar that we have any control over here in Congress is 
going to the Defense Department?
    Mr. Sunshine. Mm-hmm.
    Mr. Doggett. You mentioned an inability to get some 
information that is necessary for the effective review, and 
timeliness of information. That is the cost model on the war 
and the war obligation reports, they are not arriving timely at 
the Congressional Budget Office?
    Mr. Sunshine. Well, they do not arrive at the Congressional 
Budget Office. The Congressional Budget Office has to go seek 
them out. We would like them to arrive at the Congressional 
Budget Office.
    Mr. Doggett. They could be distributed at the same time 
they are distributed to the appropriate offices in the 
Pentagon?
    Mr. Sunshine. Yes.
    Mr. Doggett. And with regard to your testimony about the 
``other'' category in the supplemental. How much did you say, 
or what percentage did you say that that included a vague 
``other'' category?
    Mr. Sunshine. In the obligation reports?
    Mr. Doggett. Yes.
    Mr. Sunshine. It is about a quarter.
    Mr. Doggett. What does that, have you been able to make any 
determination of what that includes?
    Mr. Sunshine. It is a variety of activities and operations 
and maintenance, for example, but with no specificity as to 
what they are.
    Mr. Doggett. Has that changed over time? Have they become, 
have you had more in the other category?
    Mr. Sunshine. I do not know the answer to that.
    Mr. Doggett. We received some reportedly reassuring 
comments from the Secretary that in terms of a gross domestic 
product the military budget is not all that high. Mr. Kosiak, 
is it not about fifteen percent above the Cold War average?
    Mr. Kosiak. Well, as a share of overall funding levels for 
defense when you adjust for inflation are very high by 
historical standards. In terms of gross domestic product it is 
much lower.
    Mr. Doggett. But that really does not have much meaning, in 
terms of this spending does it?
    Mr. Kosiak. I mean, I think you have to separate out in 
terms of how much are we actually spending on defense, we are 
spending a lot by historical standards today. In fact, 
depending on which deflator you are using, we are spending more 
than we were spending even at the time of the Korean War which 
was the other high point.
    Mr. Doggett. Right.
    Mr. Kosiak. But so in terms of cost, we are spending a lot, 
even adjusting for inflation. In terms of burden on the economy 
if you use the simple measure of, which may or may not be 
appropriate, but if you use the simple measure of percentage of 
GDP that goes to defense spending it is much less than it was 
during the time of the Vietnam War or the time of the Korean 
War when it was, I believe, around ten percent at the time of 
the Korean War.
    Mr. Doggett. And a much more modest gross domestic product, 
and on a military that was about a third of the size. We have 
one now that is about a third of the size it was in 1990. Thank 
you.
    Mr. Kosiak. About two-thirds the size.
    Chairman Spratt. Mr. Conaway?
    Mr. Conaway. Thank you, Mr. Chairman. Steve, you mentioned 
the War is running the rate of $200 billion now. And we heard 
Ms. Jonas say it was like $9.6 billion a month. Can you 
reconcile between those two statements?
    Mr. Kosiak. When I said it was approaching $200 billion, 
that is just doing the simple math of, you know, Congress 
provided $70 billion in GWOT funding for 2007 as part of the 
Annual Defense Appropriations Act. And then, reportedly the 
supplemental that is pending at OMB right now from DOD is for 
$100 billion. So that brings it up to $170 billion for 2007.
    Mr. Conaway. Okay, so there is some conjecture on your part 
right now about the $200 billion? Okay.
    Mr. Kosiak. Right, right. And again, part of that appears 
to be fairly unrelated to actual military operations.
    Mr. Conaway. Okay. Robert, you commented on the ``other'' 
category, the infamous other category that we all hide things 
in, lack of specificity on what the budget number means. Is 
there any lack of being able to tie in total what that money 
actually gets spent for? And then a difference between what 
they actually spend it for and what the overall umbrella of the 
budget was? I mean, is there, is this just a problem with the 
budget request not having the specificity? Or is it actually 
they are taking it and spending it in places they should not?
    Mr. Sunshine. I was not referring to the budget request. I 
was referring to the obligation reports that are produced 
monthly as to how the money is actually being committed. And so 
in terms of judging what is being, what it is actually being 
used for there is this big chunk that it is hard to tell.
    Mr. Conaway. Okay. How does CBO get at that number, or get 
at that information? Is that a part of your normal charge to 
look at that? Or is that GAO is the better entity to go after 
that?
    Mr. Sunshine. We do not ordinarily get into that level of 
detail in terms of agency budgets. The reason that some of this 
stuff is valuable to us is if we are dealing with requests as 
we have gotten from this Committee that say, ``Under various 
scenarios of the intensity of the war, what might the 
government have to spend over the next three, five, ten 
years?'' It is helpful for us to know not only how much we are 
spending now but what we are spending it on.
    Mr. Conaway. All right, thank you.
    Mr. Sunshine. But ordinarily we do not get into that level.
    Mr. Conaway. Okay, okay. Well, that is fair.
    Mr. Sunshine. But for all kinds of purposes it is very 
helpful.
    Mr. Conaway. Sure, that is fair. Steve, in terms of the 
overall comment about what we are spending or how much we are 
spending, any sense from your professional background that this 
is too much? Too little? Just right?
    Mr. Kosiak. Well, I think it is very difficult to tell 
because, you know, if you look at the best guesses as to what 
this war was going to cost going back prior to the War and then 
early in the War and then later in the War, the costs keep 
going up and up. I do not think we have a real good sense for 
sort of what the baseline costs are for carrying out these 
kinds of military operations right now. And I am not entirely 
sure why that is. I think part of it is we do not have, I mean 
Secretary England suggested that we know what the War is 
costing because we just look at the supplemental and that is 
what it is costing. I think that is kind of what we are left 
with and we try to go beyond that with difficulty.
    Mr. Conaway. But you were responding, I think, to Mr. 
Doggett's question about total spending, total defense spending 
which is a very sizable number no doubt about it. In terms of 
looking at an all in number, from your professional background 
at your think tank, is that total number way too high? Too 
little? Just right?
    Mr. Kosiak. Well I would say, I mean again, based on and 
CBO does infinitely better analysis on this than I have done, 
although I have tried to do some. But I think if you look at 
what CBO has estimated in the past going back to the beginning 
of the war and even at their most recent estimates about what 
these military operations themselves should be costing in 
Afghanistan and Iraq, I think the upper level, my sense is on 
the order of $120 billion.
    Mr. Conaway. Okay, my question is broader. I am sorry, I am 
not asking it very well. Because not only do we have to fight 
the Global War on Terror, we have got to build deterrents into 
a huge set of platforms across a broad spectrum of ways to 
defend this country. The total defense spending, a number off 
the top of my head is $450 billion a year, whatever. Is that 
number too big? Too little? Just right?
    Mr. Kosiak. You know, I am not going to offer an opinion on 
that.
    Mr. Conaway. Okay, that is fine.
    Mr. Kosiak. Except to say that----
    Mr. Conaway. So you are going to offer an opinion?
    Mr. Kosiak. What is that?
    Mr. Conaway. No, I am just teasing with you, go ahead.
    Mr. Kosiak. Well, I think it is very high by historical 
standards. On the other hand, there are certain areas, such as 
in procurement, where I think we clearly do have to spend more 
to recoup some of the losses and some of the downturn in 
spending and procurement that we had in the 1990's. On the 
other hand, I think there are some hard choices that also have 
to be made in terms of what are the priorities in the Pentagon, 
what the mission priority, and also what are the programmatic 
priorities.
    Mr. Conaway. Sure, that is fair. Thank you. Mr. Chairman, 
thank you so much.
    Chairman Spratt. Ms. Sutton?
    Ms. Sutton. Thank you, Mr. Chairman. I apologize, I missed 
a bit of your testimony when I came in. I really am looking 
for, more than anything, some clarification about some very 
simple terms. I heard the prior witnesses talking about, you 
know, and you, talking about the Global War on Terror. I heard 
one of our previous witnesses talking about the supplementals 
are, the entire war costs are in the supplementals. I hear this 
word, just War, talked about. And I'm just not really sure 
exactly what all those things mean. The Global War on Terror, 
what is the definition of the Global War on Terror?
    Mr. Kosiak. I think, I mean I assume DOD has an official--
--
    Ms. Sutton. Definition?
    Mr. Kosiak. I mean, I think that the reality is the Global 
War on Terror is Iraq, Afghanistan and then it is other things 
which we do not really know. I mean, it depends on who, you 
know, that is where it becomes unclear. And you are right to 
raise a question because it is an important question. And it is 
why I think that the supplementals really should be limited to 
what we do understand relatively well, which are what are the 
costs being incurred in military operations in Iraq and 
Afghanistan? They should not go beyond that. Because people 
have different views and different Defense Department programs 
are justified in different ways in terms of their role in the 
Global War on Terror.
    Ms. Sutton. Okay. So if we were talking in the terms that 
you just said and we defined the supplemental and we 
constrained the supplemental to the costs for Iraq and 
Afghanistan, that would be something that we could clearly 
identify and budget for?
    Mr. Kosiak. I think that is something you could relatively 
clearly identify and budget for.
    Ms. Sutton. Okay. And what, you know, again I understand 
this, when you have a category that is called ``other,'' and it 
is not defined, it is a bit problematic for budgeting as well 
as accountability purposes and that is sort of what I am 
hearing here today. Talk to me a little bit more about the long 
war, and the costs that you are talking about. Because I am 
assuming those are part of the ``other'' category.
    Mr. Kosiak. Well I think that we might be getting a couple 
of ``other'' categories mixed up.
    Ms. Sutton. Okay, there are several ``others.''
    Mr. Kosiak. But I think in general, you know as I say, the 
costs that are directly related to ongoing operations in Iraq 
and Afghanistan, most of those costs are relatively clear. 
Things like activating reserve personnel and things like that, 
and special pay for military personnel, higher op tempo, 
operations/maintenance costs caused by higher op tempo, things 
like that. And that does account for a good share of it. Once 
you get into some of these other areas, procurement, weapons, 
modernization programs in particular, it starts becoming less 
clear.
    And I do not think there is any, and the Secretary was 
right earlier that it is complicated to do this. It is not as 
though it is a simple matter of deciding what is really an 
incremental cost for military operations and what is not. I 
mean, there are some pretty tricky areas. I just think that the 
incentives currently are to, you know, when in doubt put things 
in the supplementals, basically. Because those are must pass 
pieces of legislation, they do not have the same levels of 
oversight and the money seems to flow more freely there than it 
does in the regular defense budget. One of the points I tried 
to emphasize in my testimony was I think we really do want DOD 
to try to make a really good, solid effort at distinguishing 
costs directly related to war and stuff outside of it, which 
may be important to winning the broader Global War on Terror. 
But to the extent it is important to that, to me if that is the 
long war, again, that is really exactly the kind of stuff that 
belongs in the baseline budget because that is a core mission, 
a long term mission of the U.S. military.
    Ms. Sutton. Have you ever seen a written definition by DOD 
on what the Global War on Terror includes?
    Mr. Kosiak. I suspect I have because I have read so many 
documents. But honestly, I could not remember what it is. I 
think it is a pretty simple definition, so I am not sure I can 
really give you what you are looking for.
    Ms. Sutton. Okay. I really have no further questions.
    Chairman Spratt. Thank you, Ms. Sutton. Mr. Campbell?
    Mr. Campbell. Thank you, Mr. Chairman. Mr. Sunshine, just 
one question for you. And if I heard these right, I did not 
write either one down, but I believe that you said you 
estimated that CBO said that the total cost of the War on 
Terror, the wars in Iraq and Afghanistan largely, was five 
hundred and something?
    Mr. Sunshine. Total appropriations since 2001 have totaled 
by our estimate about $503 billion.
    Mr. Campbell. The prior witnesses, Under Secretary Jonas 
detailed out something that was $372 billion. What is the 
difference? What is the discrepancy?
    Mr. Sunshine. Well, about $40 billion of the $503 billion 
was not appropriated to the Department of Defense, so.
    Mr. Campbell. Ah ha. It as appropriated to?
    Mr. Sunshine. To the Executive Office of the President and 
the State Department, USAID.
    Mr. Campbell. Okay. So that is forty, we now need to find 
another roughly ninety.
    Mr. Sunshine. But I think the number she was talking about 
was probably an obligation number. It sounded to me like it was 
an amount that has been obligated to date, not the amount that 
has been appropriated to date. Obviously there is some amount 
of the appropriation that has not yet been obligated. I think 
that accounts for most of the difference between those numbers.
    Mr. Campbell. Okay. For those of us sitting here, what that 
would mean is your number basically then would be excluding any 
spring supplemental, the amount we would expect through the end 
of fiscal year 2007, right?
    Mr. Sunshine. It will probably take longer than that for 
all of it to be spent, but----
    Mr. Campbell. Okay. Great. Thanks. That's the only question 
I had. I yield back, Mr. Chairman.
    Chairman Spratt. Thank you, Mr. Campbell. Mr. Scott?
    Mr. Scott. Thank you. Thank you, Mr. Chairman. It just 
seems to me that trying to figure out what is a war expense and 
what is not a war expense is going to be problematic anyway. As 
a troop at home, at war, if he is getting ready to go or if he 
is coming back, I mean how do you, it is just going to be 
always awkward. Did the decision to include all of this in the 
2008 budget cure most of the problems for the future?
    Mr. Sunshine. I do not know that it clarifies the issue as 
to what is for the war and what is not for the war. You still 
have that question.
    Mr. Scott. But I mean in terms of budgeting?
    Mr. Sunshine. Well, I think it gives this Committee a 
clearer picture, assuming that there is some meaning to that 
2008 number, in terms of what you want to do in a budget 
resolution.
    Mr. Scott. But do you have any reason to believe that they 
are going to give you a reasonable five-year budget? Because he 
was a little evasive after 2008, 2009, it sounded like that 
there is going to be zero after that which would obviously be 
unrelated to reality.
    Mr. Sunshine. That is what it sounded like to me, that they 
would not have numbers beyond 2008.
    Mr. Campbell. Is there any way we can get a handle on 
whether or not we are conducting the war in an efficient 
manner? The Persian Gulf War start to finish cost the United 
States less than $10 billion, start to finish. We had allies 
that were contributing a substantial amount. Is this my way or 
the highway and running up bills for the supplemental is $170 
billion, is there any way we can try to see if there are other 
ways to conduct this war that might not cost? Or it just, you 
know, it is what it is?
    Mr. Kosiak. I mean, I guess I do not feel like I am 
competent to talk to that. I think GAO would probably have some 
ideas on that. I guess I would say it is, you know, to the 
extent you can have a solid idea of where the money is actually 
going and how it relates to levels of activity, numbers of 
troops and things like that, you are in a better place in terms 
of trying to figure out how much waste there is in the funding. 
And we are not there yet. Maybe we will get closer there with 
the 2008 request.
    Mr. Campbell. Steve, can you just say a word about the 
interest costs?
    Mr. Kosiak. Yeah, I mean obviously we are paying for this 
war on our national credit card right now so there are 
significant interest costs. I believe the, I am not sure I can 
give a good estimate of what the interest costs are. At $500 
billion certainly the ten-year, you know, looking out ten years 
from now, what the ten-year costs are, certainly interest 
costs----
    Mr. Campbell. The number I saw was about $40 billion a 
year. If we keep going the way we are going by 2016 it would be 
about $40 billion a year.
    Mr. Kosiak. I think that is about right. I mean, it is in 
the hundreds of billions of dollars.
    Mr. Campbell. Is that about right?
    Mr. Kosiak. Yes.
    Mr. Sunshine. We did an estimate last year of something 
along those lines, although it was based on lower costs. That 
was the number that you were referring to, actually. It was 
based on lower costs than we are actually incurring so it would 
probably, under a similar scenario to what we did that one for 
the cost would probably be at least $50 billion. Assuming that 
there were no effect on other spending or taxes as a result.
    Mr. Campbell. And assuming we are not paying for it, I 
guess, which is I guess the other question. Thank you, Mr. 
Chairman.
    Chairman Spratt. Just a couple of final questions. Both of 
you emphasized that the supplemental request should come and be 
a part of the defense budget for that Defense Authorization 
Act, Defense Appropriations Act, but it should maintain some 
wall of separation between the two so that you can identify the 
war costs. And in addition to that, which is something I 
preach, you can also, when one day we finally disengage we 
hope, know what the incremental cost was that does not need to 
be recurring and can be extracted from the budget. How would 
you structure this to give us the best insight into what was 
actually being spent on the war? It comes with the Defense 
Authorization Request, or the Defense Appropriations Bill, but 
it is not part of it. It is not integrated in it, so you know 
exactly what the incremental cost is. And then someday when you 
want to phase out you know exactly, or roughly, how much you 
need to extract in order to phase out and phase down the war. 
Do you have any guidelines for how to achieve that?
    Mr. Sunshine. I think having separate appropriation 
accounts might be helpful. And I think having as clear as 
possible definitions as to what we mean by what is for the War, 
in the sense the short term War, as opposed to long term, 
ongoing responsibilities of the Department of Defense. I think 
the Congress might want to clearly identify for its purposes 
what it would like to see in those two different categories and 
then set up a budget structure so those two categories are as 
clear as possible.
    Chairman Spratt. Mr. Kosiak?
    Mr. Kosiak. Yes, I would certainly concur with that. And 
also I think to the extent that you can, one of the problems 
now is that once you get beyond the current fiscal year, if you 
look back, of the upcoming fiscal year, all of the historical 
data basically goes into all of the traditional appropriations 
accounts. So it is difficult to look backwards and see how much 
of the costs are incremental. But I also think that it also 
goes to the point of the importance of trying to make this 
distinction between the cost of military operations and other 
costs related to this Global War on Terror. Because I think a 
downside for the Defense Department is that once we do get out 
of Iraq and Afghanistan, the way things currently stand I think 
there may be a tendency for people to assume that, I mean, that 
all of these costs, ``I guess we do not need any of the money 
that was in these supplementals because after all that was just 
for the War and the War is over now.'' But I think that is not 
true. I think some of the costs in those is needed for the 
Defense Department's baseline budget.
    Chairman Spratt. You suggest that it be a separate 
attachment to the Defense Appropriations Act?
    Mr. Kosiak. Right.
    Chairman Spratt. One of the problems with that is that the 
Defense Appropriations Act tends to be passed at the very end 
of the fiscal year, start of the next fiscal year. And the sup 
might genuinely be needed in the field well before September 30 
of that particular year.
    Mr. Kosiak. I think you would still need to have the option 
of doing supplementals. But if, for example, we were to provide 
full funding for 2008 this year and it was passed before the 
beginning of 2008 then that should not be a problem, right? We 
will clearly need an 2007 supplemental this year because we did 
not sort of do it right at the outset. But for 2008 presumably 
if you finish the bill before the fiscal year starts you will 
have enough money. And then if later in the year you do need 
more, it turns out your estimates were not that accurate, you 
might need another $5 billion, $10 billion, something like 
that, then of course you need to ask for a supplemental. But 
that would be a much easier task for Congress to manage and 
oversee effectively than a $100 billion supplemental.
    Mr. Sunshine. There might also be not quite as much of a 
rush to enact it if you are not depending on it so early in the 
fiscal year. If you have more of the money up front and less in 
the supplemental then there is less of a rush to enact a 
supplemental.
    Chairman Spratt. Yeah. Yeah. One final question: do you 
think it is asking too much, the impossible, to ask for a five-
year projection of likely costs based upon some kind of 
stipulated scenario, or several alternative scenarios?
    Mr. Sunshine. I think it would be too much to ask to 
predict what the scenarios would be. I do not think it is too 
much at all to ask under a variety of scenarios, perhaps a 
range of different scenarios, what the possible exposure would 
be.
    Chairman Spratt. Yeah. CBO did it.
    Mr. Sunshine. We have done that. I am not sure we have done 
it as well as we would have liked to have done it, but we have 
done it.
    Chairman Spratt. Is your model a fairly simplified back of 
the envelope model? Or is there some vast database that is not 
visible to us as we look at the simple summary of it?
    Mr. Sunshine. We have a number of factors that we take into 
account, but the model is based on data that is not current.
    Chairman Spratt. Yeah.
    Mr. Sunshine. Because we do not have current data for this 
particular conflict and therefore it is not behaving very well 
in predicting the costs of this particular conflict.
    Chairman Spratt. Well, you assume the bill down to 55,000 
troops in two theaters, Afghanistan and Iraq. How did you pick 
the number 55,000?
    Mr. Sunshine. I think that was worked out with your staff, 
because I----
    Chairman Spratt. Okay. That's what you call a circular 
chain of reasoning.
    Mr. Sunshine. In our outlook report that we release next 
week we decided it was not prudent to pick just one path so we 
are going to present a couple of different paths, a higher kind 
of number and a lower kind of number. Because it is so hard to 
determine what the military situation is going to be, what the 
strategy is going to be, how long we are going to stay there 
and do what. So I think trying to predict one path is a pretty 
dangerous kind of thing to do.
    Chairman Spratt. Well, they have more assumptions built 
into doing the five-year or future years defense plan than they 
do, I would think, in the model that you presented for 
estimating what costs might be over a five-year period of time. 
So they do that all the time. It is hard for me to believe that 
there are not some cost studies in the Pentagon of what the 
consequences would be of some draw on our forces over a 
reasonable period of time.
    We could go on and on. Thank you for your testimony, your 
excellent testimony, your patience in coming here, and for the 
contribution you have made which has been very substantial and 
is very much appreciated. Thank you.
    [Whereupon, at 5:10 p.m., the Committee was adjourned.]

                                  
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