"GAO: Iraqi Budget Surplus Of $79 Billion By Year’s End"
As reported in this morning’s New York Times and Washington Post, a new report from the Government Accountability Office states that the Iraqi government could have “a cumulative budget surplus of as much as $79 billion by year’s end”:
For 2008, GAO estimates that Iraq could generate between $73.5 billion and $86.2 billion in total revenues, with oil exports accounting for between $66.5 billion to $79.2 billion. Projected 2008 oil revenues could be more than twice the average annual amount Iraq generated from 2005 through 2007.[...]
From 2005 through 2007, the Iraqi government spent an estimated $67 billion on operating and investment activities. Ninety percent was spent on operating expenses, such as salaries and goods and services, and the remaining 10 percent on investments, such as structures and vehicles. The Iraqi government spent only 1 percent of total expenditures to maintain Iraq- and U.S.-funded investments such as buildings, water and electricity installations, and weapons. While total expenditures grew from 2005 through 2007, Iraq was unable to spend all its budgeted funds.
While I think there’s no escaping the financial responsibility that Americans have incurred by invading and occupying Iraq, American taxpayers have a right to ask why, given its substantial oil revenues, the Iraqi government isn’t dedicating more of that money to rebuilding its country.
The answer is that billions of dollars in Iraqi oil wealth is effectively being held hostage to the stalled Iraqi political process. Notwithstanding the incessant claims of “breakthrough!” from the Iraq war’s surge-emboldened cheerleaders, the GAO report is evidence that political progress in Iraq has been ephemeral. Among other divisive issues on which Iraqis have failed to achieve any sort of consensus, Iraqi political factions still have not agreed on a acceptable formula for the distribution of resources.
Further underlining the persistent political impasse, today the Iraqi parliament adjourned for the month “after failing to agree on a provincial election law, casting doubt on whether U.S.-backed balloting can be held in the country’s 18 provinces this year.”
The political impasse resulting in the unused Iraqi billions gets at the broader strategic confusion of U.S. policy in Iraq. Back in 2002, Bush economic adviser Larry Lindsey estimated that the Iraq war could cost “$100 billion to $200 billion” in the “upper bound“:
The White House was quick to distance itself from Lindsey’s view. Mitch Daniels, director of the White House budget office, quickly called the estimate “very, very high.” Lindsey himself was dismissed in a shake-up of the White House economic team later that year, and in January 2003, Defense Secretary Donald Rumsfeld said the budget office had come up with “a number that’s something under $50 billion.” He and other officials expressed optimism that Iraq itself would help shoulder the cost once the world market was reopened to its rich supply of oil.
As of 2008, America has paid over $500 billion to fight the Iraq war — with some economists putting the overall cost to the U.S. economy as high as $3 trillion. Some $48 billion of this sum has gone to Iraqi reconstruction. But just as the Bush committed tens of thousands of American troops to the Iraq war with no plan for winning the peace, so they’ve committed tens of billions of American dollars to various Iraqi construction projects with no real plan for how all of it’s supposed to add up to a stable Iraqi state.
Ironically, Iraq’s oil revenues are so high in part because of the skyrocketing oil prices resulting from the destabilization caused by the Iraq war itself. American taxpayers are getting getting touched twice for this: With the money spent at the pump, as well as with the money sent to the war. President Bush’s commitment to a continued U.S. presence in Iraq, coupled with his unconditional support for Iraqi politicians’ treading water — both policies which John McCain wholeheartedly endorses — means that this won’t change any time soon.