Boost to Occupation Doesn't Help Unemployment

Article for Information Gathering & Analysis December 2003

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$87 billion to aid Iraq’s continued occupation and reconstruction lays a heavy burden for Americans down the road.

It is a model for positive economic diplomacy, a rational effort by the United States aimed at reducing hunger, homelessness, sickness, unemployment, and political restlessness of millions of people. Funds have not been allocated mainly toward feeding individuals or building individual houses, schools, or factories, but at strengthening the economic superstructure. This was the description for the Marshall Plan that integrated and reconstructed the economies of Western Europe after World War II.

Equally florid language used by President Bush described the $87 billion package approved last month for the reconstruction of Iraq. But the biggest and boldest reconstruction project since the Marshall Plan comes at a time of U.S. economic uncertainty. It is also granted to an amorphous effort of unforeseen length with little to no aid from other nations.

This is the third large economic package pushed through the legislature this year for the War on Terror equalling a total of nearly $196 billion in emergency funds. This most recent allocation to maintain the occupation and reconstruction of Iraq is larger than the funds approved last April to overthrow the Saddam Hussein government ($79 billion).

At home in the U.S. though, President Bush is confident that increased deficit spending will not hurt America’s future as the economy is looking up. Bush stated that "Exports are expanding, investment is rising, housing construction is growing. The tax relief we passed is working."

The Commerce Department reports that from July to September GDP has increased by 7.2%. This means that the American economy is experiencing the fastest growth since 1984. However, this recovery which could pull the country out of the economic slump it has experienced since 9/11 has made economists question the significance and accuracy of the Commerce Department report.

"When you have a growth rate of 7.2 percent and don't see jobs appearing, it's a real puzzle for economists," said William Spriggs of the National Urban League Institute for Opportunity and Equality.1 This makes for a puzzling picture of the new wartime economy developing. Perhaps one way to put the current economy into a context is to look at what this emergency spending expands: the national debt.

The Concord Coalition refers to the growing national debt as a fiscal crisis “developing in the United States”. An ironic statement for a crisis that has grown exponentially since 1983. The emergency funds Bush has just been granted follow the announcement of the largest budget shortfall in U.S. history. The 2003 budget deficit reached $374 billion and the good news is that that was smaller than anticipated.

Bush stated that he was pleased that congress agreed to provide the $87 billion in funds as grants and not loans, “so that this struggling nation is not burdened with new debt at a moment of new hope.” The catch is that these funds are borrowed by the U.S. and increase the massive national debt as the baby boom generation inches ever closer to collecting Social Security.

In response to the emergency funds, Senator Ted Kennedy remarked that the, “recipients of the laughable Bush tax ‘refunds’ of all of $300.00, will pay this back, along with the rest of the $400 trillion Bush deficit.” But the harder puzzle is to figure out: Where is the money actually going and why?

Six months ago the Bush administration decided to undertake “blitzkrieg” reconstruction in Iraq. What this translated to was skipping the bidding process altogether or having limited bids on contracts and handing many over to large contractors such as Dick Cheney’s former employer Halliburton. The “blitzkrieg” approach left out Iraqis completely, effectively deterred foreign aid, and has moved at a rate slower than the Saddam-run reconstruction after the first Gulf War.

One of the greatest problems facing efficiency of reconstruction efforts is that neither the US Agency for International Development or the Coalition Provisional Authority are clearly in charge of administering contracts. As well, due to security reasons day to day operations are very expensive and not properly audited if at all. Accusations of mass fraud and congressional criticism over the lack of transparency have pushed USAID and the CPA to install accountability controls and to now competitively bid contracts. Regardless, major world bodies such as the UN want more transparency. This all paints a picture that shows money poorly allocated, poor management of a project with indefinite goals, continued occupation past the vague deadline of next year, further financial allocations from the U.S. and a heavier burden on American taxpayers.

USAID chief Andrew Natsios still contends, “It’s faster than the Marshall Plan,” which took four years to reconstruct Western Europe. However, U.S. military commander for Iraq Ricardo Sanchez admitted last week, “the pace at which we are making progress: we need to accelerate it.”

One solution to the Iraqi quagmire that could accelerate reconstruction would be to incorporate more Iraqis in the process. Iraq has many well-educated and skilled people that can do the jobs that outsiders are now performing at a mere fraction of the amount it costs to send in and protect outsiders. This would also win the hearts and minds of Iraqis much more effectively as Bush has claimed to desire as Iraqi unemployment is near 75%.1 Washington could also clearly outline what its objectives for Iraq are, set up a realistic timetable for accomplishment, declare one ultimate administrative body (CPA or USAID) and have open, competitive requests for proposals before granting contracts.

The primary objective with consideration to the American taxpayer is to reduce the burden that will finally fall on their shoulders. “Instead of asking Iraq to borrow against its bountiful oil reserves, we are asking our children and grandchildren to continue to borrow to build Iraq,” said Senator Richard Durbin. Finding additional financial supporters and returning power to Iraqis as quickly as possible would hopefully make huge financial packages such as $87 billion continue to be unusual in an occupation that is finite. The new funding bill does include provisions to encourage competitive bidding for contracts in Iraq’s reconstruction, but nothing to impose criminal penalties for profiteering.

One trend that harkens to Cold War days and that has slowed political discourse is the language used in the debate of issues associated with the War on Terror. “Those who vote against this bill will be voting against supporting our men and women in the field,” is a statement made by Senator Ted Stevens during the debate over the $87 billion bill. Remarks of this nature allure to McCarthyist claims of communism in the 1950’s and do nothing to forward sensible dialogue. This trend is not likely to change as statements like these make nice soundbites, but still important to recognize.

Saddam Hussein’s capture yesterday marked a win to a clear objective of the invasion of Iraq. However, the reserved nature of President Bush’s address to the U.S. shows that this is no relief to his administration’s predicament. Perhaps a similarly unenthused reaction to the announcement that the economy is growing faster than it has in 20 years came from some of the 1.1 million Americans currently unemployed whose benefits are exhausted and that congress will not extend.
Perhaps the provisions in the United States’ biggest military and foreign aid spending measure since the Marshall Plan will find greater success than previous expenditures in an increasingly hostile Iraq. Unfortunately, next year’s projected deficit of over $500 billion does not decrease taxpayers’ burdens down the road for an open-ended occupation.