Budget analyst: Recent funding approach masks true costs of war

The Bush administration's novel approach to budgeting for and financing the wars in Iraq and Afghanistan has made it very difficult to discern the true costs of the conflicts, a new report by the Center for Strategic and Budgetary Assessments concludes.

Historically, the United States has covered the costs of war through the annual appropriations process. Supplemental appropriations were used to cover only initial, unanticipated phases of major conflicts. But the Bush administration relied exclusively on supplemental appropriations to cover the costs of the wars in Iraq and Afghanistan until 2008 -- seven years after U.S. troops invaded Afghanistan and five years after they entered Iraq.

The reliance on supplemental funding creates a misleading picture of overall requirements, said Steven Kosiak, vice president of budget studies at CSBA and author of the report, during a briefing on Monday. "A sound budgeting process forces policymakers to recognize the true costs of their policy choices," he said.

"The failure to include estimates of the costs of these military operations in the administration's annual projections of federal spending means that those projections substantially understate likely future funding requirements," the report stated. "In turn, this may lead the administration and Congress to enact spending increases in other areas or tax cuts that it would not consider if, more realistically, its projections of federal spending requirements included an estimate of war costs."

In addition, reliance on supplemental appropriations substantially diminishes the level of oversight Congress can exercise. Funding requests submitted through the normal Defense budget process are reviewed by the House and Senate Budget and Armed Services committees and finally by the Appropriations committees. Supplemental requests go directly to appropriators, and because they are generally submitted in the middle of the fiscal year, the time available to consider them is limited.

In its fiscal 2008 budget request, the Bush administration bowed to congressional pressure and included funding for the wars. But for fiscal 2009, the administration again excluded full war-funding costs from its annual Defense budget request, citing uncertainty in Iraq. This will force the Obama administration to submit a supplemental request early in 2009.

Another problem with supplemental budget requests is teasing out war costs from nonwar costs, the report noted. The Pentagon has taken an expansive view, especially recently, of the kind of costs that can be covered by supplemental appropriations. In 2007 Deputy Defense Secretary Gordon England issued a memorandum to the services telling them they could include the cost of efforts related to the global war on terror in their requests.

Kosiak likened that to telling the military services in the 1970s that they could include the cost of Cold War programs in estimating Vietnam War funding requirements.

With the exception of the 1991 Gulf War, which was financed almost entirely by contributions from U.S. allies, the United States has paid for war through a combination of tax increases, domestic budget cuts and some borrowing. But that pattern changed with the Bush administration.

"Not only did we not raise taxes, we cut taxes and significantly expanded spending," said Kosiak, citing prescription drug coverage extended to Medicare recipients. That has caused a number of observers to argue that the wars in Iraq and Afghanistan have been financed entirely through borrowing, he said.

According to CSBA's analysis, based on data provided primarily by the Defense Department and the Congressional Research Service, the United States has spent $904 billion on the wars thus far, in 2008 dollars. By 2018, those costs could grow to between $1.3 trillion and $1.7 trillion, depending on the number of troops deployed. If one assumes the wars are being funded with borrowed money, those costs grow by another $600 billion in total war funding through 2018, Kosiak said.

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