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Dollar Dilemma: Paying for Iraq Reconstruction

It is Congress's duty to approve government spending, and of late, this role has taken on the guise of a check-n-balance of the Bush administration's postwar policy. Although both Houses of Congress approved Bush's request for $87 billion for the Iraq and Afghanistan efforts, the debates over postwar costs elucidated Americans' growing anxiety with the Iraq project.

Many Americans feel resentful of spending billions to reconstruct Iraq when the American economy is still flailing. People are beginning to doubt if the value of rebuilding Iraq matches its multibillion-dollar price tag. Some Congresspeople have responded to their constituents' complaints by voting to make half of the reconstruction aid a loan. $20 billion of the $87 billion is reserved for reconstruction, so the loan would amount to $10 billion. Arguably, this loan would lighten the burden of the American taxpayer.

The Bush administration and its backers feel strongly that the $20 billion in reconstruction should be a grant, not a loan.

Grant v. Loan

Those in favor of a grant argue that Iraq is already buried in debt and is not likely to repay a loan anytime soon, if ever. The administration would like to see Iraq begin its new democratic life free of debt or with very little debt, and is planning to request that other nations absolve their loans to Iraq as well. (Iraq has accumulated $150 billion to $200 billion in debt.) Of course, this request would not allow the U.S. to place a new debt on Iraq.

Grants also allow the grantee to stipulate how the money is spent, while loans do not.

Those in favor of a loan remind their opponents that the U.S. has sizeable debt itself. Loan proponents feel that Iraq can afford its own reconstruction, since it is oil-rich and, therefore, sure to have considerable revenue in the future. They believe that a loan is a more responsible way to fund the efforts in Iraq.

Senate v. House

The Senate version of the spending bill includes the $10 billion loan; the House version does not. A committee will resolve this discrepancy before handing a final version to President Bush, who has not threatened to veto the bill if it includes a loan. However, it is likely that the final bill will consist only of grants, because anti-loan Republicans lead the committee.

Americans are not alone

Americans are not alone in supporting Iraq reconstruction with their tax dollars. According to the Associated Press, Japan has pledged $1.5 billion, Britain $900 million, Spain $300 million, South Korea $200 million, and the European Union $230 million.

Other nations are more likely to contribute now that Bush has conceded some control over foreign donations. The administration has decided to let an independent agency decide how to spend reconstruction dollars contributed by other countries. Since the United Nations and the World Bank will operate this agency, there will be substantial international control over the reconstruction effort.

Details of Congress' dealings

In the Senate, eight Republicans crossed party lines and voted with Democrats for Evan Bayh's (D-IN) amendment. The amendment allows the $20 billion in reconstruction aid to be grants if and only if all other foreign debt is excused. If the debt remains, $10 billion becomes a loan. Supports say the bill provides incentive for other nations to forgive Iraq's debts.

Opponents say this plan is illogical -- it is unlikely that a foreign nation will forgive Iraq's debt based on U.S. promises to do the same. From this point of view, the amendment results in more debt for Iraqis and, thus, an unstable Iraqi economy for a longer period of time.

Why was there so much dissent over $20 billion? What about the other $67 billion?

The heated discussion reflects an important continuing question about most legislation: that is, what's the question? Is the question how to help our soldiers? The remaining $67 billion goes to the U.S. troops, and most Congresspeople are in favor of this aid. Since the bill links the reconstruction funds to funds for troops, most representatives voted in favor of the spending bill. Voting "nay" may appear as an affront to U.S. soldiers.

Yet, many representatives voted against the bill altogether. 125 Representatives and 12 Senators voted against spending more in Iraq. One of the most vocal was Senator Robert C. Byrd (D-WV), who claims that $87 billion dollars is too much to pay for a war based on lies.

Although Byrd's claim does not represent the majority, it is not necessarily unsubstantiated. Many Americans feel that the war was based on falsehoods, since no weapons of mass destruction have yet been discovered. In this case the question is: if we were tricked into war, is it wrong to continue?

Others claim that American troops deserve funding nonetheless. And many believe that Iraq reconstruction is vital to the prevention of terrorist attacks on American soil. If Iraq can be stabilized, terrorist undercurrents will be easier to control. For this reason, Bush supporters claim, the $87 billion is for America -it goes to U.S. soldiers and U.S. safety.

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Article Posted on: 10/21/2003

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