On October 29, House and Senate appropriators announced a conference agreement, H.Rept.108-337 , on H.R. 3289 , a bill providing supplemental appropriations for militaryoperations and for reconstruction assistance in Iraq and Afghanistan. The House approved the billby a vote of 298-121 on October 31, and the Senate approved it by voice vote on November 3. ThePresident signed the bill into law, P.L. 108-106 , on November 6. The conference agreement rejecteda Senate proposal to provide about half of the Iraq reconstruction assistance as loans. For a review of conference action on key issues, see the section entitled "Key Issues in Conference," below. In a nationwide address on September 7, 2003, the President announced that he would requestan additional $87 billion for reconstruction assistance to Iraq and Afghanistan and for ongoingmilitary operations there and elsewhere. (1) OnSeptember 17, the White House submitted a formalrequest for the funds to Congress. On September 21, the Defense Department provided backupmaterial to congressional committees. (2) OnSeptember 23, the Coalition Provisional Authority thatis administering Iraq provided information on the details of its request for reconstruction aid. Congressional consideration of the request was completed on November 3, when the Senate approved a conference agreement on H.R. 3289 providing supplemental appropriationsof $87.5 billion for FY2004. Earlier, congressional committees held a number of hearings on issuesraised by the Administration request. Readers in congressional offices may click on the highlightedhearings listed below (in the .html version of this report) to link to hearing transcripts. During congressional debate, a wide range of legislative proposals addressing costs, burdensharing, and other issues were considered, including measures to require the Administration to provide reports on Iraq policy, giving details of plans to establish security and restore basic services; roll back reductions in the top income tax rate from 2005 through 2010 enoughto offset costs; encourage greater allied contributions of troops and reconstruction aid; transfer control of Iraq reconstruction from the Defense Department to the StateDepartment; and require fair and open competition on contracts in Iraq. The major issue in Congress was whether to provide Iraq reconstruction funds as grants, as the Administration proposed, or as loans. The following discussion (1) briefly reviews the basic elements of the request; (2) discusses the debate about long-term costs; (3) discusses congressional action on key legislative proposals; (4)provides an overview of funding for ongoing military operations in Iraq, Afghanistan, and elsewhere;and (5) provides an overview of funding for reconstruction and security in Iraq, for reconstructionin Afghanistan, and for other foreign policy initiatives. Of the $87 billion that the Administration requested, $65.6 billion was for defense, and $21.4billion for foreign policy programs. Of the $65.6 billion for defense, $51.5 billion was for ongoingmilitary operations in Iraq, $10.5 billion for U.S. forces in Afghanistan, and the remaining $3.6billion for homeland defense and support to allies. (3) Of the $21.4 billion for foreign policy programs,$20.3 billion was for security and reconstruction in Iraq, about $800 million for Afghanistan, andabout $200 million for other Global War on Terrorism foreign policy initiatives. Table 1 providesan overview of the request. Table 1. Basic Elements of the Administration Request for Additional Funding for Iraq, Afghanistan, and Other Activities (amounts inbillions of dollars) Sources: Congressional Briefing material provided by the Office of Management and Budget,theDepartment of Defense, the Department of State, and the Office of the Coalition ProvisionalAuthority, September 8, 2003; Office of Management and Budget, Supplemental AppropriationsRequest, September 17, 2003; Department of Defense, FY2004 Supplemental Request, September21, 2003. Note: a. Includes $61 million for U.S. diplomatic facilities and security and $50 million for multinationaldivision peacekeeping costs. Administration officials said that the request was designed to cover only pressing requirements through the next year to fifteen months -- the defense money through FY2004, which ends onSeptember 30, 2004, and the Iraq reconstruction money through December 2004. The request formilitary operations assumed that current troop levels and the current pace of operations in Iraq,Afghanistan, and elsewhere would continue unchanged through the fiscal year. The request did notaddress ongoing military costs after FY2004. Presumably, if the number of troops deployed in Iraqwere to change, costs would change as well. The $20 billion requested for reconstruction and security in Iraq finances only a part of what Administration officials estimate will be needed in the long run. Current estimates, from a varietyof sources, including the U.S. government, put the figure in the $50-75 billion range. A needsassessment released by the World Bank and the U.N. Development Program (UNDP) puts the costof reconstruction in 14 key sectors at $36 billion over four years, not including $19.4 billionestimated by the U.S.-led Coalition Provisional Authority (CPA) for security, oil, and other criticalsectors not covered by the Bank assessments. (4) TotalBank/CPA projected reconstruction coststhrough 2007 amount to $55 billion, $17.5 billion in 2004 alone. The White House says that theIraqi oil revenues and "recovered assets," along with additional international support, are expectedto contribute to meet remaining needs. Officials have also said, however, that Iraqi oil revenues areexpected to total about $12 billion in the next year, and that government operations will cost aboutas much, (5) leaving no Iraq oil money forreconstruction efforts in the near term. The request for $87 billion for defense and reconstruction assistance comes on top of more than$110 billion provided for those purposes since the September 11, 2001, terrorist attacks. Congresshas provided $100 billion in defense funding, over and above regular defense appropriations, formilitary operations in Afghanistan, for other global counter-terrorism military and intelligenceoperations, for homeland defense, and, most recently -- in last April's Emergency WartimeSupplemental appropriations bill -- for the war in Iraq. Table 2 provides a summary of defensefunding by appropriations bill. Table 2. Defense Funding for Iraq, Afghanistan, and Other Global War on Terrorism Activities: FY2001-FY2003 (amounts in billionsof dollars) *Notes: Total may not add due to rounding. The FY2004 Defense Appropriations Act rescinded$3.5 billion of funds provided in the FY2003 Emergency Wartime Supplemental. Since September 11, Congress has appropriated about $12 billion for Iraqi and Afghan reconstruction and for foreign aid to the "front-line" states in the global war on terrorism. Of that,Congress has provided $1.4 billion in reconstruction assistance to Afghanistan, with another $600million pending in regular FY2004 appropriations bills. For Iraq, the April FY2003 EmergencyWartime Supplemental provided $2.5 billion in foreign operations funding for relief andreconstruction. Additional funding for Iraq reconstruction totals $1.6 billion, of which $1.1 billionis from Department of Defense funds (part of the $62.6 billion shown above in Table 2 from theFY2003 Emergency Wartime Supplemental), and the remainder from the regular U.S. Agency forInternational Development (USAID) budget (see below for a further discussion). A large part of the debate in Congress about the Administration's $87 billion request focused on cost issues, including the impact of the new funding on the overall federal budget; whether the Administration was adequately forthcoming in its previousstatements about costs; how accurate and complete the current cost projections are; and how great costs will be in future years. The following sections review each of these issues in turn. The Office of Management and Budget (OMB) mid-session review of the budget, released in July, estimated that the federal budget deficit would total $455 billion in FY2003 and $475 billionin FY2004, assuming congressional enactment of the Administration program for FY2004. (6) WhiteHouse officials said that the requested additional appropriations of $87 billion for FY2004 wouldpush the deficit to about $525 billion for that year. (7) The Congressional Budget Office (CBO)updated budget baseline projected deficits of $401 billion in FY2003 and $480 billion in FY2004. (8) It is important to note that the CBO baseline for FY2003 included outlays from the April 2003wartime supplemental, and CBO projections for future years assumed growth with inflation inoverall discretionary spending. So, in effect, the CBO estimate of the FY2004 deficit alreadyassumed additional supplemental appropriations for military activities in Iraq and elsewhere roughlyequal to the amount provided in FY2003. (Reconstruction assistance for Iraq and Afghanistan,however, was more than three times as high in the FY2004 request as in FY2003.) (9) Administration officials argued that the economy can readily absorb additional federal borrowing entailed by the requested supplemental, particularly since the economy is still recoveringfrom recession. Using OMB economic projections, a deficit of $525 billion in FY2004 would totalequal 4.4% of gross domestic product -- less than the 5%-6% of GDP that the government borrowedin the mid-1980s. Congressional critics argued that funding for domestic programs, though not taxcuts, has been constrained; that borrowing 20%-25% of the overall federal budget is fiscallyirresponsible; and that continuing deficits will endanger the economy in the long term. Others, including some Members of Congress, contended that, given Iraq's future oil revenue potential, reconstruction costs should be financed as loans rather than grants. In this way, they say,future loan repayments would be a source of revenue for the United States. In the months leading up to the war with Iraq, Administration officials were generally unwilling to provide long-term estimates either of the costs of a war or of subsequent post-war needs, sayingthat no final decision had been made to go to war and that costs could not be projected withsufficient accuracy. What little officials did say, however, became a matter of contention inCongress. In a September 9 Senate Armed Services Committee hearing, Senator Levin recalled thatformer White House economic advisor Larry Lindsey had said a year earlier that a conflict with Iraqcould cost $100-200 billion. (10) OtherAdministration officials, however, notably then-Budget DirectorMitch Daniels, immediately dismissed Lindsey's figures as ill-founded, and the press widely reportedAdministration estimates that costs would be in the range of $50 billion. (11) That figure provedreasonable for the war itself and for subsequent stability operations for the remainder of FY2003,but did not take account of later post-war costs. By March of this year, shortly before the White House submitted its FY2003 supplemental request, some legislators were complaining that the Administration was withholding cost projectionsso as not to weaken support for pending tax cut legislation. At one point, during the tax debate, theSenate approved an amendment to set aside $100 billion of the of the tax cut as a hedge againstunplanned war costs. Before the war began, several independent estimates of war costs and ofpost-war expenses were prepared, including assessments by the Congressional Budget Office, theHouse Budget Committee Democratic Staff, Yale economist William Nordhaus, the Center forStrategic and International Studies, and the Council on Foreign Relations. Several of theseindependent estimates projected considerably higher costs than the Administration was providing,mainly because the independent projections took account of post-war peacekeeping andreconstruction costs and, in some cases, costs of borrowing funds because the war added to thedeficit. For a list of major cost studies, see "For Additional Reading," below. Estimates of reconstruction costs became a particular focus of attention in view of the Administration's request for $20 billion for Iraq. In a widely quoted statement last March, whenasked about long-term reconstruction costs in Iraq, Deputy Secretary of Defense Paul Wolfowitz saidthat the oil revenues of that country could bring between 50 and 100 billion dollars over the course of the next two or three years. Now, there are a lot of claimson that money, but ... we're not dealing with Afghanistan that's a permanent ward of theinternational community. We are dealing with a country that can really finance its ownreconstruction and relatively soon. (12) More recently, Secretary of Defense Rumsfeld acknowledged that the U.S. government underestimated Iraq reconstruction costs, saying, The infrastructure of that country was not terribly damaged by the war at all. It was damaged by 30 years of Saddam Hussein, with a Stalinist-likeeconomy, denying the people of that country the money and the funds and the resources and theinvestments that they could have had.... Now ... did we underestimate something? Yes. I don't thinkpeople really fully understood how devastating that regime was to the infrastructure of the country;how fragile the electric system is, how poorly the water's being managed, and how -- the extent towhich the people are being denied. (13) Leaving aside the politically contentious issue of past cost estimates, many questions remain about the accuracy of the most recent military and reconstruction cost projections. On the militaryside, officials have said that they do not believe there will be any need for more U.S. troops in Iraq,first, because the security situation in the country is generally good except in areas, like the "Sunnitriangle," where diehard opposition is concentrated; second, because rapid progress is being madein organizing Iraqi security forces which, the Administration expects, will take up most of theburden; (14) and, third, because of expectedcontributions of forces from other nations. Cost projectionsjustifying the supplemental request assume that current force levels and the current pace ofoperations will be maintained for the next year. Whether that is sufficient, however, depends firstof all on whether the security situation is improving, as Administration officials insist, or gettingworse, as others argue. There have also been some questions about specific elements of the Defense Department's supplemental funding request. In a hearing of the Senate Appropriations Committee on September24, Senator Harkin questioned whether several requested projects were war-related emergencies thatrequire immediate funding, including $293 million for various military construction projects, $329million for R&D projects, and $345 million for base camp housing. Others have raised the oppositequestion: whether the DOD request understates costs by leaving for the future projects which willlater need funding. One particular issue is that the request includes relatively little money for"reconstituting" or -- in the new DOD vernacular "resetting" -- Army forces. The Army estimatesthat several billion dollars will be required to refill stocks of prepositioned materiel and repairequipment to pre-war standards, but the request does not finance these measures. In addition, as a recent Congressional Budget Office assessment concluded, it is questionable whether the current force level can be maintained without further extending reserve tours and,perhaps, mobilizing even more reserves, either of which might undermine reserve personnelretention. (15) Several Members of Congress haveproposed increasing the size of the Army to easepressures on the force, though CBO cautions that this would take up to five years to implement andwould subsequently cost $9-10 billion per year. On the reconstruction side, officials acknowledge that they originally underestimated significantly the weakness of Iraq's infrastructure and overestimated potential short-term Iraqi oilrevenues. Even now, however, different officials project somewhat different upper estimates oflikely reconstruction costs. Moreover, how much multilateral donors will contribute to cover thecurrent reconstruction financing gap ($50 to 75 billion, minus the $20 billion supplemental andperhaps $5 to $6 billion per year from Iraqi oil revenues beginning in 2005) is highly unclear. Undersecretary of State Larson told the Senate Banking Committee on September 16 that, while theAdministration believed that bilateral donors and international financial institutions should "makea maximum effort to pay their share," he was not in a position to provide a specific figure until betterestimates of reconstruction costs are available. With the Madrid donor conference scheduled forOctober 23-24, U.N. officials estimate that about $2 billion for Iraq will be pledged for 2004. (16) Ontop of this amount, the World Bank plans to recommend to its governing board $1 billion inconcessional and market rate loans to Iraq through June 30, 2005. (17) Of all the uncertainties about costs of U.S. operations in Iraq (and Afghanistan), perhaps the greatest is how long the United States will have to maintain a substantial military presence. Secretary of Defense Rumsfeld has said that he does not anticipate that large numbers of U.S.military forces will be required in the long term. Some legislators, however, including somesupporters of Iraqi regime change, have said that the United States should expect to be involved forfive years or more. Recently Lt. Gen. Carlos Sanchez, who commands U.S. and allied forces in Iraq,said "it's going to be a few years" before the United States can withdraw from Iraq. (18) How long U.S.forces will stay is the main factor affecting long-term estimates of costs. Most recently, the HouseBudget Committee Democratic Staff has prepared an updated report that projects "that the long-termcost of the war in Iraq and the post-war reconstruction effort will be more than $178 billion andunder plausible assumptions could exceed $400 billion." (19) By comparison, the Vietnam war, from1964 through 1973, cost about $584 billion in FY2003 prices. A number of issues were a focus of legislative attention, including both issues directly relatedto the supplemental request and some not directly related. Legislative measures that were proposedor acted on include proposals to assert congressional oversight; measures on taxes and domestic priorities; proposals to provide additional funding for variousprograms; a measure to provide health insurance for militaryreservists; competitive contracting and limitations on profits of corporations withcontracts in Iraq; and proposals to provide loans rather than grants for Iraq reconstruction. From the beginning of the congressional debate, a key issue was how Congress should exercise oversight over U.S. policy, particularly in Iraq. On September 9, just a day-and-a-half after thePresident's speech, Senator Feinstein and ten other Democratic Senators introduced a freestandingbill, S. 1594 , designed to be attached to the supplemental, that would require anextensive report on the economic and security situation in Iraq. The report would be required toinclude information on attacks on U.S. and coalition military and civilian personnel, a detailed planto establish security and restore basic services, current and projected costs, efforts to secure increasedinternational participation, a timetable for restoring self-government, and projected U.S. andinternational military personnel requirements. The reporting requirements in the Feinstein proposal were echoed in several other proposals that were under consideration in Congress. In floor action, the Senate has adopted a number ofamendments to impose various reporting requirements on the Administration. And in its markupof its version of the supplemental appropriations bill, the House Appropriations Committee approvedan amendment by Representative Hoyer to establish extensive reporting requirements. (See belowunder "Congressional Action" for more details.) Taxes and the budget were another key focus of congressional debate. In a speech at the National Press Club on September 9, Senator Biden announced that he would offer a measure tooffset costs of the supplemental by delaying implementation of tax cuts for the top 1% of taxpayersfor one year, which, he said, would free up about $85 billion. The Administration vigorouslyopposed any offsetting reduction in tax cuts. (20) On October 1, Senator Biden, along with SenatorsKerry, Chafee, Corzine, Feinstein, and Lautenberg, proposed an amendment to limit the plannedreduction in the top marginal income tax rate from 2005 through 2010 sufficiently to increaserevenues by $87 billion. The Senate rejected the amendment on October 2. In the House, duringAppropriations Committee markup on October 9, Representative Obey proposed a substitute billthat, among other things, offset costs by reversing tax cuts. (See below under "CongressionalAction" for more details.) Funding for domestic programs was also an issue. Many legislators criticized the Administration for opposing some domestic spending while asking for larger amounts for similarprograms in Iraq, including border security, schools, and prison construction. In the House,Representatives Emanuel, DeFazio and others introduced an amendment requiring parity betweenmoney for domestic needs and the amount devoted to Iraq reconstruction. On October 14, the Senaterejected an amendment by Senator Stabenow to reduce Iraq reconstruction funding by $5 billion andtransfer the money to domestic priorities. (See below under "Congressional Action" for moredetails.) Several measures to provide funds for various domestic and international programs were matters of continuing debate in Congress, and some were offered as amendments to thesupplemental. Some Members advocated additional funding for homeland security, while SenatorMikulski discussed adding $100 million for AmeriCorps. An amendment by Senator Durbin, tabledby the Senate on a vote of 56-43, would have added $880 million for international HIV/AIDS,bringing the total U.S. commitment in FY2004, as included in other pending bills, to $3 billion. TheHouse measure added $345 million for Liberia peacekeeping and reconstruction and for Sudan, inline with an earlier Dear Colleague letter from Representative Payne and others. The Senate-passedmeasure included $200 million for Liberia, while the enacted bill provides $200 million, plus $245million for a contribution to U.N. peacekeeping operations in Liberia. A key issue was whether toadd $1.4 billion to the bill for veterans health benefits. The Senate approved an amendment to the FY2004 defense authorization bill that would offer health insurance to non-active duty reservists (of which there are about 800,000) and their familiesthrough the DOD TRICARE program. Non-active duty reservists would be allowed access toTRICARE by paying premiums substantially below the average cost of private health insurance. CBO estimated that the provision would cost about $500 million in FY2004 and over $2 billion ayear by FY2008 as more reservists signed on. The Administration threatened to veto theauthorization if it included this provision. Supporters said that they might offer the measure as anamendment to the supplemental if it were not enacted in the authorization. On October 2, the Senateapproved an amendment to its version of the supplemental bill providing health insurance tonon-activated reservists, though only to those who are unemployed or ineligible for employerprovided insurance. (See below under "Congressional Action" for a discussion of Senate action onthis issue. Also see the discussion of "Military Personnel Benefits" below.) A particularly sensitive political issue was whether companies like Halliburton, which have been awarded non-competitive contracts for support of U.S. forces and for reconstruction activitiesin Iraq, may be earning excessive profits. Some legislators mentioned measures to address the issue- Representative Maloney, for example, introduced the Clean Contracting in Iraq Act of 2003( H.R. 3275 ). In its markup, the Senate Appropriations Committee approved anamendment by Senator Leahy to stiffen penalties for fraud and profiteering on contracts for Iraq. The House version of the bill included a measure to limit non-competitive procedures forreconstruction contracts, and during House floor debate, Members adopted amendments byRepresentatives Kirk and Slaughter tightening reports and information regarding non-competitivecontracts. A third amendment by Representative Sherman required oil infrastructure procurementto follow normal competitive bidding procedures. A combination of these proposals was includedin the enacted legislation (see "Congressional Action" below). Several Members drafted amendments to require portions of the $20.3 billion Iraq reconstruction request to be guaranteed by Iraqi oil or extended as loans rather than grants. TheAdministration's proposal called for all assistance to be provided on a grant basis. Although most of these efforts failed or were not offered, a Senate-passed amendment by Senators Bayh, Ben Nelson, and others drew strong objections from the White House. On October16, the Senate adopted (51-47) language that would convert $10 billion of Iraq reconstructionfunding to loans. The U.S. would treat these loans as grants, however, if foreign creditors cancel90% of Iraq's debt. This was one of the key issues during congressional conference deliberations,although it was dropped from the enacted bill. Other unsuccessful attempts to shift grants to loans included amendments by Senator Dorgan, tabled during both Committee markup (15-14) and floor consideration (57-39), creating an IraqReconstruction Finance Authority that would obtain financing for infrastructure rehabilitation bycollateralizing the revenue from future sales of Iraq oil. The full Senate also tabled a similaramendment by Senator Landrieu during floor debate (52-47). Representative Wamp offered, butwithdrew under White House pressure, a proposal during House Committee markup that would havemade half of the reconstruction available only after an elected government was in place and only ona loan basis. A similar amendment by Representative Pence was ruled out of order during Housefloor consideration. Senator Hutchison and others introduced, but did not offer, an amendment ( S.Amdt. 1798 ) directing $10 billion of the proposed $20.3 billion supplemental to anIraq Reconstruction Trust Fund, to be created within the World Bank, that would issue loans andloan guarantees to implement economic development projects in Iraq. Any U.S. contribution to theFund would require a matching pledge from other bilateral donors. After six months, if the TrustFund had not been established, the $10 billion would transfer to the CPA and be used forreconstruction loans to the Iraq Governing Council. There were, however, legal questions as to who could assume responsibility in the near term for accepting sovereign loans and concerns raised by the Administration, of increasing Iraq's alreadylarge and currently unserviceable debt. (For more discussion, see below under sections onCongressional Action and Iraq Reconstruction Issues.) The Senate Appropriations Committee marked up its version of a bill, S. 1689 , onSeptember 30, and the Senate began floor debate on October 1. On October 9, the HouseAppropriations Committee marked up its version of a supplemental appropriations bill, H.R. 3289 , providing funds for ongoing military operations and for reconstructionassistance in Iraq and Afghanistan. Floor action began on October 15. Both the House and theSenate approved their versions of the bill on October 17. On October 29, House and Senateappropriators announced a conference agreement, on H.R. 3289 . The House approvedthe conference agreement by a vote of 298-121 on October 31, and the Senate approved the measureby voice vote on November 3. The President signed the bill into law, P.L. 108-106 , on November6. As proposed by Committee Chairman Ted Stevens and as agreed to by the committee, the reported bill provided the amounts requested both for defense and for foreign operations, thoughwith some shifts of funds among various activities. For defense, the bill provided $65.560 billion, equal to the amount requested. The committee bill made some minor changes in requested equipment funding and, most notably, rejected anAdministration proposal to revise military personnel benefits. In action on some key issues, theSenate committee bill Extended through FY2004 an increase in Imminent Danger Pay and in Family Separation Allowances that Congress provided in the April 2003 Wartime Emergency Supplemental. The Administration proposed eliminating these increased benefits after December 31, 2003, andinstead using an increase in amounts of Hazardous Duty Pay to provide the same amounts to troopsdeployed in conflict areas (see below for a further discussion). Provided an additional $962 million for Army operations and maintenance and procurement funding for materiel and activities such as body armor for soldiers in Iraq andAfghanistan, battlefield ordinance cleanup, transportation of damaged combat equipment to depots,communications equipment, and replenishment of Army prepositioned stocks used in combat. Theseincreases were offset by reductions in Air Force, Navy, and Defense-Wideaccounts. Provided the Defense Department with the authority to transfer up to $2.5 billion among defense accounts without advance congressional approval rather than $5 billion asrequested by the Administration. The bill also, however, provided authority for DOD to transfer anadditional $5 billion subject to approval by the House and Senate Appropriations Committees. Senator Byrd proposed measures to limit the funding flexibility the billprovided. Allowed DOD to transfer $150 million into unplanned military construction projects rather than the $500 million requested. Provided $200 million to provide training and equipment to the new Iraqi Army and the Afghan National Army. The Administration had requested the funds for forces in Iraq,Afghanistan, and "other nearby regional nations." Provided $1.0 billion for "coalition support" to reimburse Pakistan, Jordan, and other cooperating nations for logistical and other support to U.S. operations. This is $400 millionless than the Administration requested. Although there was some debate about the defense request, most of the debate during the Senate markup concerned reconstruction funds. The committee rejected an amendment by Senator Byrdto eliminate most of the reconstruction funds -- except for amounts for security -- leavingreconstruction to be considered later in a separate measure. The committee also rejected anamendment by Senator Byrd to limit the transfer authority for defense programs that the billprovides. For Iraq and Afghanistan reconstruction and other global war on terrorism, S. 1689 , as reported, provided $21.445 billion, as requested, supported the full request for Afghanistan,and made small changes in other areas. Regarding Iraq reconstruction, the Senate Appropriations Committee supported the total funding request of $20.3 billion and provided the President with the flexibility to allocate resourcesto any federal account. This would allow the Coalition Provisional Authority, headed byAmbassador Bremer who reports to the Secretary of Defense, to continue its coordination role andcontrol over reconstruction funding. The Senate-reported measure, however, deleted the $60.5million requested for U.S. diplomatic facilities in Iraq, noting that these funds were previouslyprovided in the FY2003 emergency supplemental measure ( P.L. 108-11 ). The Administration,however, had planned to use these supplemental resources for what it considered as more urgentneeds for an interim USAID mission in Kabul and training for the Afghan transitional government. Instead, S. 1689 provided a separate $60.5 million appropriation for USAID's CapitalInvestment Fund to meet the requirements in Afghanistan, making the FY2003 supplemental fundsavailable for U.S. facilities in Baghdad. Other additions and changes made by the Senate panel were to earmark $100 million of the $20.3 billion total for democracy-building activities in Iraq; require full and open competitive contracting procedures(waivable); apply current and future USAID standards related to meeting the needs ofdisabled persons to activities in Iraq and Afghanistan; ensure that a new Iraqi constitution preserves full rights to religiousfreedom; prohibit any funds from being used to repay debts incurred by the formergovernment of Saddam Hussein; and impose fines and criminal charges against persons engaged in war profiteeringand fraud relating to military action, relief, and reconstruction in Iraq. Also during Senate Committee markup, the panel tabled (15-14) two amendments by Senator Dorgan related to reducing U.S. costs of rebuilding Iraq. The first would have created an Iraq ReconstructionFinance Authority that would use future Iraq oil revenues to secure financing for reconstructionprojects. Senator Dorgan argued that the Iraq Governing Council had sufficient authority to createsuch a facility and to raise money that could reduce the size of proposed U.S. expenditures. SenatorDorgan subsequently reintroduced the amendment for Senate floor debate, at which time the Senatetabled the proposal 57-39. The second Dorgan amendment considered during Committee markupwould have converted the reconstruction package from grants to loans. Opponents of the Dorganamendments maintained that adding to Iraq's already sizable debt obligations would enormouslycomplicate the difficult task of stabilizing the economy. Also tabled during markup (15-14) was aproposal by Senator Harkin that would have reduced reconstruction funds to $10 billion and delayedsubmission of additional requests until the President had reported on contributions made by otherdonors and submitted a detailed reconstruction plan. For other matters concerning the global war on terrorism, S. 1689 , as reported, approved the President's request for a $100 million emergency fund for complex foreign crises. TheSenate Appropriations Committee expressed support for using the contingency fund for peace andhumanitarian efforts, such as those required in Liberia. The bill further authorized the use of $200million for Pakistan debt relief pending in the regular FY2004 Foreign Operations bill and extendsthrough FY2004 the waiver of foreign aid restrictions that applied to Pakistan prior to September11, 2001. Beyond agreeing to $50 million proposed for Emergencies in the Diplomatic and ConsularServices for rewards for Osama bin Laden and Saddam Hussein, S. 1689 adds $41million for two other specific purposes: reimbursement to New York City for additional costs of protecting foreign missions and officials since September 11 ($32 million); and costs of the 2003 Free Trade Area of the Americas Ministerial meeting ($8.5million). The Senate measure further included $40 million, as requested, for USAID operating expenses inAfghanistan and Iraq, plus an additional $60.5 million for construction and upgrades of more secureoverseas USAID facilities. The Senate began floor consideration of S. 1689 on October 1 and continued on October 2, 3, and, after recess, on October 14, 15, 16, and 17. Amendments Considered. The major debates onthe Senate floor were over an amendment by Senator Byrd to eliminate $15.2 billion of the $20.3 billion requested for Iraq reconstruction in order to review the proposal more closely and consider it at alater point (rejected by a vote of 38-59 on October 1); an amendment by Senator Biden that would have suspended a portion of tax reductions in order to pay the costs of Iraq security and reconstruction (tabled by a vote of 57-42 onOctober 2); an amendment by Senators Daschle and Graham of South Carolina ( S.Amdt. 1816 ) to offer health insurance under the Defense Department-run TRICAREprogram to reservists and their families who are either unemployed or who are not eligible foremployer-sponsored health insurance (adopted October 2); various amendments to provide some or all of the Iraq reconstruction funds as loans (the Senate adopted the Senators Bayh-Ben Nelson-Ensign-Collins-Clinton-Dorgan-Snowe-Graham amendment to provide $10 billion as loans by a voteof 51-47 on October 16); a Reed-Hagel proposal to add 10,000 active duty personnel to the Army (rejected a motion to table the amendment by 45 to 52 on October 15 and adopted the amendmentwithout objection on October 16); an amendment by Senators Dorgan and Wyden to cut $1.655 billion from specific Iraq construction projects, as in the House committee version of the bill, and to cut anadditional $200 million for Iraqi oil imports (agreed to on October 17); a Durbin amendment ( S.Amdt. 1879 ) to reduce Iraq reconstruction funds by $879 million and provide the same amount for HIV/AIDS prevention, treatment, andresearch (tabled by 56-43, October 17); and an amendment by Senators Chafee and Leahy to add $100 million to funds available to assist Liberia (agreed to on October 17). Reconstruction Transfers as Loans. Perhaps the most extensive discussion during Senate deliberation came on the issue of whether Iraq reconstructionfunding should be financed strictly on a grant basis, as proposed by the President, or whether someof the money should be loaned to Iraq. On October 17, over strong White House objections, theSenate adopted (51-47) an amendment ( S.Amdt. 1871 ) by Senators Bayh, Ben Nelson,and others to provide $10 billion as loans. Should international creditors subsequently agree tocancel 90% of Iraq's debt, the President could convert the loans into grants. Other proposals, however, were either defeated or not offered. Earlier in the debate, there was substantial discussion of an amendment introduced by Senator Hutchison and others( S.Amdt. 1798 ) requiring that the Secretary of the Treasury negotiate with the WorldBank and member nations of the Bank to create within World Bank an Iraq Reconstruction TrustFund. Under the terms of the Hutchison amendment, the Fund would be governed by a Board ofTrustees made up of a U.S. official and five others representing the top country contributors to theTrust Fund. The Board would use Trust Fund contributions to extend loans and loan guarantees forprojects advancing economic development in Iraq. Of the $20.3 billion appropriated Iraqreconstruction, the amendment would have directed $10 billion to the Trust Fund, although the U.S.contribution could not exceed the total amount pledged by other nations. After 6 months, if the TrustFund had not been established, the $10 billion would be transferred to the Coalition ProvisionalAuthority, which would loan to, or guarantee loans made by, the Iraq Governing Council. SenatorHutchison, however, did not bring up her amendment for a vote. Another proposal by Senators Bayh and Nelson ( S.Amdt. 1815 ) would have required that prior to the obligation of non-security reconstruction funds, each country that is oweddebt incurred during the Saddam Hussein regime forgives such debt. Otherwise, after 6 months,reconstruction appropriations would be transferred to an account for use as a loan to the IraqGoverning Council. This amendment was not debated, although, as noted above, the Senate adoptedan alternative Bayh/Nelson amendment on October 16 addressing the same theme. Amendments Adopted. Overall, during the seven days of debate through October 16, the Senate acted on more almost 50 amendments, adopting 47and rejecting 16. Those adopted included amendments by Senators Collins and Wyden ( S.Amdt. 1820 ) to require all contracts over $1 million military purposes and reconstruction in Iraq to use full and opencompetition procedures unless the executive agency responsible for the contract justifies the reasonsfor using a non-competitive process (October 2); by Senators Murray and Durbin ( S.Amdt. 1822 ) requiring that a number of women's issues be given priority in reconstruction programs in Iraq and Afghanistan(October 2); by Senators Voinovich and Lott ( S.Amdt. 1808 ) requiring a report within 6 months on efforts made by the United States to increase contributions by other nations andorganizations for Iraq reconstruction, the status of pre-war Iraqi debt, and the prospect for repaymentof infrastructure costs by Iraq (October 2); by Senators Daschle and Graham of South Carolina ( S.Amdt. 1816 ) to offer health insurance under the Defense Department-run TRICARE program to reservistsand their families who are either unemployed or who are not eligible for employer-sponsored healthinsurance (October 2) (see below, under "Military Personnel Benefits," for a description of thespecific proposal); and by Senators Reed and Kennedy ( S.Amdt. 1812 ), to increase by $191.1 million the amount provided up-armored High Mobility Multipurpose Wheeled Vehiclesoffset by a cut in funds in the Iraq Freedom Fund (October 2) by Senator Ensign ( S.Amdt. 1839 ) to prevent reconstruction funds from being used to repay foreign debts (October 15); by Senator Reid ( S.Amdt. 1836 ) and by Senator Hollings ( S.Amdt. 1870 ) to permit citizens held as POWs or as "human shields" in the 1991 GulfWar to pursue damages in court (October 15 and 16); by Senator McConnell ( S.Amdt. 1863 ) to permit the export of lethal military equipment to reconstituted Iraqi military forces (October 16); by Senator Nickles ( S.Amdt. 1876 ) to express the sense of the Senate that foreign countries should forgive Iraqi debt (October 16); by Senator Nelson of Florida ( S.Amdt. 1858 ) to provide $10 million for a National Guard family assistance program (October 16); by Senator Warner ( S.Amdt. 1880 and S.Amdt. 1867 ) to provide funds for defense facilities damaged by Hurricane Isabel (October 16); by Senator Feingold ( S.Amdt. 1852 ) to all military personnel to take leave to attend to deployment related business (October 16); by Senator Durbin ( S.Amdt. 1837 ) to require the federal government to make up any difference between what federal employees who are members of themilitary reserves activated for service will earn when activated and what they would normally earnin basic pay (approved 96-3, October 17); by Senator Boxer ( S.Amdt. 1843 ) to make retroactive the relief of hospitalized members of the uniformed services from the obligation to pay for food andsubsistence while hospitalized (99-0, October 17); by Senators Dorgan and Wyden ( S.Amdt. 1887 ) to cut $1.655 billion from specific Iraq construction projects, as in the House committee version of the bill, andto cut an additional $200 million for Iraqi oil imports (October 17); by Senators Chafee and Leahy ( S.Amdt. 1807 ) to add $100 million to the $100 million available in the committee bill for assistance to Liberia (October17); by Senator Harkin ( S.Amdt. 1860 ) to provide up to $13 million for conflict resolution, rule of law, and democracy activities (October 17); by Senator Boxer ( S.Amdt. 1845 ) to prioritize the equipping of aircraft enrolled in the Civil Reserve Air Fleet when counter-measures against the threat ofshoulder-fired missiles are deployed for homeland defense (October 17); by Senators Bond and Mikulski ( S.Amdt. 1825 ) to provide an additional $1.3 billion for in medical care funds for the Department of Veterans Affairs (October 17);and at least 15 amendments to require various reports on Iraq reconstruction and security and on other issues. Amendments Rejected. The Senate also rejected amendments by Senators Leahy and Daschle ( S.Amdt. 1803 ) to place the Coalition Provisional Authority under the direct authority and foreign policy guidance of theSecretary of State (tabled 56-42, October 2); by Senator Dodd ( S.Amdt. 1817 ) to provide an additional $322 million for safety equipment for United States forces in Iraq offset by reducing the amount providedfor reconstruction (tabled by 49-37, October 2); by Senator Bingaman ( S.Amdt. 1830 ) to authorize the award of the Iraqi Liberation Medal as a campaign medal for members of the Armed Forces who serve inSouthwest Asia in connection with Operation Iraqi Freedom (rejected 47-48, October14); by Senator Stabenow ( S.Amdt. 1823 ) to reduce Iraq reconstruction funds by $5.03 billion and to provide an equal amount of additional spending for domestic education,veterans, health, and transportation programs (tabled by 59-35, October 14); by Senator Dorgan ( S.Amdt. 1826 ) to require that Iraqi oil revenues be used to pay for reconstruction in Iraq (tabled by 57-39, October14); by Senators Byrd, Leahy, and Kennedy ( S.Amdt. 1818 ) to allow only $5 billion of non-security Iraq reconstruction funds to be used prior to April 1, 2004; after April1, the remaining funds would become available if the President issues certain certifications andCongress approves a subsequent appropriations law approving the additional funds (tabled by 57-42,October 16); by Senator Leahy ( S.Amdt. 1868 ) to prohibit contracts with corporations that owe deferred compensation to specific U.S. government officials (tabled by 65-34,October 16); by Senator Daschle ( S.Amdt. 1854 ) to require that any future funding for Iraq be matched by foreign contributions (tabled by 55-44, October17); by Senator Landrieu ( S.Amdt. 1859 ) to establish an Iraq Reconstruction Finance Authority (tabled by 52-47, October 17); by Senator Durbin ( S.Amdt. 1879 ) to reduce Iraq reconstruction funds by $879 million and provide the same amount for prevention, treatment, and control of, andfor research on HIV/AIDS (tabled by 56-43 nays, October 17); by Senator Corzine ( S.Amdt. 1882 ) to establish a National Commission on the Development and Use of Intelligence Related to Iraq. (tabled by 67-32, October17); by Senators Byrd and Durbin ( S.Amdt. 1819 ) to shift $600 million from the Iraq reconstruction to the Army to secure and destroy weapons in Iraq (tabled by 51-47,October 17); by Senator Byrd ( S.Amdt. 1886 ) to prohibit involuntary deployment overseas in support of Operation Iraqi Freedom of members of the National Guard andReserves who have been involuntarily deployed for more than six months during the preceding sixyears (tabled by 82-15, October 17); by Senator Byrd ( S.Amdt. 1888 ) to eliminate the flexibility given to the President to reallocate Iraq reconstruction funds without approval by Congress (tabled by49-46, October 17); by Senator Brownback ( S.Amdt. 1885 ) to reduce the amount appropriated for reconstruction in Iraq by $600 million and to increase the amount available to theIraqi Civil Defense Corps by $50 million, the amount available for Afghanistan by $400 million, and the amount available for Liberia (tabled by 55-43, October 17); and by Senator Byrd ( S.Amdt. 1884 , to S.Amdt. 1819 ), to shift $1.655 billion from Iraq reconstruction funds to reconstruction assistance to Afghanistan,destruction of conventional weapons in Iraq, disaster relief in Liberia, and repair or Hurricane Isabeldamage to military and Coast Guard facilities (fell when Byrd-Durbin S.Amdt. 1819 wastabled, October 17). Also Senators Reid and Lincoln withdrew an amendment ( S.Amdt. 1835 ) to permit concurrent receipt of military retired pay and veterans administration disability benefits after acompromise on the issue in the conference on the FY2004 defense authorization bill was announced. In addition, an amendment by Senator Schumer regarding appointment of a special counsel was ruledout of order and not reconsidered. The House marked up its version of a supplemental appropriations bill ( H.R. 3289 ) on October 9. As approved by the House Appropriations Committee, the bill provided $86.9 billion in total, $184 million below the request; provided $18.65 billion for Iraq reconstruction, $1.65 billion below therequest; provided $1.2 billion for Afghanistan reconstruction, $400 million above therequest; moved $858 million from the defense part of the bill to the foreign operationspart to cover operating expenses of the Coalition Provisional Authority in Iraq;and added $544 million to the defense part of the bill to cover Hurricane Isabeldamage at military facilities. In the defense part of the bill, the committee bill also added funds for force protection and unexploded ordnance clearing, offset by cuts elsewhere; allowed the Army to contract out for security guards at military facilities in the United States to replace 7,000 to 10,000 reserve personnel mobilized for thoseduties; as in the Senate version of the bill, extended through FY2004 increases in Imminent Danger Pay and Family Separation Allowances provided in the April 2003 WartimeEmergency Supplemental and rejects the Administration proposal to instead use Hardship Duty Payto increase pay to deployed personnel; provided the Defense Department with the authority to transfer up to $3.0 billion among defense accounts without advance congressional approval rather than $5 billion asrequested by the Administration (the Senate bill provides $2.5 billion for transfer without advancecongressional approval plus $5 billion subject to prior approval by the defense appropriationssubcommittees); allowed DOD, as requested, to transfer up to $500 million into unplanned military construction projects, rather than the $150 million allowed in the Senatebill; provided $100 million to provide training and equipment to the new Iraqi Army and the Afghan National Army, rather than the $200 million provided in the Senate bill -- theAdministration had requested $200 million for forces in Iraq, Afghanistan, and "other nearbyregional nations;" and provided $1.3 billion for "coalition support" to reimburse Pakistan, Jordan, and other cooperating nations for logistical and other support to U.S. operations, rather than the $1.4billion requested or the $1.0 billion in the Senate bill. In the Iraq/Afghanistan reconstruction part of the bill, the committee bill provided all Iraq reconstruction in the form of a grant, as requested; cut Iraq reconstruction by reducing by $300 million funds for proposed prison modernization and construction, $153 million for recommended solid waster management programs(including trash trucks), $335 million for transportation and communication projects (including zipcodes), $100 million for 7 new housing communities, $150 million for a new children's hospital inBasra, and $200 million for an American-Iraqi Enterprise Fund (see Table 5 , below, for moredetailson sector and project adjustments); provided full or near-full funding for security and law enforcement ($3.2 billion), electrical generation and distribution infrastructure ($5.56 billion), and oil infrastructure($2.1 billion), and adds $100 million for modernizing medical facilities ($493 million total) and $90million for education programs; increased funding for Afghan reconstruction from $799 million proposed to $1.2 billion, adding resources for road construction, private sector development, power generation,education, and improved governance; limited the use of non-competitive contracts for Iraq, but with a presidential waiver; continued the organizational structure for Iraq reconstruction of Ambassador Bremer reporting to the President through the Secretary of Defense; and prohibited the use of funds to pay Iraq's foreign debts. The Committee bill further added several items unrelated to Iraq and Afghan reconstruction issues concerning Pakistan, Liberia, and victims of September 11: The Administration had requested authority (but not money) to use $200 million in Economic Support Funds (ESF) pending in the regular FY2004 Foreign OperationsAppropriation ( H.R. 2800 and S. 1469 ) for Pakistan debt reduction. TheHouse Committee granted this authority, plus provides $200 million in ESF to fund debtrestructuring; Responding to international calls for additional humanitarian relief aid and finances for a U.N. peacekeeping force in Liberia, the House measure added $100 million fordisaster and famine support and $245 million for a U.S. contribution to a U.N. peacekeepingoperation. The disaster relief money can also be used in Sudan; and The House Committee included $15 million for the Department of Justice September 11 Victims Compensation Program. During the markup, the committee agreed to a manager's amendment by committee Chairman Bill Young that -- added $150 million for Hurricane Isabel storm damage at military and Coast Guard facilities to the $413 million in the chairman's mark, for a total of $544 million;and prohibited the use of any funds in the bill for defense or reconstruction activities "coordinated by any officer of the United States Government" not subject to confirmationby the Senate. The latter provision was a response to the White House decision, announced on October 6, to give White House National Security Advisor Condoleezza Rice responsibility for coordinating Iraqreconstruction activities. The issue for Congress was that officials not subject to Senate confirmationare not readily available to provide congressional testimony. (See below for a further discussion ofissues regarding management of reconstruction funds.) The committee also accepted a number of other amendments, including proposals by Representative Hoyer to require the President to submit a quarterly report on reconstruction in Afghanistan and Iraq, the security situation, troop requirements, and othermatters; by Representative Wolf requiring the General Accounting Office to reviewmost reconstruction contracts; by Representative Lowey to shift $90 million of Iraq reconstruction funds toeducation; by Representative Cunningham to ensure that impact aid to local schooldistricts is not reduced if both parents of a student are deployed abroad; by Representative Kolbe to strengthen requirements in the bill regardingcompetitive bidding on reconstruction contracts; by Representative Hinchey to prohibit funding for foreign military units thatare credibly suspected of violating human rights; by Representative Nethercutt to allocate 10% of reconstruction fundsadministered by the U.S. Agency for International Development to small and minority-ownedbusinesses; by Representative Nethercutt to require the Secretary of Defense to submit toCongress within 30 days an analysis of alternatives for replacing the existing Air Force fleet ofKC-135 tanker aircraft; and by Representative Bonnilla, regarding repatriation of illegal immigrants (twoamendments). The Nethercutt amendment regarding tanker aircraft had to do with an Air Force proposal to lease 100 Boeing 767 aircraft as tankers that is currently being held up. The Senate removed an identicalprovision from its version of the bill in floor action on October 2. Some regarded this measure as aplace holder allowing the appropriations committees to provide funds for the lease in a conferencereport on the bill. The committee rejected (by a recorded vote of 25-36) a substitute amendment by Representative Obey that would transfer $4.6 billion from Iraq reconstruction to defense to among other things, increase the size of the Army by 20,000, increase funding for force protection measures, expandhealth care for military personnel, and increase family support services; require that half the remaining $14 billion in reconstruction aid (i.e., $7 billion)be provided as loans through the World Bank; require that other donors make a matching contribution of 50%;and reduce tax cuts to offset costs. Representative Wamp brought up but then withdrew a widely discussed amendment to provide half of the reconstruction money for Iraq as loans. Representative Culberson brought up but alsowithdrew an alternative measure that would require the President to ensure that the United States isultimately reimbursed for the reconstruction funds. Other measures that the committee rejected included amendments by Representative Goode to eliminate all Iraq reconstruction funds; by Representative Jackson to add $100 million for assistance to Liberia; by Representative Hinchey to require information on non-competitive contractsfor activities in Iraq entered into after September 30, 2002; and by Representative Obey to add $14 billion to buy, rather than lease, Boeing 767tanker aircraft. The House began general debate on its bill on the floor on October 15 and then took up amendments on October 16 and 17. The Rules Committee approved an open rule, allowingunlimited amendments, but did not protect any amendments against points of order. As a result, anumber of amendments, including a substitute amendment by Representative Obey like the one heoffered in committee and a loans versus grants amendment by Representative Pence, were ruled outof order as constituting legislation on an appropriations bill. In debate on October 16, the onlyamendment on loans made in order was a proposal by Representative Obey to provide that allreconstruction grants should be converted to loans. In floor action on October 16 and 17, the House adopted amendments by Appropriations Committee Chairman C.W. "Bill" Young of Florida to exempt servicemembers with combat-related injuries from a requirement to for meals whilehospitalized; by Representative Maloney to make available $20 million for women and girls in Afghanistan; by Representative Kirk to tighten the congressional reporting requirements related to non-competitive contracts (405-20) by Representative Slaughter to require more information from the executive branch related to contracts awarded through a non-competitive process; by Representative DeFazio that prohibits the funds provided by the bill to be used for Iraq to participate in the Organization of Petroleum Exporting Countries; by Representative Millender-McDonald to transfer $50 million funds from the Operation and Maintenance Defense-Wide to the Family Advocacy Program; by Representative Ramstad to shift $98 million within the bill to provide funds for domestic travel for Army personnel receiving rest and recuperation leave; by Representative Hoeffel to add reporting requirements on international military and economic cooperation and on guard and reserve deploymentplans; by Representative Velazquez to prohibit funds from being used for any contract in contravention of Section 8 (d)(6) of the Small Business Act; and by Representative Sherman to require that normal competitive bidding procedures are followed in procurement under the funds appropriated for Iraq's oil infrastructure (bya recorded vote of 248-179). The House rejected amendments by Representative Obey that would have converted reconstruction grants to loans (200-226); by Representative Obey to shift funds from Iraq reconstruction to various military programs (209-216); by Representative Goode to delete funding for Liberia; by Representative Blumenauer to shift reconstruction funds from Iraq to Afghanistan; by Representative Waxman to reduce reconstruction aid for Iraq; by Representative Markey to limit the Defense Department's authority to transfer funds (146-279); by Representative Holt to bar funds for petroleum imports into Iraq (169-256); by Representative Tauscher to transfer $300 million from funding weapons inspections to Army force protection measures; by Representative Deutsch to prohibit any of the funds for reconstruction in Iraq from being provided until September 30, 2004; by Representative Kind to reduce funding for the Iraq Relief and Reconstruction Fund by 50% (by a recorded vote of 156-267 with one voting"present"); by Representative Stupak to increase the basic rate of pay to all military services to provide a $1,500 bonus to each person serving in operations in Iraq or Afghanistan (bya recorded vote of 213-213); by Representative Reyes to increase funding for programs and scholarships to increase language proficiency and workforce diversity in the intelligence community (by a recordedvote of 206-221); by Representative Jackson-Lee of Texas to shift $70 million to Afghan women's programs and $300 million from Iraq oil industry reconstruction to human rights,education, refugees, and democracy and governance (by a recorded vote of 156-271); and by Representative Weiner to prohibit funds in the bill to be used for assistance or reparations to Cuba, Libya, North Korea, Iran, Saudi Arabia, or Syria (by a recorded vote of193-233). House Motion to Instruct Conferees. On October 21, the House approved (by a vote of 277-139) a motion offered by Representative Obey to instructHouse conferees to accept four Senate provisions: providing medical screening for military reservists before mobilization (Section 317); extending transitional health care and benefits to military personnel for 180days from separation from the armed forces (Sec. 321); providing that $10,000,000,000 of the amounts provided for the reconstructionof Iraq be in the form of loans, subject to certain conditions (Sec. 2319); and providing of $1,300,000,000 to the Veterans Health Administration for medicalcare for veterans (Title IV). Earlier in the day, Office of Management and Budget Director Joshua Bolten sent a letter to the House and Senate Appropriations Committees warning that the President's advisors wouldrecommend a veto if the conference agreement on the bill included a requirement that Iraqreconstruction funds be provided as loans. The letter also opposed the $1.3 billion in the Senate billfor veterans health and the Senate provision that provides health insurance for some non-deployedmilitary reservists and their dependents through the DOD TRICARE program. The major issue in House-Senate conference consideration of the bill was whether to provide some of the Iraq reconstruction funds as loans. The Senate bill included an amendment to provide$10 billion of the Iraq reconstruction funds as loans. In a vote on October 29, the conferencerejected by a vote of 13-16 a proposal to provide half the $18 billion for Iraq reconstructionassistance as loans. On other key issues, the conference agreement provides $500 million for the Federal Emergency Management Agency (FEMA) for disaster relief for Hurricane Isabel and the California wildfires, which was not in eitherchamber's bill; eliminates a House provision requiring that Iraq reconstruction aid be coordinated by an official subject to Senate confirmation - the conference also rejected by a vote of14-15 an alternative proposal by Senator Byrd to require Senate confirmation of the director of theIraq Coalition Provisional Authority; cuts the Administration request for the Iraq Relief and Reconstruction account by $1.655 billion as in the House bill rather than by $1.855 million as in the Senate bill. Theconference, however, further directs that $210 million of Iraq funding be transferred for aid toJordan, Liberia, and Sudan, leaving resources for Iraq $1.865 billion less thanrequested; agrees, as in the House bill, to provide about $1.2 billion for Afghan reconstruction, $400 million more than the Administration requested and the Senateprovided; provides $245 million for assessed costs of U.N. peacekeeping in Liberia, as in the House bill, and earmarks a total of $200 million for Liberian relief aid and $10 million forSudan humanitarian assistance rather than $200 million in the Senate bill and $100 million in theHouse measure; provides $200 million in economic aid to Pakistan, as in the House bill; includes a modified version of a Senate measure to provide health insurance through the DOD TRICARE program to non-active duty reservists who do not have access toemployer-provided health insurance; the conference report presents this and other reserve health caremeasures as a one-year trial through FY2004 and requires that DOD report on its cost andimplementation; rejects a Senate provision to increase Army end-strength by 10,000 active duty personnel for assignment to peacekeeping types of duties; provides $313 million in defense operation and maintenance and in procurement funds to repair Hurricane Isabel damage at military facilities, $100 million less than inthe House bill, and provides another $130 million in military constructions funds for disaster repair,as in the House bill; provides $100 million in a general provision that was not in either chamber's bill for munitions security and destruction in Iraq; moves $858 million from the defense part of the bill to the foreign operations part to cover operating expenses of the Coalition Provisional Authority in Iraq, as in the House bill; provides $3 billion in general transfer authority to the Secretary of Defense with a requirement that Congress be notified promptly but not that Congress provide advanceapproval as in the House bill and rejects the Senate provision that would provide $5 billion in suchtransfer authority and an additional $2.5 billion subject to congressional approval;and rejects a Senate provision to provide $1.3 billion for veterans health benefits, as in the Senate bill; Senator Stevens said that the funding would be addressed in the pendingVA-HUD-independent agencies appropriations bill. The conference also adopted compromise language to impose a variety of reporting requirements; and require competition on contracts in Iraq or to report on non-competitivecontracts. The Administration proposal devotes $66 billion of the $87 billion total to military andintelligence operations in Iraq, Afghanistan and elsewhere. On September 21, the Administrationprovided Congress with backup material justifying the request. The Senate AppropriationsCommittee provided the full funding requested for defense, though it added funds for Armyoperation and maintenance and weapons procurement and made offsetting reductions in Air Force,Navy, and Defense-Wide operation and maintenance. The House Appropriations Committee cutabout $289 million from the defense total. It added funds mainly for Army weapons procurementand made offsetting cuts similar to those in the Senate bill. Table 3 provides a breakdown byappropriations account of the request and congressional committee action. Table 3. Congressional Action on FY2004 Supplemental Appropriations for the Department ofDefense (thousands of dollars) Sources: H.Rept. 108-312 ; S.Rept. 108-160 . Several aspects of the request are worth noting, including basis of the cost projections, funding flexibility, authority to train and equip foreign military forces, and military personnel benefits. According to DOD officials, the request is based, first, on the assumption that current force levels and the current pace of operations will be maintained throughoutFY2004, although it assumes some change in the mix of active and reserve forcesdeployed. DOD and OMB backup material on the request notes that the number ofArmy combat divisions in Iraq will be reduced, but this will not substantially affectthe total number of personnel deployed in Southwest Asia and nearby areas insupport of Operation Iraqi Freedom and Operation Enduring Freedom (inAfghanistan). The requested is based, second, on the use of a model for estimating costs of military operations know as the "Contingency Operations Support Tool" (COST). The COST model was developed by the Institute for Defense Analyses (IDA) in thelate 1990s under a contract from the Department of Defense Comptroller followingproblems the Defense Department had in accurately projecting costs of operations inthe mid-1990s. Using inputs of data about the duration of an operation, the numberand original location of units to be deployed, means of transportation both to deployand to sustain forces, and unique expenses, and relying on historical cost factorsbased on earlier operations, the model can provide quite detailed breakdowns ofprojected costs in advance of an operation. Although these projections are not technically considered "budget quality" data for purposes of making congressional requests, the estimates resulting from themodel appear to be the most reliable available advance projections of costs of anoperation, though actual expenses may differ as operations unfold. One question forCongress may be why the Defense Department is using COST model data now, butdid not choose to provide COST model figures to Congress last spring in advance ofthe war. An answer may be the Defense Department did not feel in a position toprovide an estimate of war costs until a final decision was made to go to war, and thesize and composition of the force remained in flux until very shortly before the warbegan. DOD's new cost estimates appear to be substantially higher, on a per troopbasis, than recent estimates by the Congressional Budget Office. An ongoing issue between the Administration and Congress -- particularly the appropriations committees -- has been how much flexibility the Defense Departmentneeds to reallocate funds after they are appropriated. In the FY2003 EmergencyWartime Supplemental, the Administration proposed that $59.9 billion of the $62.6billion it requested for the Department of Defense be provided in a flexible transferaccount called the Iraq Freedom Fund. Congress agreed to provide $15.7 billion inthe fund, some of which was subject to additional ceilings on expenditures. In thenew request, the Defense Department asked for $2.0 billion to be appropriated intothe Iraq Freedom Fund, while the rest is requested in regular appropriations accounts. The Iraq Freedom Fund amount is, in effect, a contingency fund, that DOD says itwill use either to support a multinational division or, if allied forces are not available,to deploy two Army National Guard Enhanced Separate Brigades and one MarineExpeditionary Force. (21) The Defense Department also requested authority to transfer $5 billion between appropriations accounts provided that "the Secretary shall notify the Congresspromptly of each transfer made pursuant to this authority." According to DOD,"promptly" means that the Secretary will inform Congress within five days after suchtransfers. This money, therefore, would not be subject to normal limitations on"transfers" -- or, in DOD parlance "reprogramming" of funds -- in which transfersabove certain thresholds require advance approval of congressional defensecommittees. In addition, in another proposed general provision, the DefenseDepartment has requested that $500 million of the amounts appropriated be availablefor a contingency construction account for military construction projects that are nototherwise authorized by law. (22) (See above fora discussion of Senate and HouseAppropriations Committee action on these proposals.) Though not a budget item, per se , one element of the request reintroduces an issue that has been controversial in Congress in the past. The request includes aproposal to provide the Defense Department with general authority to use up to $200million of available funds for "training and equipping" military forces in Iraq,Afghanistan and "other friendly nearby regional nations" to carry outcounter-terrorism operations and support U.S. military operations in Iraq andAfghanistan. In earlier funding bills, Congress has agreed to Administration requeststo provide money, termed "coalition support," to reimburse nations, such as Pakistanand Jordan, that have provided material support for U.S. military operations, and to"lift and sustain" foreign troops, such as the Polish forces now in Iraq, that aredirectly participating in operations. The new request includes $1.4 billion forcoalition support, and additional amounts to lift and sustain multinational forces. Congress has, however, rejected repeated Administration requests for funds for the Defense Department to train and equip foreign militaries, which would be, ineffect, a DOD-run military assistance program not approved through the usualcongressional budget procedures and not subject to human rights and otherprovisions of standing law governing U.S. foreign aid. Most recently, theAdministration requested $200 million for that purpose in the regular FY2004appropriations, but neither the House nor the Senate approved the request in anyversion of the regular FY2004 defense authorization or appropriations bills. The newrequest differs in that it is limited to support for nations in the region of Iraq andAfghanistan. The Senate Appropriations Committee agreed to provide $200 millionto train and equip the new Iraqi Army and the Afghan National Army, and the HouseAppropriations Committee provided $100 million (see above). Both committees alsorequired 15 days' advance notification to Congress before obligating funds. In the April 2003 Emergency Wartime Supplemental ( P.L. 108-11 ), Congress increased Imminent Danger Pay (from $150 to $225 per month) and the FamilySeparation Allowance (from $100 to $250 per month). These increases expired atthe end of FY2003 on September 30. The first continuing resolution for FY2004, H.J.Res. 69 , P.L. 108-84 , extends the benefits through October 31, 2003. The House and Senate have taken somewhat different approaches to extending thesebenefits permanently in their versions of the FY2004 defense authorization bill( H.R. 1588 ). In its supplemental proposal, the Defense Departmentrequested that the increased Imminent Danger Pay and Family Separation Allowancepayments continue through December 31, 2003. After that, DOD requested that itbe permitted instead to provide $225 per month in additional Hardship Duty Pay topersonnel serving "in a combat zone" in Operation Iraqi Freedom and OperationEnduring Freedom. DOD argues that this would equalize pay between troopsdeployed in combat zones; troops with dependents now receive more because of theFamily Separation Allowance. It may also mean, however, that troops not actuallydeployed "in a combat zone" would receive less, so there may be some oppositionfrom military advocacy groups and in the Congress. Both the House and the SenateAppropriations Committees, however, rejected the Administration request andinstead extended increased Imminent Danger Pay and Family Separation Allowancesthrough FY2004. Another significant issue in Senate action on the supplemental was whether to provide health insurance for non-deployed military reservists. The Senate approvedan amendment to the FY2004 defense authorization bill that would allownon-activated reservists to sign up for health insurance for themselves and theirdependents through the DOD-run TRICARE program. The Administration hasthreatened to veto the authorization if it includes this provision. In floor action onthe supplemental, the Senate approved an amendment by Senators Daschle andGraham of South Carolina to offer health insurance to reservists through TRICARE,though with somewhat different provisions from those in the Senate version of theFY2004 authorization. Specifically, the Daschle-Graham amendment is availableonly to reservists who are receiving unemployment compensation or who are noteligible for an employer-sponsored health insurance plan. The measure also requiresa co-payment of 28% of the value of the plan, on the model of the federalgovernment's FEHBP insurance plan for civilian employees. So theDaschle-Graham amendment is much more limited and more targeted than the Senateprovision in the FY2004 defense authorization bill. The Administration sought a total of $21.44 billion in its FY2004 supplementalfor reconstruction activities in Iraq and Afghanistan and for other foreign policyprograms related to the global war on terrorism. As shown in Table 4 $20.4 billionwould be allocated for Iraq. To put the amount of resources in some perspective,Congress appropriated about $9.6 billion in FY2003 for similar activities, includingIraq reconstruction and aid to the "front-line" states in the global war on terrorism,and has been considering funding requests totaling roughly $4.9 billion in thepending FY2004 Foreign Operations appropriation bill ( H.R. 2800 / S. 1426 ). Table 4. Iraq, Afghanistan, Other Foreign Policy Funding (billions of dollars) a. Excludes $210 million transferred for aid to Jordan, Liberia, and Sudan, as noted below. b. The Administration and Senate bill included CPA operating expense fundingunder title I (Defense), in the account for Operations and Maintenance, Army. c. The Administration proposed to use funds previously appropriated for Baghdadfacilities in P.L. 108-11 for urgent USAID needs in Afghanistan and requestedin this supplemental additional resources for Iraq facilities to replace thosediverted to Afghanistan. The Senate bill appropriated funds for USAID inAfghanistan separately, thereby making funds provided in P.L. 108-11 availablefor U.S. diplomatic facilities in Baghdad, without the need for newappropriations in this supplemental. The House bill and the conferenceagreement provided $35.8 million for a new U.S. mission in Iraq in the D&CSaccount below, and rescinded $35.8 million provided in P.L. 108-11 . d. The House bill and the conference agreement specified that peacekeeping fundsare available for both Iraq and Afghanistan. e. In addition to the amounts shown in this total for Afghanistan, the Administrationis reprogramming $390 million from other defense, State Department, andforeign aid accounts for Afghan reconstruction. f. The Administration had requested $40 million for USAID operating expenses inboth Iraq and Afghanistan. The Senate bill and the conference agreementprovided $40 million for USAID operating expenses in Afghanistan only. g. Instead of funding the Emergency account, the House bill provided $100 millionin disaster and famine relief aid for Liberia and Sudan, below. The Senate billprovided $200 million in the Emergency Crises Fund account, but designatedall of it for Liberia and required that $100 million be drawn by transfer from anyother account in the bill. The conference agreement provided $210 million forLiberia and Sudan, funds drawn from the Iraq Relief and Reconstructionaccount and from a new account for International Disaster and FamineAssistance, as shown below. h. Under the account for Diplomatic and Consular Services (D&CS), theAdministration proposed $11 million for additional security operations inAfghanistan and $29.5 million to cover a projected shortfall in MachineReadable Visa (MRV) fees that had been expected to fund border securityinitiatives. The Senate bill provided $35.8 million as a rescission andreappropriation for security operations in Afghanistan and Iraq, and addedfunding under the separate account of Emergencies in the Diplomatic andConsular Services to cover the MRV shortfall. The Administration requestedfunds under this latter account only for rewards related to Osama bin Laden andSaddam Hussein. The House bill provided $156.3 million in the D&CSaccount, of which $109.5 million was for MRV fees and consular services, $11million for security measures in Afghanistan, and $35.8 million for a diplomaticmission in Iraq. The conference agreement provided $115.5 million forEmergencies in the Diplomatic and Consular Services, $50 million of whichwas for rewards and $65.5 million was for costs of protecting foreign missionsand officials in New York City, and security and protection for the 203 FreeTrade in the Americas Ministerial and the 2004 Summit of the IndustrializedNations. i. The Administration requested authority to use $200 million in Economic SupportFunds pending in the regular FY2004 Foreign Operations Appropriation (H.R.2800 and S. 1469) for debt reduction for Pakistan. TheSenate bill included this authority, while the House bill included both theauthority for debt reduction and the $200 million appropriation. The conferenceagreement is the same as the House bill. Supplemental Request. The $20.3 billion Administration request for reconstruction and security in Iraq represented asignificant increase from amounts previously appropriated for reconstruction. Up tothen, the United States had committed $4.1 billion to reconstruction, including the$2.5 billion appropriated to an Iraq Relief and Reconstruction Fund established bythe April 2003 Emergency Wartime Supplemental ( P.L. 108-11 .) (23) These earlier funds had been used to support a broad range of humanitarian and reconstruction efforts. The new request was intended to fund the most pressing,immediate needs in Iraq, with the aim of having a noticeable impact on the twogreatest reconstruction concerns that have been raised since the occupation of Iraqbegan security and infrastructure. More than $5 billion would be targeted atimproving the security capabilities of the Iraqi people and government, includingtraining and equipment for border, customs, police, and fire personnel, and todevelop a new Iraqi army and a Civil Defense Corps. Enhanced efforts to reform thejudicial system would also be included. Most of the remaining $15 billion supplemental request would go toward rapid improvements in infrastructure, including electricity, oil infrastructure, water andsewerage, transportation, telecommunications, housing, roads, bridges, and hospitalsand health clinics (see Table 5 for a breakdown). According to Administrationofficials who briefed Members of Congress and staff, these investments representedthe most urgent needs over the next 12 months, but by no means addressed totalreconstruction requirements in the coming year. (24) Other concerns in such areas ofgovernment reform, agriculture, economic development, and education, were notincluded in the Administration request. A relatively small amount of funds, $300million, was requested for programs designed to encourage the growth of the privatesector and jobs training. Table 5. Iraq Supplemental: Sector Allocation (billions of dollars) Source: Office of the Coalition Provisional Authority Representative, September 8, 2003, OMB, FY2004 Supplemental Appropriation request, September 17, 2003, andHouse and Senate Appropriation Committees. a. The House bill excluded $50 million requested for Iraq traffic police and $400 million for two prisons; reduced funding for the National SecurityCommunications Network. The conference agreement also excluded $50million for Iraq traffic police, reduced by $300 million funding for two prisons,and further reduced several other requested under Justice, Public SafetyInfrastructure, and Civil Society. b. Excluded $25 million for consultants to plan for continued development andbuilding rehabilitation and reduced amounts for electric generation. c. The conference agreement reduced funds for emergency supplies of refined oilpetroleum products by $210 million. d. House and Senate bills combined the categories of Water and sewerage servicesand Water resources. The House amount excluded $153 million for solid wastemanagement, including 40 trash trucks and $100 million for environmentalrestoration (marsh) projects. e. The conference agreement excluded $153 million for solid waste management,including 40 trash trucks and $100 million for environmental restoration(marsh) projects. f. Excluded $4 million for a nationwide telephone numbering system, $9 million forpostal information architecture and zip codes, and $10 million for television andradio industry modernization. g. Excluded $100 million for seven housing communities. h. Excluded $150 million for a new children's hospital in Basra and $7 million forAmerican and Iraqi health care organization partnerships, but included anadditional $100 million for clinics and hospital modernization. i. Excluded $200 million for an American-Iraqi Enterprise Fund, but added $45million for micro-small-medium enterprises. j. Excluded $90 million for Public Information Centers in Iraq municipalities, butadded $90 million for education. Background. Among the key policy objectives laid out by the Bush Administration in conjunction with the war inIraq were the restoration of basic human services and the economic and politicalreconstruction of the country. The Coalition Provisional Authority (CPA) under theadministration of Ambassador L. Paul Bremer is responsible for the formulation andimplementation of this effort. The CPA has initiated a process intended to lead to Iraqi self-rule. It has appointed a 25-member Iraqi Governing Council and provided it with specificpowers and duties, including the choosing of a cabinet to serve as ministers under thesupervision of CPA advisors and the responsibility to set in motion formulation ofa national constitution. It has encouraged establishment of councils in villages andcities throughout the country to run local affairs and identify community needs. WithCPA funding and encouragement, institutions of civil and economic society havebeen reconstituted. Schools, including universities, hospitals and health clinics, arefunctioning. The oil-for-food program continues to provide basic foodstuffs. Newpolice and security forces are being trained. Programs to renovate and repair electricpower, water, oil production, roads and bridges, airports, and the seaport have beenlaunched. Jobs programs have been instituted to help stimulate the economy andlessen unemployment. Although much has been accomplished since the U.S. occupation began in April, the occupation authority in the view of many has failed to successfullyreestablish order and security, restore infrastructure, and introduce political andeconomic reform, including Iraqi self-governance, in a timely manner. Theseproblems are interlinked; the successful conduct of much reconstruction work iscontingent on an environment of order and stability, and the lack of visible progressin restoring basic infrastructure and institutions of security opens the door to politicaldiscontent and opposition. The $20.3 billion supplemental request apparently soughtto address those infrastructure and security needs on which other U.S. objectives inIraq hinge. Until recently, the Administration had suggested that the cost of reconstruction through the end of 2003 could largely be met by Iraqi and already previouslyappropriated U.S. resources. A national budget for Iraq covering the rest of the year,announced by the CPA on July 7, estimated expenditures of $6.1 billion and thecreation of a Central bank currency reserve of $2.1 billion, for a total budget of $8.2billion. New oil revenue, taxes, and profits from state owned enterprises would makeup $3.9 billion of these costs, according to the CPA's analysis. The remaining deficitof $4.3 billion would be covered by recently frozen and seized assets ($2.5 billion),the Development Fund for Iraq ($1.2 billion), and $3 billion in already appropriatedU.S. assistance. Iraq was projected to have $1.1 billion remaining for reconstructionby end of December 2003. (25) The Administration request suggested that a re-assessment of Iraq's immediate reconstruction needs demanded greater outlays of revenue than projected in July. Italso suggested that presumed sources of additional revenue in the coming year -- chiefly, oil export production and international donor contributions -- might not beas large as originally anticipated. In any case, the result was a supplementalreconstruction request nearly 20% larger than the size of the entire national budgetfor Iraq projected on an annualized basis in early July. (26) Issues. Total Iraq Reconstruction Needs. The supplemental request was intended to meet only the most important, immediate needsin Iraq in the 2004 fiscal year. Up to that point, the cost of Iraq reconstruction wasbased on speculation and educated guesswork. However, as part of the lead-in to aninternational donors conference held in Madrid on October 24, the World Bank andthe U.N. Development Program released a needs assessment they conducted of 14Iraqi economic and social sectors. (27) The resultingBank/UNDP estimates haveestablished targets by which the adequacy of available resources will be judged. TheBank/UNDP assessments put the cost of reconstruction for the 14 sectors at $36billion over four years, a figure that does not include $19.4 billion estimated by theCPA for security, oil, and other critical sectors not covered by the Bankassessments. (28) Total Bank/CPA projectedreconstruction costs through 2007 amountto $55 billion, $17.5 billion in 2004 alone. If Iraqi oil revenues are not sufficient tomeet the projected needs -- which appears likely in the near term by most accounts -- and other international donors do not pledge significant contributions, the UnitedStates may face increased financial demands, if it seeks to meet projected Iraqi needs. The new needs assessment points out another possible concern. The Bank/UNDP report suggests that Iraq cannot absorb more than $6 billion ininfrastructure program commitments (excluding oil) in 2004, in view of the unstablesecurity situation and the time it takes to plan and implement contracts. (29) TheAdministration request for infrastructure (excluding oil) was $12.4 billion. Inresponse to this point, OMB has reportedly confirmed that the reconstruction requestis intended to cover 18 months. (30) That theAdministration request in categories suchas electric power and water composes half or more of requirements projected by theWorld Bank assessment over a four-year period, however, suggests that the requestmay meet needs beyond even 18 months. Iraqi Oil Revenues and Financing Reconstruction. Until recently, the Administration hadexpected most costs of reconstruction to be borne by Iraq through receipts from itsoil exports. While the decrepit state of oil production infrastructure and recurrentsabotage to pipelines and facilities have forced experts to downgrade expectationsof potential exports and receipts, any sustained increase in production will assist thereconstruction effort. Current rates of production are nearing 2 million barrels a day,but Iraqis do not expect to reach the prewar level of 2.8 million barrels until spring. After subtracting 0.5 million barrels/day for domestic consumption, a level of 2.3million might generate between $18.5 billion and $23 billion annually, depending onthe price of oil. Production levels of 6 million/day, possible within a decade, wouldrequire significant investment outlays. (31) In thenear term, Administration officialssaid that their budget calculations assume an average production of 2 million barrelsper day over the next 12 months, generating about $12 billion in revenues that willroughly cover government operating expenses, but not the type of urgentreconstruction needs identified in the supplemental request. (32) Roughly $503 million has already been allocated from the 2003 Emergency Wartime Supplemental for repair of oil facilities and restoration of production anddistribution systems. The Administration request for these purposes under theFY2004 supplemental was $2.1 billion. Additional sums for Iraqi security forceswere in part intended to create an Iraqi force to defend against pipeline and other oilfacility sabotage. Loans vs. Grants for Reconstruction. Closely related to the issue of Iraqi oil revenues as a means of financingreconstruction projects was the question of whether assistance could be extended ona loan rather than grant basis. Some argued that, given the substantial amount of oilrevenues that Iraq will generate at some point in the future, Baghdad will have themeans to service debt incurred for the purpose of rebuilding its infrastructure. Loans,either extended bilaterally or through some sort of trust fund, possibly managed bythe World Bank, would be repaid at some point, thereby reducing reconstructioncosts to the United States, they said. The Administration, which proposed that the entire $20.3 billion supplemental be offered as grants, argued repeatedly during congressional hearings against addingto Iraq's already substantial debt obligations. Witnesses asserted that Iraq owesroughly $200 billion in pre-war debts, reparations, and other claims. G7 leadersagreed informally at the June 2003 summit to suspend through 2004 the requirementfor Iraq to service any existing debt, giving time to construct some sort of multilateraldebt restructuring arrangement. (33) Further, U.N.Security Council Resolution 1483states that Iraqi oil exports or proceeds could not be attached by creditors through2007 unless authorized by the Council. Beyond the matter of whether Iraq should incur more debt obligations in the near term is the question over who could legally assume responsibility for newsovereign debt. Although it is possible that the World Bank could manage an Iraqreconstruction trust fund that would receive contributions from international donors,if the Bank were to use these resources for project lending, it would almost certainlyrequire, as it has in the past, that some sort of sovereign Iraq authority assume thedebt obligation. Until such time that legal authority is transferred to Iraqi hands, theCoalition Provisional Authority is the temporary government of Iraq and would bethe one signing for the loans. Most legal scholars take the position that an occupyingpower has no authority to incur new debts on behalf of the displaced sovereign. (34) Some contend, however, that there is an exception in which a new government wouldbe responsible for the debt if it can be shown that the loans were required for thewelfare of the occupied territory and the terms were fair and reasonable. (35) Also, while loan reconstruction assistance would likely require smaller appropriations than grant aid, some congressional appropriation would be necessary. Under the 1990 Credit Reform Act, Congress must provide a subsidy appropriationin advance of the U.S. government extending direct loans or loan guarantees. Thesize of the subsidy appropriation is based on several factors, including any subsidyvalue of the loan terms and the likelihood that the loan will be repaid fully and ontime. Given the current state of the Iraqi economy and the high degree of uncertaintyover when the debt service payments could begin, the necessary subsidyappropriation likely would be quite large. As discussed in more detail above under "Congressional Action," this issue was closely examined by lawmakers. The Senate adopted (51-47) an amendment bySenators Bayh, Ben Nelson, and others on October 16 converting $10 billion ofreconstruction grants to loans, which could be later restored as grants if foreigncreditors cancel 90% of Iraq's debt. Conferees, however, rejected the Senateproposal on a 13-16 vote. Earlier, Senator Dorgan had offered amendments in committee markup and on the Senate floor (tabled in both venues) that would have created an authority to useIraqi oil to secure reconstruction financing and convert U.S. grants to loans. Asimilar amendment by Senator Landrieu was also rejected. Senator Hutchison andothers submitted an amendment that did not come up for floor debate directing $10billion of the total reconstruction supplemental to a Trust Fund, to be establishedwithin the World Bank, out of which loans and loan guarantees would be made. On the House side, Representative Wamp proposed but later withdrew an amendment during Committee markup that would have withheld one-half of Iraqfunds until after the election of a new Iraqi leader, at which time the remainingmoney would be available in the form of a loan. Representative Obey offered anamendment (defeated 25-36) that, among other things, would have transferred about$7 billion of reconstruction funds to a World Bank-administered loan facility. Afurther amendment by Representative Obey regarding a shift of grants to loans wasdefeated in the House 200-226. The Supplemental's Impact on Other Donors. Many, including Administration officials, believedthat congressional action on the supplemental could influence the contributions ofinternational donors at the late-October donors' conference. Some argued that a largepledge of U.S. aid prior to the conference might stimulate other donors to contributemore; diminution of the Administration plan, they argued, might have the oppositeeffect. Opponents of making U.S. aid for reconstruction in the form of loans alsocontended that other donors might follow the American lead and offer loans ratherthan grants, adding further to Iraq's debt problems. In addition, the supplementaltargeted sectors -- infrastructure and security -- that other donors would be lesslikely to support themselves. In similar "nation-building" exercises elsewhere,donors have tended to funnel contributions to the social sectors, such as educationand health, and grassroots democratization and economic development, all areasrelatively untouched by the supplemental. Perhaps a more important factor in other donor calculations was the extent to which they would have a say in the use of funds. Up to then, donors had beenreluctant to provide assistance because they were wary of being perceived assupporting a unilateral U.S. policy. In response to this concern, donors discussed ata September 6 meeting in Brussels, the concept of creating Iraq reconstruction trustfunds, managed by the U.N. or World Bank, which would accept and distributecontributions. Control over how the money was spent, according to Undersecretaryof State Alan Larson who represented the U.S. at the September 6 meetings, wouldbe handled by some sort of a multilateral management board that might includeofficials from international organizations, major donors, and Iraqis representinginterim ministries. (36) The Madrid donors'conference created two trust funds, onemanaged by the World Bank and the other by UNDP. Management of Iraq Reconstruction Funds by U.S. Agencies. Administrative control over Iraq reconstructionfunds became a significant issue during congressional debate on the $2.475 billionappropriation in P.L. 108-11 . At that time, most had expected that transfers forreconstruction and post-conflict aid would be made to USAID, the State Department,and other traditional foreign assistance management agencies. But with plans for theDefense Department to oversee the governing of Iraq immediately after the end ofhostilities, the White House wanted to maintain maximum flexibility over thedistribution of resources so the President could transfer some or all of the funding toDOD. The proposal stimulated immediate controversy with a number of critics,including Members of Congress, arguing that aid programs should remain under thepolicy direction of the State Department and under the authorities of a broad andlongstanding body of foreign aid laws. Although initial House and Senate decisionswould have blocked Administration efforts to place control of reconstruction fundswith the Pentagon, ultimately Congress agreed to allow the White House to allocatethe resources among five agencies, including DOD. Funds for the Iraq Relief andReconstruction Fund appropriated in P.L. 108-11 have been managed by L. PaulBremer, head of the Coalition Provisional Authority (CPA), and the U.S. civilianadministrator in Iraq, who reports to the Secretary of Defense. The Administration proposed that the entire $20.3 billion be placed in the Iraq Relief and Reconstruction Fund, as was the case with the previous supplemental, andto continue Ambassador Bremer and the CPA's role as administrators of the Fundunder DOD guidance. Since submission of the supplemental, however, the WhiteHouse announced the establishment of a new "Iraq Stabilization Group,"headed byNational Security Advisor Condoleezza Rice. The Group is intended to help speedup reconstruction efforts by identifying and resolving problems that had in somecases been the source of decision-making disputes in Washington. Some analystsbelieve that the move is also intended to allow the State Department a greater voicein reconstruction policy. At the same time, the State Department staff serving underthe CPA in Iraq is expected to grow from 55 to about 110. Nevertheless,Ambassador Bremer will continue to report to the Secretary of Defense. (37) As noted above, the Senate tabled (56-42) an amendment by Senators Leahy and Daschle ( S.Amdt. 1803 ) that would have placed the CPA under thedirect authority and foreign policy guidance of the Secretary of State. The House bill,however, added a provision barring the coordination of defense or reconstructionactivities in Iraq or Afghanistan by a U.S. government officer who is not subject toconfirmation by the Senate. The House Committee wanted to ensure that whoeveris in charge of coordination be available to testify at congressional oversighthearings. This proposal appeared to block the initiative of placing National SecurityCouncil Advisor Rice, who is not subject to confirmation and who does not testifybefore Congress, in charge of coordinating reconstruction. The White House,however, contended that the new Iraq Stabilization Group does not affect control of reconstruction efforts and that the job remains under control of the DefenseDepartment. (38) Conferees, however, decided todelete this House-added provisionfrom the enacted legislation. Reconstruction Priorities and Costs. The Administration said that the request included only the most pressing, immediateneeds for Iraq in FY2004. However, the relative importance of certain items detailedin the request -- 're-engineering of postal service business practices' andconstruction of seven residential communities, for example -- was closelyquestioned in Congress. Further, the costs associated with reconstruction requestshave been subject to skepticism, with some congressional staff reportedly suggestingthat the price tag was intentionally inflated so that the Administration would not haveto return to Congress to ask for more funds in 2004. (39) As mentioned above in the Congressional Action section, the House bill proposed a $1.655 billion cut in Iraq reconstruction funding, reducing or eliminatingresources for a wide range of activities that the House found to be un-executable, lowpriority, or likely to receive funding from other international donors. The Senateadopted an amendment by Senators Dorgan and Wyden reducing Iraq reconstructionby $1.855 billion. The Senate cuts were identical to those approved by the House,with an additional reduction of $200 million for oil infrastructure rehabilitation. Theconference agreement closely follows the reductions proposed in both House andSenate bills, including the Senate's cut of $200 million for emergency supplies ofrefined oil petroleum products. While the enacted legislation provides $18.649billion for the Iraq Relief and Reconstruction Fund - $1.655 billion less thanrequested - the bill further transfers $210 million from the Fund to assistance forJordan, Liberia, and Sudan. Consequently, the President's $20.3 billion proposal forIraq was reduced by Congress to $18.439 billion, a cut of $1.885 billion. See Table5 above for details of sector and project reductions directed by Congress. Afghanistan Supplemental. The Administration's $1.2 billion supplemental aid request was made up of $799 millionfrom new appropriations and $390 million from previously appropriated DOD, StateDepartment, and USAID funds, which together would more than double current U.S.assistance to Afghanistan for FY2003. The proposal came at a time of growingcriticism over delays in aid delivery, deteriorating security conditions, and concernthat U.S. and international attention had shifted to Iraq. (40) Key features of the $799million in new appropriations included targeting projects intended to have the mostimmediate impact on the lives of the Afghan population, such as $402 million for security, with funding included to train and support police, border patrol, the military and counter-narcotics forces, disarmamentand de-mobilization programs, and courthouse construction inKabul; $129 million to reinforce the authority of the government of Afghanistan with budget support for high priority projects, technical experts placedin Afghan ministries, and voter registration and electionsupport; $105 million for completion of the Kabul-Kandahar-Herat major highway, a program jointly financed by the United States, Japan, and SaudiArabia; and $163 million for social programs and critical infrastructure, including education, health, and local projects. An additional $390 million would be made available from reallocated, prior-year funds, but the Administration did not specify how they would be used. The WhiteHouse further asked that the $300 million limit on military drawdowns from DODstocks enacted in the Afghanistan Freedom Support Act of 2002 ( P.L. 107-327 ) beincreased to $600 million. Table 6. Afghanistan Supplemental: Sector Allocation ($ in millions) a. House bill and conference agreement included funding for Experts and Policy within the category for Elections and Improved Governance. b. Total does not include $61 million provided by the Senate for a USAID interim facility in Kabul, $44 million provided in the House bill for an annex to the U.S.embassy in Kabul, or $56.6 million provided in the conference agreement for USAIDoperating expenses in Afghanistan, a USAID interim facility in Kabul, and theUSAID Inspector General. As demonstrated in Table 6, the enacted legislation increased the overall reconstruction funding from new appropriations by $365 million with significantchanges over the Administration's request in allocations for infrastructure(particularly power generation and road construction), governance, and socialservices. Of note, the conference agreement includes an earmark of $60 million fromthe ESF for women's programs, including technical and vocational education,programs for women and girls against sexual abuse and trafficking, shelters forwomen and girls, humanitarian assistance for widows, support of women-led NGOs,and programs for and training on women's rights. The conference agreement also amends the authorization levels in the Afghanistan Freedom Support Act of 2002 ( P.L. 107-327 ) to be consistent with thelevels of funding provided in the FY04 Supplemental and H.R. 2800 . Background. Since the beginning of post-conflict aid in late 2001, U.S. assistance has focused on three broad areas:security, governance, and reconstruction. Security. Much of the U.S. program for Afghanistan is intended to establish security institutions to bolster the authorityof the central government and prevent the regrouping of the Taliban or Al Qaeda. The pillars of this effort are (1) the presence of an International Security AssistanceForce (ISAF);(2) the establishment and training of an Afghan National Army; (3) thedemobilization of private militias; and (4) the formation of "ProvincialReconstruction Teams" (PRTs). Despite their defeat, Taliban groups reportedly continue to operate in Afghanistan, mostly in the southeast, targeting U.S. and Afghan forces and creatinga perception of continuing insecurity. Factional in-fighting and increased criminalactivity have also undermined humanitarian operations. In some cases, whereinternational operations have been directly targeted, this has led to the temporarysuspension of U.N. missions or withdrawal of aid agencies from certain areas. In mid-December 2002, the Defense Department said it would work to create secure conditions for aid workers by forming eight "Provincial ReconstructionTeams" (PRTs) composed of about 60 U.S. forces plus Defense Department civilaffairs officers, representatives of U.S. aid and other agencies, and allied and someAfghan personnel. The objective of the PRTs is to provide safe havens forinternational aid workers, to help with reconstruction, and to extend the writ of theKabul government throughout Afghanistan. PRTs, each with about 60 U.S. militarypersonnel, have begun operations at Gardez, Bamiyan, Konduz, and Mazar-e-Sharif. The PRT in Mazar-e-Sharif is led by Britain and the one in Bamiyon is led by NewZealand. Reportedly, the United States might be considering increasing the PRTprogram to 16 such enclaves in which Germany and others may take a leadershiprole. Some report the Provincial Reconstruction Teams (PRTs) are helping thesecurity situation in their deployed areas, but other reports dispute their effectiveness. Governance and Institution Building. A conference in Bonn in December 2001, held as the Taliban regime was falling inthe U.S.-led war, the pro-U.S. Pashtun leader Hamid Karzai was selected chairmanof the interim administration and the loya jirga, held during June 11 - 19, 2002, selected him to continue to lead Afghanistan until national elections are heldsometime in 2004. The loya jirga adjourned without establishing a new parliament. The scope and powers of such a body might be dependent on the outcome of a "constitutional loyajirga," which is expected to fashion a permanent governing structure in a newconstitution. This assembly was to be held in October 2003, but it has now been putoff until December 2003. However, the draft constitution was made public onNovember 3, 2003. Observers say that preparations for the 2004 elections have alsofallen behind and that the elections might be delayed beyond the planned June 2004time frame, although the United Nations and the Afghan government have begun aprogram to register voters. Concerns remain about the power of regional leaders and their relative independence from central government authority, although Karzai has moved sinceMay 2003 to bolster his authority in Kabul by shuffling or firing some local leaders.In the runup to the planned 2004 Afghan national elections, the United States plansto try to bolster the efficiency and effectiveness of the Kabul government by placingabout 120 U.S. officials as advisers to various Afghan ministries. Reconstruction. The international recovery and reconstruction effort in Afghanistan is immense and complicated,involving the Afghan government, numerous U.N. agencies, bilateral donors, manyinternational organizations, and countless non-governmental organizations (NGOs).Intended outcomes of the reconstruction process identified by the internationalcommunity and the Afghan government include political stability and security, accessto basic services, an adequate standard of living for the Afghan people, economicgrowth, and, in the long term, independence from foreign aid. According to many observers, successful reconstruction will stopdisillusionment with the new system in Afghanistan and will keep Afghanistan fromagain becoming a haven for terrorists. Programs intended to yield benefits within ashort time frame (four to six months) initiated the transition from the humanitarianrelief phase to programs targeted toward reconstruction. These so-called "quickimpact" programs were followed by more long-term programs in education, health,poppy eradication, and other areas. Numerous small-scale and some largelonger-term projects, mostly for road reconstruction, are currently underway. Table 7. U.S. Assistance to Afghanistan ($s - billions) Issues. Reconstruction Priorities and Progress. According to some observers, Afghans have become frustrated with what theyperceive to be a lack of progress on reconstruction. (41) Many factors may be slowingthe reconstruction effort: lack of security, lack of human and physical capacity toimplement substantial reconstruction, funding shortages, and funding predominatelygoing towards the continuing humanitarian crisis and towards the administrativecosts of the international donor community. Analysts agree that both enhancedsecurity and progress on reconstruction are necessary in order to sustain internationaldonor involvement in Afghan reconstruction, encourage private investment inAfghanistan, and maintain Afghans' hope for improvement in their country and theirown lives. Effective reconstruction assistance, according to USAID, could reduce the war and drug economies and provide incentives for beneficial economic growth, such asgovernment capacity building, employment generation, and agriculturalrehabilitation. Other reconstruction initiatives include road construction, urbanreconstruction, infrastructure repair, energy development, and programs for women,education, health, and the media. The strength and influence of the centralgovernment is viewed as a key factor in the success of the intervention and assistanceon the part of the international community. Impact of Efforts to Accelerate Reconstruction. The international community and theAfghan government are now seeking to increase the pace of reconstruction. Ifprogress on security, road construction, and reconstruction efforts are made inadvance of the 2004 elections, it could increase the chances of the success ofmoderates in those elections. Supporters argue that additional funding could alsohave an impact on decisions by the international donor community, possibly resultingin larger contributions. It could also help efforts now being discussed to expand theInternational Security Assistance Force (ISAF), which is currently limited to Kabul. Increased funding may also have negative effects. There are concerns that more money could add to the already high levels of corruption. Some experts areconcerned about absorption capacity and whether additional funds can be allocatedquickly and effectively. If progress is not achieved, the increase may be seen aslargely symbolic and ineffective. Others have raised the possibility that the UnitedStates will be perceived as giving too much support to the Karzai government inadvance of the elections next spring. Other Donors. So far, the international community has continued to provide significant amounts of aid and resources for thereconstruction effort, although Afghanistan officials have reportedly complainedabout the slow pace at which pledged funds were being paid. Among examples ofother reconstruction efforts by other countries, Italy is providing advice on judicialreform and Germany is helping establish a national police force. The United States,Japan, and Saudi Arabia are financing the building of the Kabul-Kandahar-Herathighway. Some experts consider a long-term commitment will be necessary to ensure a stable, democratic Afghanistan emerges. The outcome of the international donorsconference in January 2002 and of other donor conferences since then indicate awillingness on the part of the international community to assist in the restoration ofAfghanistan. However, in a preliminary needs assessment presented in January 2002by UNDP, the World Bank, and the Asian Development Bank, reconstruction costswere estimated to be more than $15 billion over the next decade. (42) United Nationsand Afghan government officials have since reportedly said $15 billion will beneeded over 5 years. (43) Amounts pledged andcommitted to date fall well below theseestimates. With the estimates on the significant cost of Iraq reconstruction nowemerging, some are concerned that international donors might shift their focus to Iraqreconstruction, and lose interest or run too low on resources to continue to participatein Afghan reconstruction. The supplemental proposal also included $201 million for four other foreign policy initiatives labeled by the Administration as "Other Global War onTerrorism"programs: $50 million for terrorist rewards for information leading to the capture or killing of Saddam Hussein and Osama bin Laden, $11 million for additional diplomaticsecurity, $40 million for USAID facilities, operations, and security inIraq and Afghanistan, and $100 million for an Emergency Fund for Complex ForeignCrises Congress has considered a request to create a foreign policy contingency fund twice this year as part of the regular FY2004 Foreign Operations appropriations and theFY2003 Iraq war supplemental. For many years, Administrations have askedCongress for various types of contingency resources that can be drawn uponimmediately to address unanticipated foreign policy emergencies. Except in the caseof humanitarian situations, however, Congress has been reluctant to support suchrequests, stating that the President has other mechanisms and special authorities fortemporarily "borrowing" funds from other aid accounts over which Congress canmaintain closer scrutiny and consult in advance about the purposes of the transfers. Congress deferred the proposal in the FY2003 supplemental ( P.L. 108-11 ), choosinginstead to allocate the resources for specific needs in Iraq and for coalition partners. Thus far, House and Senate-passed FY2004 Foreign Operations appropriation bills( H.R. 2800 ), do not provide money for a Complex Foreign Crises Fund,as requested by the Administration. As enacted, the supplemental legislation includes relief aid for Liberia and Sudan in lieu of appropriating money for the more general Emergency Fund forComplex Crises. Congress provided $200 million specifically for Liberia, and $10million for Sudan. The supplemental proposal further included two provisions concerning Pakistan. The first would extend through FY2004 an existing waiver on aid restrictions toPakistan. Since September 11, 2001, Congress has authorized temporary waivers offoreign aid restrictions regarding nuclear proliferation and military coups that wouldprohibit Pakistan from receiving U.S. assistance. The current waiver expires onSeptember 30, 2003. The supplemental also requested that up to $200 million inFY2004 economic aid to Pakistan be made available to cover the costs of cancelingdebt owed by Pakistan to the United States. As enacted, the supplemental includesthe aid waiver for Pakistan, plus $200 million in economic aid for Islamabad whichmay be used for debt reduction in lieu direct grant assistance. This will presumablyremove the need for Congress to consider the debt reduction request, and a $200million aid proposal for Pakistan when it concludes deliberation on the regularFY2004 Foreign Operations spending measure. The enacted supplemental furtherprovides $100 million in additional economic aid for Jordan that had not beenrequested. This too could reduce the amount necessary for Congress to include forJordan in the regular pending Foreign Operations bill for FY2004. S. 1689 (Stevens) An original bill making emergency supplemental appropriations for Iraq andAfghanistan security and reconstruction for the fiscal year ending September 30,2004, and for other purposes. Senate Appropriations Committee consideration andmarkup held, September 30, 2003. Report filed by the Senate AppropriationsCommittee, October 2, 2003, S.Rept. 108-160 . Considered on the Senate floor,October 1, 2, 3, 14, 15, 16, and 17, 2003. Passed by the Senate with amendments(87-12), October 17, 2003. Incorporated into H.R. 3289 as anamendment and passage of S. 1689 vitiated, October 17, 2003. H.R. 3289 (Young) Making emergency supplemental appropriations for defense and for thereconstruction of Iraq and Afghanistan for the fiscal year ending September 30, 2004,and for other purposes. House Appropriations Committee markup held and orderedto be reported, October 9, 2003. Reported by the House Appropriations Committee( H.Rept. 108-312 ), October 14, 2003. Considered on the House floor, October 15,16, and 17, 2003. Passed by the House, with amendments, October 17, 2003(305-125). Considered by the Senate, Senate struck all after the enacting clause andsubstituted the language of S. 1689 , passed by the Senate by unanimousconsent, and Senate requested a conference, October 17, 2003. House agreed to amotion to instruct conferees (277-139) and appointed conferees, October 21, 2003. Conference held and conference report agreed to, October 29, 2003. Conferencereport filed ( H.Rept. 108-337 ) October 30, 2003. Conference report agreed to in theHouse (298-121) October 31, 2003. Conference report agreed to in the Senate, byvoice vote, November 3, 2003. Signed into law by the President ( P.L. 108-106 ),November 6, 2003. CRS Report RL31187(pdf) . Combating Terrorism: 2001 Congressional Debate on Emergency Supplemental Allocations , by [author name scrubbed] and [author name scrubbed]. CRS Report RS21644. Defense Funding by Mission For Iraq, Afghanistan, and Homeland Security: Issues and Implications , by [author name scrubbed]. CRS Report RL31999 . Disaster Relief and Response: FY2003 Supplemental Appropriations , by [author name scrubbed]. CRS Report RL31829 . Supplemental Appropriations FY2003: Iraq Conflict, Afghanistan, Global War on Terrorism, and Homeland Security , by AmyBelasco and [author name scrubbed]. CRS Report RL31406 . Supplemental Appropriations for FY2002: Combating Terrorism and Other Issues , by [author name scrubbed] and [author name scrubbed]. CRS Report RL31715 , Iraq War: Current Situation and Issues for Congress , by [author name scrubbed] (Coordinator). CRS products on Afghanistan http://www.congress.gov/erp/hotmap/afghanistan.html CRS products on Iraq http://www.congress.gov/erp/hotmap/iraq.html CRS products on defense policy and budgets http://www.crs.gov/products/browse/all-legislative-categories.shtml#Defense CRS products on foreign affairs http://www.crs.gov/products/browse/all-legislative-categories.shtml#Foreign_Affairs-Global President George W. Bush, "President Addresses the Nation," The Cabinet Room, September 7, 2003, available online at http://www.whitehouse.gov/news/releases/2003/09/20030907-1.html . Office of Management and Budget, "FY2004 Supplemental: Iraq and Afghanistan Ongoing Operations/Reconstruction," September 17, 2003, available online at http://www.whitehouse.gov/omb/budget/amendments/supplemental_9_17_03.pdf . Department of Defense, "FY2004 Supplemental Request for Operation Iraqi Freedom (OIF), Operation Enduring Freedom (OEF), and Operation NobleEagle (ONE)," September 21, 2003. Available electronically at http://www.dod.mil/comptroller/defbudget/FY_2004_Supplemental.pdf . Office of the Coalition Provisional Authority, "Coalition Provisional Authority Request to Rehabilitate and Reconstruct Iraq," September 23, 2003. Congressional Budget Office, "Testimony on the Ability of the U.S. Military to Sustain an Occupation in Iraq," before the House Armed Services Committee,November 5, 2003. Available electronically at ftp://ftp.cbo.gov/47xx/doc4706/11-05-IraqTestimony.pdf . Congressional Budget Office, "Letter to the Honorable John M. Spratt, Jr. Regarding the Estimated Costs for the Occupation of Iraq," October 28, 2003. Availableelectronically at ftp://ftp.cbo.gov/46xx/doc4683/10-28-Spratt.pdf . Congressional Budget Office, "An Analysis of the U.S. Military's Ability to Sustain an Occupation of Iraq," Letter to the Honorable Robert Byrd, September 3,2003. Available electronically at http://www.cbo.gov/showdoc.cfm?index=4515&sequence=0 . Congressional Budget Office, "Letter to the Honorable Kent Conrad and John M. Spratt Jr. Regarding Estimated Costs of a Potential Conflict with Iraq,"September 2002 . Available electronically at http://www.cbo.gov/showdoc.cfm?index=3822&sequence=0 . Congressional Budget Office, "Letter to the Honorable Pete V. Domenici Regarding the Cost of Activities Related to the Military Operations Taking Place in andAround Afghanistan," April 2002. Available electronically at http://www.cbo.gov/showdoc.cfm?index=3362&sequence=0 . Council on Foreign Relations, "Iraq: The Day After -- Report of an Independent Task Force on Post-Conflict Iraq," Thomas R. Pickering and James R.Schlesinger, Co-Chairs, Eric P. Schwartz, Project Director, March 12, 2003. Available electronically at http://www.cfr.org/publication.php?id=5681 . House Budget Committee Democratic Staff, "Assessing the Cost of Military Action Against Iraq: Using Desert Shield/Desert Storm as a Basis for Estimates,"September 23, 2002. Available electronically at http://www.house.gov/budget_democrats/analyses/spending/iraqi_cost_report.pdf . House Budget Committee Democratic Staff, "The Cost of War and Reconstruction in Iraq: An Update," September 23, 2003. Available electronically at http://www.house.gov/budget_democrats/analyses/iraq_cost_update.pdf . Kosiak, Steven, "Potential Cost of a War with Iraq and Its Post-War Occupation," Center for Strategic and Budgetary Assessments, February 25, 2003. Availableelectronically at http://www.csbaonline.org/4Publications/Archive/B.20030225.Potential_Costs_of/B.20030225.Potential_Costs_of.pdf . Nordhaus, William D., "The Economic Consequences of a War with Iraq," in War with Iraq: Costs, Consequences, and Alternatives , American Academy of Artsand Sciences, December 2002. Available electronically at http://www.amacad.org/publications/monographs/War_with_Iraq.pdf . Kay, David, "Statement by David Kay on the Interim Progress Report on the Activities of the Iraq Survey Group (ISG) Before the House Permanent SelectCommittee on Intelligence, the House Committee on Appropriations,Subcommittee on Defense, and the Senate Select Committee on Intelligence,"October 2, 2003. Available electronically at http://www.cia.gov/cia/public_affairs/speeches/2003/david_kay_10022003.html . U.S. Central Command, Operation Iraqi Freedom Web Site. Available electronically at http://www.centcom.mil/Operations/Iraqi_Freedom/iraqifreedom.asp . Table A1. Costs of MajorU.S. Wars (amounts in millions andbillions of dollars) Sources and Notes: American Revolution through Korean War costs from the Statistical Abstract of the United States , 1994;deflators and all other data from the Office of the UnderSecretary of Defense (Comptroller). FY2003 $ figures forAmerican Revolution through the Korean War were updatedfrom FY1967 constant dollar figures cited in the StatisticalAbstract . * World War I figures include the amount of war loans to allies, which totaled between $9.4 and $9.5 billion in current yeardollars, or 28%-29% of the total cost. ** Most Persian Gulf War costs were offset by allied contributions or were absorbed by DOD. Net costs to U.S.taxpayers totaled $4.7 billion in current year dollars, or7.7% of the total cost. Source: Department of DefenseAnnual Report to Congress , Jan. 1993. Table A2. Costs of MajorReconstruction Efforts (amounts inbillions of dollars) Sources and Notes: U.S. Agency for International Development, Department of State, and House and SenateAppropriations Committees. Deflators are from Office ofManagement and Budget, February 2003. * Although the United States continues to provide economic assistance to Bosnia and Kosovo, figures shown here reflectamounts of humanitarian and reconstruction aid transferredduring the post-conflict, "reconstruction" phase ofeconomic and social stabilization efforts.

Summary: In a nationwide address on September 7, 2003, the President announced that he would request an additional $87 billion for ongoing military operations and for reconstruction assistance in Iraq,Afghanistan, and elsewhere. On September 17, the White House submitted a formal request forFY2004 supplemental appropriations of that amount to Congress. Administration officials said theywould like to see congressional action completed some time before October 24, when aninternational donors conference was scheduled to meet in Madrid to seek pledges of economicassistance for Iraq. On October 29, House and Senate appropriators announced a conference agreement, on H.R. 3289 , a bill providing supplemental appropriations for military operations and forreconstruction assistance in Iraq and Afghanistan. The House approved the conference agreementby a vote of 298-121 on October 31, and the Senate approved the measure by voice vote onNovember 3. The President signed the bill into law, P.L. 108-106 , on November 6. The key issue in Congress was whether to provide reconstruction assistance to Iraq entirely as grants or partly as loans. The conference committee rejected a Senate proposal to provide about halfof the Iraq reconstruction assistance as loans. On other issues, conferees eliminated a Senateprovision adding 10,000 troops to the Army for peacekeeping duties; agreed to a modified versionof a Senate provision to provide health insurance through the DOD TRICARE program fornon-activated military reservists not eligible for employer-provided health insurance; cut theAdministration request for reconstruction assistance to Iraq by $1.655 billion as in the House billrather than by $1.855 million as in the Senate bill; agreed to provide $400 million more forAfghanistan than the Administration requested, as in the House bill; agreed to provided $245 millionfor assessed costs of U.N. peacekeeping in Liberia, as in the House bill; agreed to provide anadditional $100 million for Liberia and $10 million for Sudan for humanitarian assistance;eliminated a House provision to require that Iraq reconstruction be coordinated by aSenate-confirmed official; and did not include $1.3 billion for veterans health benefits that was inthe Senate bill (which may be provided instead in the pending VA-HUD-independent agenciesappropriations bill). The conference agreement also provides $500 million for the FederalEmergency Management Agency (FEMA) for disaster relief for Hurricane Isabel and the Californiawildfires. In earlier floor action, Congress rejected proposals to roll back tax cuts to pay for the bill; to shift funds from Iraq reconstruction to domestic programs; to make release of funds conditional onspecific requirements; and to transfer control of Iraq reconstruction from the Defense Departmentto the State Department.