August 1, 2006
Defense Budget Tutorial: So, You Think You Know the Cost of the Wars?
In a seemingly welcome exercise of congressional oversight, Rep. Christopher Shays, R-Conn., held hearings on the cost of the wars in Iraq and Afghanistan. He’s the chairman of the subcommittee on National Security, Emerging Threats, and International Relations of the House Government Reform and Oversight Committee. He required testimony by all three congressional research agencies (the Congressional Research Service [CRS], the Congressional Budget Office [CBO], and the Government Accountability Office [GAO]) and by the departments of State and Defense.
War Cost Estimates
CRS estimated the cost of the wars per the table below.
Table 1: CRS Data on the Costs of the Wars in Iraq and Afghanistan ($billions)
|2001 + 2002||2003||2004||2005||2006||TOTAL|
|Noble Eagle ||12.0||6.5||3.7||2.1||1.9||26.2|
|Unable to Allocate||-||3.9||-||-||-||-|
In its testimony, CBO reported different numbers:
$433 billion, not $439.9 billion, for the total cost of the various wars.
Of that amount, CBO counted $290 billion for Iraq, not $318.5 billion.
CBO counted $142 billion for Afghanistan and Noble Eagle, not $114.4 billion.
CBO also calculated the cost of interest on the national debt based on war costs ($11 billion through the end of 2006).
GAO had still different numbers, including $430.1 billion for all costs for the “war on terror”.
DoD, the State Department and other Bush administration components said the real cost was $416.6 billion.
These estimates present a range of $20.3 billion. Perhaps most troubling, these differences are not over the arcane issue of how much has been “obligated” (that is, cued up inside agencies to be spent for a specific program or contractor) or “outlayed” (actually spent). Instead, these differences are over the relatively simple question of how much has been appropriated in public bills by Congress.
Worse yet, Congress doesn’t seem to know how much it appropriated either. In a letter of July 20, Shays brought the discrepancies to the attention of the chairman of the House and Senate Appropriations Committee. Shays has received no reply, and Hill staff expect he will get none.
The Mess in DoD
These differences notwithstanding, CRS, CBO, and GAO did agree on one thing: DoD’s data on the costs of the wars cannot be trusted.
CBO stated in its testimony to the National Security Subcommittee:
CBO frequently has difficulty obtaining monthly reports on war obligations [i.e. how the money is planned to be spent] and other data. Often the agency receives that information months after the data are officially approved for release.
CBO also stated:
DoD’s supplemental budget requests and the monthly obligation reports issued by the Defense Finance and Accounting Service often do not provide enough detail to determine how … funds for operations in Iraq and the war on terrorism have been obligated.
GAO’s testimony was more pointed:
GAO’s prior work found numerous problems with DoD’s processes for recording and reporting GWOT [global war on terrorism] costs, including long-standing deficiencies in DoD’s financial management systems and business processes, the use of estimates instead of actual cost data, and the lack of adequate supporting documentation.
For example, GAO found $1.8 billion in expenses that were double counted in 2004 and 2005; some costs to be “materially overstated” by as much a $2.1 billion in 2004.
As a result, neither DoD nor the Congress reliably know how much the war is costing and how appropriated funds are being used or have historical data useful in considering future funding needs.
CRS’ testimony was the most revealing of all. It asserted that reporting on the costs of the wars requires the “use of estimates to fill gaps and resolve discrepancies and uncertainties” encountered in DoD’s data.
The terms “gaps” and “discrepancies” are perhaps a bit too polite for some of the problems CRS found, including:
In fiscal years 2001 to 2002, DoD “obligated” [intended to spend] $1.2 billion more than the budget authority appropriated by Congress for the wars—a potential violation of the Anti-Deficiency Act.
The funding sources for $2.5 billion spent in 2002, “presumably for initial troop deployments” for the Iraq war, were “unclear.”
$7 billion that was appropriated in 2003 to DoD for the war has apparently not been spent, but in any case DoD’s records on what happened to the money do not exist.
Yet again, in 2004, DoD obligated $2 billion more than the appropriations available to it from Congress—another potential Anti-Deficiency Act violation.
Most of the above data pertain to “obligations,” not the money actually spent (outlays). The outlays for the war are impossible to track; DoD mixes those records with outlays for non-war costs, making it impossible to determine if the money was actually spent as DoD, or Congress, intended.
CRS also reported that it is not just DoD’s cost estimates that are problematic. DoD apparently cannot agree with itself on the question of how many military personnel are deployed for the wars in Iraq and Afghanistan.
DoD, and the press, typically report on the numbers of U.S. military personnel deployed inside Iraq and Afghanistan, not including the numbers deployed to surrounding countries to support the in-country personnel.
Different DoD reports give different figures for the total numbers in and around both countries:
DoD’s Contingency Tracking System counted 260,000 deployed in and around Iraq (as opposed to numbers varying from 140,000 to 160,000 for those inside Iraq) and 60,000 deployed in and around Afghanistan (as opposed to 18,000 to 20,000 reported in Afghanistan);
DoD’s report “Active Duty Military Personnel by Regional Area and by Country” listed 207,000 deployed altogether for Iraq and 20,000 for Afghanistan.
DFAS cost data supports 202,000 deployed for Iraq and 50,000 deployed for Afghanistan.
In short, nobody in the executive branch or Congress can reliably say what the wars in Iraq and Afghanistan have cost, nor the exact number of troops deployed for them. Various entities have different estimates that vary by tens of billions of dollars and thousands of people; they cannot even agree on the dollars publicly appropriated by Congress. Also, there is no reliable record for how the Pentagon planned to spend the money appropriated to it by Congress, and there is no record whatsoever for how it was actually spent.
Students of DoD finances over the years will understand this unhappy fact as just one more example of the Defense Department’s failure to comply, as most other federal agencies have already done, with generally accepted laws, regulations, and practices for financial management. According to the discussion in the hearing, this problem has been with us since 1947.
Under the banner of “support for the troops,” Congress has been heaving hundreds of billions of dollars at DoD, but it has not made a public record of how much it has appropriated for the wars, and it has not required DoD to keep any competent records either. These problems caused some uncomplimentary comments at the July 18 hearing, but no plan for remedial action was decided upon.
What would seem to be a laudable exercise of congressional oversight has actually become a painful example of how little oversight there actually is.
Shays deserves credit for asking for testimony and complaining to the Pentagon and the appropriations committees. However, he might as well just shout down an empty well.
If he climbed down to the bottom of that well, he’d find the financial and moral accountability Congress and the Pentagon have thrown down there.
 Includes other Global War on Terror activities.
 GAO stated that it counted “approximately” $430 billion. See “Global War on Terrorism: Observations on Funding, Costs, and Future Commitments,” Statement of David M. Walker, Comptroller General of the United States, Testimony before the Subcommittee on national Security, Emerging Threats, and International Relations, Committee on Government Reform, House of representatives, July 18, 2006, opening page.
 Those who have read the reports from CBO, CRS, and others can find that some of the differences stem from varying methodologies. For example, CBO excluded certain intelligence costs ($13 billion) that may not be directly related to the conduct of the wars, costs the Pentagon included in its requests to finance the wars but which have little to do with them ($8 billion for Army and Marine Corps reorganization), and $6 billion which CBO seems to believe CRS may have double counted. CBO also included $1 billion in VA costs and national debt costs that CRS did not include.
 “Issues in Estimating the Cost of Operations in Iraq and the war on Terrorism,” Statement of Donald B. Marron, Acting Director, Congressional Budget Office, Testimony before the Subcommittee on national Security, Emerging Threats, and International Relations, Committee on Government Reform, July 18, 2006, as delivered orally.
 “Global War on Terrorism: Observations on Funding, Costs, and Future Commitments,” Statement of David M. Walker, Comptroller General of the United States, Testimony before the Subcommittee on national Security, Emerging Threats, and International Relations, Committee on Government Reform, House of representatives, July 18, 2006, opening page.
 Statement of Amy Belasco, Specialist in National Defense, Congressional Research Service, before the Committee on Government Reform, Subcommittee on national Security, Emerging Threats and International Affairs, Hearing on Global War on terrorism: Accuracy and reliability of Cost Estimates, July 18, 2006, p. 1.
 House Government Reform Subcommittee on National Security, Emerging Threats and International Relations Holds Hearing on Accuracy of Cost Estimates for war on Terror, Congressional Transcripts, Congressional Hearings, July 18, 2006, aunpaginated hearing transcript.
Director, Straus Military Reform Project, CDI at POGO, POGO
At the time of publication Mr. Wheeler's was the director of the Straus Military Reform Project of the Center For Defense Information at POGO.
The goal of the Straus Military Reform Project is to secure far more effective military forces and much more ethical and professional military and civilian leadership at significantly lower budget levels.
We would like to thank Philip A. Straus Jr. and family for their generous support.
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