U.S. President George W. Bush says he is fully prepared to go to war against Iraq, if necessary. His latest budget proposal, however, does not include a request for Congress to finance any military campaign, which is widely estimated to cost about $60 billion. RFE/RL reports on this omission and on how Bush might pay for a war, if it happens.
Washington, 5 February 2003 (RFE/RL) -- Conspicuously missing from U.S. President George W. Bush's federal budget proposal for the fiscal year 2004 is any outlay for a war with Iraq. The budget plan, if approved by Congress, would increase spending for the Defense Department by more than 4 percent to nearly $380 billion in the fiscal year that begins on 1 October. But that money is meant for ordinary operating expenses, higher pay for military personnel, and new equipment, including fighter jets and a new aircraft carrier.
Mitchell Daniels, the director of the White House's Office of Management and Budget, said the president's budget proposal contains no provision for war with Iraq, because Bush has not decided whether to go to war and is still hoping for a peaceful resolution of the matter.
Some observers suggest that Bush omitted the possibility of war from the budget purely for political reasons.
Henry Aaron, an economist at the Brookings Institution, a private policy-research center in Washington, told RFE/RL that he believes Bush had two reasons not to include funding for a possible war in his budget proposal. "First, the administration does not want to suggest that it is determined to go to war. Putting the money in would imply an expectation of war that they don't want to acknowledge. The second consideration is they've got budgetary problems enough: large deficits that are going to be hard to defend. Budgeting for the cost of a war would further inflate those deficits and make other initiatives harder to persuade Congress to adopt," Aaron said.
Chris Edwards, an economist at the Cato Institute, another Washington think tank, said such a conclusion is cynical. He countered that Bush cannot include provisions for a potential war in his budget proposal, because the very nature of the war -- if it is to happen at all -- has not yet been decided upon. "Things like tax cuts, you can pretty well guess how much they're going to cost, because you define a particular structure of how the tax cut's going to look and then you simply run the computer model on it. But the war, you don't know what it's going to look like, so it's hard to put in the official numbers," Edwards said.
Bill Frenzel, a former Republican member of the House of Representatives who dealt with budgets each year from 1971 to 1991, said it is not only standard procedure for a president to omit a looming war from a budget proposal, it is the law.
According to Frenzel, a U.S. president cannot by law appropriate money for something that does not yet exist, whether it is a war or the proposed restructuring of an existing government program. In such cases, he told RFE/RL, the president must ask Congress for what is known as a "supplemental appropriation." "We [members of Congress] have to make them [supplementary appropriations] based on the laws that apply today and previous appropriations, etc. And the only way that the president could change that under the current rules is to send to the Congress a notice of declaration of war or notice that he's marching into Iraq. Only then could he present a budget that would have the Iraq numbers in it," Frenzel said.
Frenzel conceded that Bush may be relieved that he does not have to add to his budget the cost of a possible war with Iraq, widely estimated to be around $60 billion. But he said that the rules of government dictate the omission, not politics. "There're some things that you don't do because of politics. There're some things you don't do because of the rules. And the rules would govern in the case of expenditures for a possible Iraqi war," Frenzel said.
Bush's budget proposes spending $2.23 trillion in fiscal year 2004. By the end of the current fiscal year, the government will have spent $304 billion more than it will have received in revenue. Under the 2004 budget, that deficit would grow to $307 billion.
With such enormous deficits, the largest in U.S. history, where would Bush get the money he would need to pursue any war against Iraq? He would do what any private citizen would do when lacking the resources to pay for something: He would borrow.
In the president's case, he would direct the Treasury to issue notes and other bonds that would be bought by investors both in the United States and overseas. These notes would be redeemed after several years, and sometimes after decades, with interest.
Aaron, of the Brookings Institution, said that borrowing the $60 billion needed to wage war on Iraq would be a disservice to future generations of Americans who would have to pay off the interest, as well as the principal, to finance a war that had been fought years before. "The U.S. government sells most of its debt domestically. Some of it goes abroad. But in either case, it's an obligation being imposed by the current generation on taxpayers of tomorrow, because they will have to pay interest on that debt and eventually pay it off," Aaron said.
According to Aaron, incurring debt is not the only option Bush has to finance a war. Alternatives include forgoing some of the tax reductions that he has promised, or perhaps spending less on one or more federal programs. But he said that Bush is unlikely to choose these paths, because it probably would mean sacrifices for some taxpayers, and voters, of today.
Frenzel said he is not as concerned about the effects of incurring debt. He said that $60 billion may be a lot of money, but it is extremely small when compared with the United States' overall budget.
Similarly, Frenzel dismissed the size of the budget deficits projected for this year and next, noting that they, too, are a small fraction of the country's gross domestic product. He noted that this debt-to-GDP ratio is still small enough that the United States would meet the European Union's strict rules for qualifying for the single euro currency. "We would still qualify for the European currency. You know, they have a limit of no more than 3 percent of debt to GDP in the current year. We'll be well under that with the budgets that are proposed and even with a war in Iraq if it should come to that," Frenzel said.
Frenzel acknowledged that budget deficits and government debt are not desirable, but he said they are small prices to pay if a country feels it must go to war. And he added that paying back the debt should not be an excessive burden on future generations, as long as Bush does not get in the habit of borrowing.