For Immediate Release
Office of the Press Secretary
February 2, 2006

Press Briefing by OMB Deputy Director Joel Kaplan and Deputy Assistant Secretary of Defense Bryan Whitman on Funding Related to Ongoing Operations in Iraq
Via Teleconference

3:08 P.M. EST

MR. MILBURN: Good afternoon, folks. This is Scott Milburn at OMB. I have Bryan Whitman, Deputy Assistant Secretary of Defense, with us. He'll start off his remarks; then he will turn it over to Joel Kaplan, Deputy Director for Budget at OMB. And then after Joel, we'll open it up for some questions.

Go ahead, Bryan.

MR. WHITMAN: Well, thanks for inviting me on to this. I don't have a whole lot to say, other than that I think we're all aware that the President, once again, as recently as Tuesday in his State of the Union address, pledged that he will commit the resources that are necessary to fight and win the war on terrorism.

And part of that, a critical part of that is ensuring that our troops in the field have all the resources that they need. The President has committed to ensuring that our military forces have not only what they need, but they have it in the quantities that they need to be successful in prosecuting the military components of the war on terror.

What Joel is going to talk to you about is, obviously, the supplemental aspect of it. This is how we do fund our military contingency operations, our war efforts. And it is -- the estimated number is not a final number, it's a number that we know -- and Joel can say this better than me, probably -- we'll have better granularity on at the time that it gets transmitted to the Congress.

But the supplemental is, as I said, essential for our military forces to be able to continue their operations, to continue to carry out the strategy in Iraq, for example, for being able to train and equip the security forces, that will allow them to continue to take over greater and greater responsibility, and for us to, as we hand over responsibility, take more of a supporting role, a training role, and eventually be able to reduce our numbers as they take over more control.

So with that, I think -- I'm sure there may be some questions that you might want to direct my way at the end of this. But I'm going to turn it over to Joel Kaplan at OMB.

MR. KAPLAN: Thank you, Bryan. And thank you all for having me. As you all know, Director Bolten will be transmitting the fiscal year 2007 budget on behalf of the President on Monday. And similar to last year, the budget that Director Bolten releases will include an estimate of the deficit impact for the supplemental funding that we anticipate will be needed for the remainder of fiscal year 2006.

We will be still in the process of finalizing that number, but again, we do want to be able to reflect what we think the deficit impacts will be, and so we will include in the budget submission an estimated $70 billion. The actual figure, when we finalize, may be slightly higher or slightly lower than that, but we thought it was important, again this year, to include an estimate of about the magnitude of the supplemental.

There are expected to be three components of the supplemental. The first, which Bryan alluded to, as is always the case, is for military operations and intelligence -- military operations of U.S. forces. Those costs constitute the major portion of the supplemental request and cover such items as pay and benefits for reservists, war-related benefits for the active duty military, fuel, spare parts, logistics, all of the normal operations elements. At this point we expect that the FY 2006 military operation costs will be roughly similar to those in fiscal year 2005.

The second element in this supplemental will be for repairing and replacing equipment -- so, procurement, essentially. We will provide additional funding for new resources to protect our troops against roadside bombs and makeshift improvised explosive devices that have been a major source of casualties. The increase will also come -- the increase in procurement will also come from the need to replace and overhaul worn equipment, what the Department of Defense refers to as "reconstituting the force." So that will be a more significant portion of the supplemental request we anticipate this year than last.

And finally, the third component I would characterize as stabilization support and embassy operations in Iraq and Afghanistan. The supplemental will include, as it did last year, funds to operate the U.S. embassy in Baghdad, as well as programs critical to combating the insurgency and sustaining the transition to Iraqi political, economic and security self-reliance.

In addition, as Brian mentioned, and most importantly, the supplemental will include funds for additional training of the Iraqi and Afghan security forces. So that will cover -- that estimate will cover the funds needed for this fiscal year to meet the anticipated needs of the FY 2007 budget year. We will also include an emergency allowance of $50 billion. This is in anticipation of a bridge fund like the Congress provided in the fiscal year 2006 DOD appropriations bill. That's essentially a plug number to make sure, again, that we're reflecting ongoing costs. When we have a clear idea of what the needs are likely to be later this spring, we'll send up a detailed request that fully allocates that allowance.

Again, I just want to make clear that we're still in the process of working out the details with the Department of Defense, the Department of State, the Director of National Intelligence. So those are not available now, and they won't be on Monday when Director Bolten releases the budget, but obviously, we will have them sometime hopefully shortly thereafter when we transmit the supplemental request to Congress.

And I think with that, I will open it up to questions.

Q Mr. Kaplan, can you lay out roughly how much in reconstruction funds will be in the supplemental? The benchmark is the $18.4 billion passed in November of '03. Will there be additional funds?

MR. KAPLAN: Well, first of all, the $18.4 billion you're referring to that was passed in the supplemental in '03, that was largely for repairing and upgrading Iraq's infrastructure that it suffered from decades of neglect under Saddam Hussein. While there will be some funding in this supplemental, as I said, it's really focused on monies that are needed to help the military combat the insurgency, and also help sustain the transition in Iraq to Iraqi self-reliance. So what that will include is some funding for provincial reconstruction teams to help build the capacity of the provincial governments, to help them provide essential services and maintain the infrastructure, and also to help provide improved security for key infrastructure.

But, again, it's not finalized, but I don't expect you'll see the type of reconstruction that we were talking about when we proposed the original $18 billion.

Q One follow-up. Can you break down the three categories, roughly, of the $70 billion -- how much for pay and ops, and how much for procurement, and how much for funding the Iraqi training?

MR. KAPLAN: You know, Tony, I'm not in a position to do that now because, as I said, we haven't finalized the number. As with any of these supplementals, the most significant component will be the funding to support our troops in the military operations. And then, again, there's a significant component, as well, for procurement and training Iraqi and Afghan security forces. That procurement number will be higher this year than it was last year, again, because of the additional wear-and-tear that you would expect to find with equipment that's been in harsh desert conditions.

Q Do you have any estimate of whether the eventual drawdown of troops would actually -- and I don't know whether you plan on that in the next 12 months, or not, or are budgeting for it -- would actually increase rather than decrease overall costs? What will be the impact as the troop numbers actually come down?

MR. KAPLAN: Bryan, do you want to start with the answer on that, and I'll fill in if there's something I need to chime in on?

MR. WHITMAN: Sure. Well, it's a good question and it's an interesting question. Many of you know that the way in which we are adjusting our forces on the ground is based on the conditions that present themselves the us. The conditions being the pace and the capability that is developed within the Iraqi security forces; the development of the political process; the nature that the insurgency takes on. So we assess every several months -- the commanders on the ground do, when I say we -- what's the appropriate force structure for the missions that they have based on the conditions that exist in the country, and then they make recommendations to the Secretary, to the President.

And it would be foolhardy for anyone, I think, at this point to try to predict a particular force structure or level at any point into the future. Obviously as Iraqi security forces become more capable and confident, we continue to hand over responsibility to them. And we now have over -- or more than 227,000 Iraqi security forces that are trained and equipped, and we have two Iraqi security force divisions with eight brigades and 30 battalions that are in the lead.

So this continues to grow all the time. And time will tell as the conditions develop what our military commanders on the ground believe are the necessary or appropriate adjustments that we can make to our force structure.

Q Hi, you answered most of my question, but I wanted to just follow up on that procurement number. You mentioned it was going to be higher this year than it was last year. Any sort of -- I mean, any ballpark whatsoever may be helpful. And also, do you expect that to continue to increase, and perhaps -- in '08 and beyond?

MR. KAPLAN: Well, I'm going to give you an unsatisfying answer to the first part, which is I'm not in a position to get into the details, other than to tell you that just directionally, we expect it will be larger this year than last. And I think the reason for that, in part, is what I said at the outset, that you just -- the longer we're there, the more we see additional wear and tear. That's what you'd expect, particularly on some of the Army and Marine Corps equipment that dates from the late 1980s. You see it ending -- coming to the end of its life cycle, expected life cycle, sooner than it otherwise would have, as a result of being employed in combat.

The increase, what I'm told -- and Brian may be able to help out with this, with some additional expertise that I don't have -- but what I'm told by the Department of Defense is that the increase in operational tempo typically has about a one year delayed effect on equipment costs. So, as we know, fiscal year 2005 was one of a fairly sustained high operational tempo, and so in fiscal year 2006, we need to make the procurement investments to reconstitute the force as a result.

So as Brian pointed out, as more and more responsibility is shifted to Iraqi and Afghan security forces, we would expect to see that reflected in our procurement investment needs, as well, and those decisions will be determined by events on the ground.

Q Do you expect to roll that number into the budget, the regular budget, anytime soon, since it's something you can kind of predict if it's sort of a year lag?

MR. KAPLAN: Well, as I mentioned at the outset, this year what we're doing is putting in a reserve of $50 billion for fiscal year 2007, so we are beginning to incorporate expected costs for the budget year that we're looking at. I think anything beyond that would be purely speculative, and we wouldn't be able to do it in a responsible way.

Q Yes, Mr. Kaplan, just to follow up on one item. The procurement number is going to be higher than it was last year -- what was last year's number?

MR. KAPLAN: Roger, that's a good and logical question that I don't have the answer to it in front of it. If I could have Scott get back to you at the end of this call.

Q Okay. And I have a follow-up. Just to make sure we're on track here, the CBO last week put out its budget, as you know, and they said the total cost for wars in Afghanistan and Iraq totaled $323 billion since the September 11th attacks. What is your folks' current number?

MR. KAPLAN: I think that -- our numbers are very close to CBO's. I think that through 2006 to date, I think we've estimated approximately $320 billion for Iraq and Afghanistan, and that includes all of the Department of Defense's costs, as well as the State Department and other agencies.

Q Yes, just one clarification for Mr. Kaplan. Just so I'm clear, this request will be around $70 billion. That's over and above the $50 billion that was contained in the Defense bill passed in December. So I guess, is it $120 billion total you're predicting for the remainder of 2006? And then, is this emergency allowance of $50 billion for '07 separate from that? So basically I'm just trying to get all the numbers right.

MR. KAPLAN: Your math is right, with the exception that the roughly $120 billion is not for the remainder of '06, it's for the entirety of '06. So it is inclusive of the $50 billion that was already appropriated. And then the second $50 billion is separate, and that's anticipated spending for fiscal year 2007, which starts next October.

Q And the CBO number that you just talked about -- you said it gibes fairly well with your numbers for Iraq and Afghanistan since 9/11. That does not include these three numbers?

MR. KAPLAN: That's correct.

Q Okay, so this is in addition to that.

MR. KAPLAN: Right.

Q Okay, thanks.

MR. KAPLAN: You should have a job at OMB.

Q This is for either one of you. Could you just give us a best estimate of the monthly cost for military operations in both Iran -- sorry -- Iraq and Afghanistan?

MR. KAPLAN: You know, Mark, I don't have that number in front of me. Bryan, if you --

MR. WHITMAN: My understanding is that -- as we call it the burn rate, I guess -- for Operation Iraqi Freedom, which is about $4.5 billion a month, and the burn rate for Operation Enduring Freedom is less than a billion -- about $.8 billion a month.

Q Just to follow up the last question -- the $4.5 billion does not include reconstruction funds, presumably.

MR. KAPLAN: That's correct.

Q The question I had is, given the ongoing cost of the Iraq war, why did the Quadrennial Defense Review not propose cutting any major weapons system to compensate for the ongoing spending?

MR. WHITMAN: Well, that would be incorrect that the QDR doesn't recommend cuts in weapon systems. And I would encourage you to attend or briefing tomorrow on the Quadrennial Defense Review at 1:30 p.m. tomorrow afternoon, here at the Defense Department. The advisory went out this morning and we'd be happy to discuss that in some detail tomorrow.

Q Does the issue of the ongoing cost of Iraq impact the QDR?

MR. WHITMAN: No. The QDR is an unconstrained look that goes 20 -- is a broad, projected look at what this country will need out to about 20 years, although that's very difficult to do. But it is certainly informed by our operations of the last four years in Afghanistan and Iraq, if that's your question.

Q Okay.

Q Either one of you, but probably for Bryan. You say there's not going to be much reconstruction money. Is there any dollar figure for reconstruction in the $70 billion at all that you can say? And secondly, why not more reconstruction funds at this time? We've all read the recent Inspector General report that suggests a lot of projects are not getting done. Why no more money at this time?

MR. KAPLAN: This is Joel. Again, I'm going to shy away from using any numbers today. We're still working with our colleagues at the Department of State and throughout the government to finalize those numbers.

At $18.4 billion in the Iraq relief and reconstruction fund, as I think I've talked about, was intended to assist the Iraqis in repairing and upgrading their infrastructure. In addition, some of those funds were used for training and equipping Iraqi security forces. And I think, as has been frequently talked about and discussed, we have had to reprogram some of those funds to accommodate higher than expected security costs. And again, the Secretary of State will be in a better position to talk about this, but the funding in the supplemental will begin the transition from repairing that infrastructure to helping Iraq fight the insurgency and become more self-reliant. It's not focused on building new, large-scale infrastructure projects.

It's going to be much more focused on the provincial reconstruction teams that can help build the local capacity of providing services, and to help maintain some of the Iraqi infrastructure that we've invested in significantly to date. Also, to provide security to key infrastructure. This is, I think, the next phase in our involvement on reconstruction, and I think the Secretary of State, when it's time to discuss the supplemental, will be able to explain the thinking behind the transition.

Keep in mind that there's also -- there have been significant pledges by the international community for reconstruction -- I think $13 billion. And as the President has pointed out, the international community needs to come through and deliver on some of the pledges that they made.

Q You talk about a transition, but if we haven't even accomplished really the goals that we have set out -- again, if you read the Inspector General's report, it certainly suggests that -- then is there a sense that we're not following through on even the goals that we set in the first place, and what message does that send to the Iraqis, who we originally were hoping to convince we were there to save by spending a significant amount of money on reconstruction?

MR. KAPLAN: I think there will be ample opportunities for you to raise your questions when we actually transmit the supplemental, and at that time the Secretaries of State and Defense and their agencies will be able, I think, to explain quite clearly how this supplemental contributes to the strategy for victory that the President laid out in the State of the Union.

Q My question is just about the Army's modularity plan, and is that still included in the supplemental?

MR. KAPLAN: Yes, it is included in the FY 2006 supplemental. I think when General Schoomaker talked about the modularity plan, I don't know if it was this time last year, maybe a year-and-a-half ago, he made clear that the initial phases of the modularity program would be funded through supplemental, and that was appropriate because the first units to go through the modularity program were those that would be rotating back into the region.

Beginning in fiscal year 2007, however, the modularity efforts, which is a multi-year program, will be reflected in DOD's base budget.

Q So is it still about $5 billion for this?

MR. KAPLAN: It's that order of magnitude, but I don't want to get into specific numbers today.

Q Good afternoon, gentlemen. I have a question about the nature of the supplemental. Iraq is a sovereign country now, so why isn't -- isn't there money that should be coming out of the State Department foreign assistance programs? And can you put a dollar number on how much you're asking for out of State for those programs?

MR. KAPLAN: Some of the supplemental funding, which, again, you'll see when the supplemental is transmitted, will be in State Department accounts. And I think when Director Bolten releases the 2007 budget, you'll also see some elements reflected in the State Department's base budget. But other than that, I'd prefer not to talk about it until we actually release it.

Q Hi. If the war costs $120 billion in '06, doesn't that indicate that your placeholder in the '07 budget is going to be a little bit off on the low side again?

MR. KAPLAN: Look, the $50 billion is being put in there because we're trying to balance the desire for transparency and accurate estimating with the unpredictable nature of war and the events on the ground. The President has been very clear that the troops and commanders will get what they need, that decisions about the size of the force and the types of operations will be dictated by events on the ground. We're certainly not in a position to evaluate that now, and as we get closer to fiscal year 2007 when we are in a position to evaluate it, we'll know what the right number is.

Q But it kind of looks like a lowball, doesn't it? I mean, I understand you can't say what it is, but doesn't history tell us that that's way too low? And why not acknowledge that?

MR. KAPLAN: Well, I think what history tells us is that we wanted to have available bridge funding at the start of a fiscal year, and that will allow us to better estimate and more reliably estimate the needs on the ground. I think we're intending to be entirely transparent as to what the $50 billion is and is not. It's a bridge fund, and when we get closer and we see how events over the next year have transpired in a very fluid situation -- fluid politically and on a security basis -- we'll be in a much better position to identify the costs.

Q Just a follow-up, Mr. Kaplan. The monthly cost for military operations, Iraq and Afghanistan, CBO said it was $7.5 billion a month. And did I understand you folks to say DOD was $4.5 billion plus something else?

MR. KAPLAN: I have not seen the CBO report to understand exactly what goes into that $7 billion number. I don't know if they're prorating procurement or something like that.

Q What was your figure --

MR. KAPLAN: But the burn rate that Brian talked about, the $4.5 billion for operations, and I think you said $800 million in Afghanistan. Bryan, do you want to add anything?

MR. WHITMAN: No, that's exactly what I would have said. This is for recurring operating costs -- $4.5 billion for Iraq and $.8 billion for -- and that excludes procurement.

Q Okay, I just wanted to double-check that. And also, the $70 billion that will be requested, or approximately, Mr. Kaplan, did you say that amount will -- or the deficit number, whatever it is, for fiscal '06 will reflect the $70 billion?

MR. KAPLAN: Yes. And, Roger, that's the reason why we do this. We want to put in -- and Director Bolten will give a deficit estimate for fiscal year 2006, and we want it to be clear that we're including all of the known costs that we have at the time. And it may vary by several billion dollars in either direction, but we wanted to make sure we were being as accurate as possible.

Q Okay. And it occurs to me -- if I could just follow up once more -- for the fiscal '07 forecast deficit number, a reason to keep the estimate of $50 billion as a placeholder would be to help keep that deficit number down.

MR. KAPLAN: Well, I can only tell you that we're being as transparent as possible, which is to say we will again need a $50-billion bridge, so we're identifying that. I'm telling you today, and I suspect that Director Bolten will tell you on Monday, that it is a bridge, it is not meant to be an estimate of what the fiscal year 2007 requirements will be. Those requirements will be determined by events on the ground. And I assume that those who report on it will report that accurately.

Q Just a quick -- triple-check the numbers that you were asked about. You said, Mr. Kaplan, the White House estimate was $320 billion thus far for Iraq and Afghanistan, and I just wanted to make sure, that does include the $50 billion that was appropriated in December, but does not include the numbers you're announcing today, is that correct?

MR. KAPLAN: That's correct.

Q Just another sort of historical clarification. I think it was CBO and maybe the Congressional Research Service that, back in October, had estimated that FY '06 operations in Iraq would be -- and Afghanistan -- would be about $85 billion total. I'm wondering is the $120 billion figure primarily because the procurement aspect of this has perhaps gone up, the need to replace equipment -- I guess the general question is, as the last couple of months have transpired, has the estimate increased dramatically? I mean, it sounds like a $35 billion difference than what you were saying a few months ago.

MR. KAPLAN: Actually, I appreciate the question because I think it confirms some of what we've been trying to say, which is that the closer you get to the time at which you actually need to request money, the more reliable your estimate is likely to be, whether that's CRS, CBO, OMB, or anybody else who has the responsibility to try to estimate these figures. I don't know what went into the October estimates by those agencies. I don't know what their assumptions were for the operational tempo, the amount of procurement that's necessary. It is true, as we've discussed on this call, that procurement will be higher this year than last, but I don't know what their assessments or estimates at the time would have been or were for procurement.

So I can't really compare it to their estimates back then. I can only tell you what it is today. And again, it confirms for me anyway the wisdom of trying to estimate these things much closer to the time at which you're actually going to request them.

END 3:49 P.M. EST