State Dept. faces skyrocketing costs as it prepares to expand role in Iraq

"We don't have a yes, and we don't have a no," Undersecretary of State for Management Patrick F. Kennedy said, adding that "a good dialogue" was underway. If the military does not provide the equipment, he said, it will have to come at an "enormously expensive" price from contractors.

The administration and Congress disagree over whether the State Department is asking for additional funds or for a reallocation of what it has already requested. To some extent, the question is irrelevant, because Lew, now Obama's nominee to head the Office of Management and Budget, warned appropriators that if there was no more money for State's operations budget, it would have to be taken out of development assistance programs in Iraq and elsewhere.

"So now you have security, but no programs," a senior House aide said, also speaking on the condition of anonymity. "That's what drives us nuts about them. They screwed this one up, and we have to fix it."

Congress hasn't bought the argument, first articulated by Secretary of State Hillary Rodham Clinton when she introduced the budget in February, that State's Iraq proposal is a bargain compared with the $16 billion overall the U.S. government will save in reduced military costs after a reduction to 50,000 U.S. troops at the end of this month.

While defense appropriators are used to such funding levels, they are astronomical to lawmakers overseeing the State Department, whose global operations budget request totals about $16 billion for 2011. An additional $36 billion has been requested for worldwide foreign assistance programs.

But even the defense committees are balking at what Defense Secretary Robert M. Gates has called an unsustainably bloated Pentagon budget and continued expenditures for Iraq. The military's request for $2 billion to equip and bolster the Iraqi armed forces next year -- on top of $18 billion spent since 2003 -- was cut in half by the Senate Armed Services Committee this summer. Defense officials have asked for the decision to be reconsidered.

"They've got a surplus of oil revenue," Sen. Carl M. Levin (D-Mich.), whose Armed Services Committee halved to $1 billion the Iraq military equipment request, said in an interview last week. "And we've got a tight budget here. Connect that with the fact that we've got a damned big budget deficit of our own. A billion dollars seems to me to be a very generous contribution."

In an interview, Odierno said there was a "misinterpretation that Iraq has this huge amount of wealth now," adding that it is unlikely the country will substantially boost its output of crude oil before 2013.

Money for the Iraqi military is important, he said, to help "mitigate the risks associated with U.S. forces leaving." The 50,000 U.S. troops who will remain in Iraq after Sept. 1 are due to leave by the end of next year.

Officials in Washington said that the Defense and State cuts were interconnected in several ways, including the expectation that the Iraqi military could assist in providing security for an increased American civilian presence as the U.S. military relinquishes that task.

But while Iraqis are providing some help, officials said they were not yet comfortable depending on them. "We want to work with both the Iraqi army and the Iraqi police in bolstering our security," a senior administration official said. "That has to be worked out in terms of the availability of trained personnel, and it will take time to achieve it.

"I'm not saying it's never going to happen. I'm just saying it's not going to happen tomorrow."

Londoño reported from Baghdad.