The war in the Persian Gulf seems certain to consume more than the entire "peace dividend" that many lawmakers were hoping would help bring down the federal budget deficit.
In testimony yesterday, the head of the General Accounting Office, Charles Bowsher, said the savings hammered out in the deficit reduction agreement last October, following the decline in East-West tension, could be "totally swamped by the cost of Desert Shield and Desert Storm."
Under the deficit reduction pact, Congress and the Bush administration agreed to trim $9.8 billion from projected military spending during the 1991 fiscal year that started last Oct. 1. Administration sources have said that even without combat, the deployment of United States troops in the Persian Gulf would have cost about $30 billion. In a White House briefing that went relatively unnoticed on the first day of the war against Iraq, Defense Secretary Richard B. Cheney told congressional leaders that Desert Shield had already cost about $10 billion by Dec. 31.
With American soldiers engaged in combat, it will be politically difficult for lawmakers to oppose the supplemental appropriation that the administration is expected to make in a few weeks. In an interview yesterday morning on ABC's "Good Morning America" program, House Speaker Thomas S. Foley (D-Wash.) said that "obviously, the Congress is going to appropriate whatever money is necessary to see that our troops are fully armed and prepared to bring this war to the fastest conclusion possible."
So far, however, the Defense Department has not issued cost estimates for the fighting. Outside experts are estimating the cost of combat in a range of less than $500 million to $1 billion a day. GAO head Bowsher said yesterday that his agency's "best estimate" was "several hundred millions of dollars a day in the early part of the war."
Foley said, "We don't know how much it's going to cost." But, he added, "it's going to be a great cost, we know that; a very, very large cost."
In addition to combat costs, Congressional Budget Office Director Robert D. Reischauer noted in testimony yesterday that there could be "rather significant" postwar costs, including increased foreign aid to allies and, perhaps, even defeated parties. In addition, a large U.S. military presence could remain in the region after the shooting stops.
The 1992 administration budget is also expected to include major military aid funding increases for U.S. allies in the Middle East, such as Turkey and Israel. That brought a sharp warning yesterday from Rep. David R. Obey (D-Wis.), whose appropriations subcommittee writes the military aid bill. "I don't believe we should be reloading everybody's gun," he cautioned.
Under the terms of last year's budget agreement, the costs of the Persian Gulf War do not fall under the pact's spending limits and may add to the deficit without triggering automatic spending cuts.
Lawmakers are divided over whether taxes should be raised to pay for the war's costs in the current fiscal year, or whether to shift the costs to future years by adding to the massive federal debt. Without new taxes, "I suppose we'll put it on the cuff again," Senate Budget Committee Chairman Jim Sasser (D-Tenn.) said. "We'll borrow it temporarily."
Foley said yesterday that "it would be, I think, a mistake for us to just put this entire cost on the next generation without any sharing of the burdens here at home."
"We face a choice of whether we're going to face up to this thing ... or just slip and slide by," Sen. Paul Simon (D-Ill.) said at a Senate Budget Committee hearing yesterday. Simon said President Truman waged the Korean War without adding to the deficit or triggering inflation. Sen. Ernest F. Hollings (D-S.C.) recalled another president, Lyndon Johnson, who imposed a surtax to help finance another war, in Vietnam.
But Reischauer noted that the economic conditions at the start of the Vietnam war -- an economy operating at nearly full capacity and high inflation -- were different and that the higher tax was useful in cooling off the economy. Resichauer suggested to the panel that the costs need not be paid as they are incurred.
"Wars probably should be viewed as investments, investments in the long-range peace and stability of the world and, as such, should be paid for over an extended period of time," he said in response to a question by Simon.
It is also unclear how much of the costs will be borne by U.S. allies. As of Dec. 31, allied contributions totaled $4.6 billion in cash, $1.3 billion in in-kind contributions and numerous other promises.
Noting that many of the munitions being dropped on Iraq and Kuwait have been long paid for and may not be replaced, Reischauer said it is "an open question" how much of those costs will be translated into new military spending.
Staff writer Dan Morgan contributed to this report.