WARTIME SUPPLEMENTAL

Hearing of the
Senate Committee on Appropriations

September 22, 2003

SEN. STEVENS: (Strikes gavel.) Mr. Ambassador, I notice you have your statement ready, and we have -- other senators are on their way. I'm going to call on you to make your statement first, and then senators will make their statements or ask questions after you're finished.

STATEMENT BY

AMBASSADOR L. PAUL BREMER III,
Administrator of the Coalition Provisional Authority

MR. BREMER: Thank you, Mr. Chairman, members of the committee, and thank you for this opportunity to discuss the president's supplemental request.

Mr. Chairman, before I begin, I would like to pay tribute to the men and women of our armed services. Leading a coalition, our armed forces delivered a military victory without precedent. In roughly three weeks, they liberated a country larger than Germany and Italy combined, and they did it with forces smaller than the Army of the Potomac. They did all this while absorbing and inflicting minimal casualties. Iraqis understood that we tried to spare the innocent. After the first days of the war, only those citizens of Baghdad living close to obvious targets feared our bombing.

Mr. Chairman, I know you and all Americans hate waking up to hear a newscast that begins: "Last night, another American soldier was killed in Iraq." Well, my day starts eight days (sic) earlier than yours, and I'm among the first to know of those deaths and --

SEN. STEVENS: Eight hours, I think, Mr. Ambassador.

MR. BREMER: Excuse me?

SEN. STEVENS: Eight hours. Eight hours earlier.

MR. BREMER: Yeah.

SEN. STEVENS: Yeah.

MR. BREMER: No one regrets those deaths more than I do. But these deaths, painful as they are, are not senseless. They are part of the price we pay for civilization, for a world that refuses to tolerate terrorism and genocide and weapons of mass destruction. Those who ambush coalition forces, like those responsible for this morning's suicide bombing in Baghdad and those who ambushed Governing Council member Akila al-Hashimi on Saturday, are trying to thwart constitutional and democratic government in Iraq. They are trying to create an environment of insecurity. Mr. Chairman, they are in a losing battle with history.

President Bush's vision, in contrast, provides for an Iraq made secure through the efforts of Iraqis. In addition to a more secure environment, the president's plan provides for an Iraqi economy based on sound economic principles, bolstered by a modern, reliable infrastructure. And finally, the president's plan provides for a democratic and sovereign Iraq at the earliest reasonable date.

If we fail to recreate Iraq with a sovereign democracy sustained by a solid economy, we will have provided the terrorists with an incredible advantage in their war against us.

Terrorists love state sponsors, countries that provide them with cash, arms, refuge; a protected place to rest and plan future operations. Saddam's Iraq was one of those countries. If terrorists cannot find a congenial state sponsor, they thrive in chaotic environments with little or no effective government. When militias, warlords and communities war with each other, terrorists are right at home. Think back on the Lebanon we knew in the 1980s.

Either outcome, or some combination of both, is possible in Iraq if we do not follow up on our military victory with the wherewithal to win the peace. The opposite is also true. Creating a sovereign, democratic, constitutional and prosperous Iraq deals a blow to terrorists. It gives the lie to those who describe us the enemies of Islam, enemies of the Arabs, or enemies of the poor. That is why the president's $87 billion request has to be seen as an important element in the global war on terrorism.

Mr. Chairman, our national experience teaches us how to consolidate a military victory. We didn't have that experience 85 years ago, when we emerged victorious from the First World War. Many had opposed that war; wished to shake the Old World dust off their boots and solve the problems here at home. We had spent and lent a lot of money. The victors celebrated their victory, mourned their dead, and demanded the money they were owed.

Mr. Chairman, we know the results of that policy. Extremism bred in a swamp of despair, bankruptcy and unpayable debts gave the world fascism in Italy and Nazism in Germany. The result was another world war.

After that conflict, we showed that we had learned that military victory must be followed by a program to secure the peace. In 1948, our "greatest generation" recognized that military victory was hollow if democracy was not reinforced against tyranny and terrorism. Democracy could not flourish unless Europe's devastated economies were rebuilt. That generation responded with the boldest, most generous, most productive act of statesmanship in the past century -- the Marshall Plan. Winston Churchill called it "the most unsordid act in history."

The Marshall Plan, enacted with overwhelming bipartisan support, set war-torn Europe on the path to freedom and prosperity which Europeans enjoy today. After a thousand years as a cockpit of war, Europe became the cradle of peace in just two generations.

The $20.3 billion in grants to Iraq the president seeks as part of this $87 billion supplemental, bespeak grandeur of vision equal to the one which created the free world at the end of the Second World War.

Iraqis, living in freedom with dignity, will set an example in this troubled region which no -- which so often spawns terrorism. A stable, peaceful, economically productive Iraq will serve America's interest by making America safer.

There are a few things I'd like to point out about this $87 billion request. No one part of this supplemental is dispensable, and no part is more important than the others. This is a carefully considered request.

This request is urgent, Mr. Chairman. The urgency of military operations is self-evident. The funds for non-military action in Iraq are equally urgent.

Most Iraqis welcomed us as liberators, and we glowed with pleasure at that welcome. Now the reality of foreign troops on the streets is starting to chafe. Some Iraqis are beginning to regard us as occupiers and not liberators. Some of this is inevitable, but faster progress on reconstruction will help.

Unless this supplemental passes quickly, Iraqis face an indefinite period with blackouts eight hours daily.

The link to the safety of our troops is indirect but very real. The people who ambush our troops are small in number and don't do so because they have undependable electrical supplies. However, the population's view of us is directly linked to their cooperation in hunting down those who attack us. Earlier progress gives us an edge against the terrorists.

We need to emulate the military practice of using overwhelming force in the beginning. Incrementalism and escalation are poor military practice, and they are a poor model for economic assistance.

This money will be spent with prudent transparency. Every contract of the $20 billion for Iraq will be competitively bid.

That the money be granted and not loaned, Mr. Chairman, is essential. Initially, offering assistance as loans seems attractive. But once again, we must examine the facts and the historical record.

Iraq today has almost $200 billion in debt and reparations hanging over it as a result of Saddam's economic incompetence and aggressive wars. Iraq is in no position to service its existing debt, let alone take on more. Mountains of unpayable debt contributed heavily to the instability that paved Hitler's path to war (sic) -- power. The giants of the post-war generation recognized this, and the Marshall Plan assistance was overwhelming in the form of grant aid.

Turning to the specifics of the supplemental request, the president's first priority is security -- security provided by Iraqis and to Iraqis. That security extends to our forces and changes Iraq from a logistics and planning base for terrorists into a bulwark against them.

The president's supplemental seeks $5.1 billion for three pillars of security. The first pillar is public safety. If Congress agrees to the president's request, we will spend just over $2 billion for police and police training, border enforcement, fire and civil defense, public safety training and a communications network to draw all of these together. Already, Mr. Chairman, 40,000 police are on duty throughout Iraq, and our plan will double this number in the next 18 months.

National defense forces are the second pillar of this security. The president seeks another $2 billion for a new three-division Iraqi army and a civil defense corps. The first battalion of the new Iraqi army will graduate on schedule October 4th. By next summer, Iraq will have 27 battalions trained.

The third pillar is a justice system to reign in the criminal gangs, revenge-seekers and others who prey on Iraqis every day and make them fear that they will never know the quiet enjoyment that so many of us take for granted. To fund this justice system, the president requests approximately $1 billion for technical assistance to investigate crimes against humanity, to provide security for witnesses, judges and prosecutors, and to construct prisons sufficient to house an additional 16,000 inmates.

This security assistance to Iraq benefits the United States in four ways: First, Iraqis will be effective. As talented and courageous as the coalition forces are, they can never replace an Iraqi policeman who knows his beat, knows his people, their customs, rhythms and language. Iraqis want Iraqis providing their security, and so do we.

Second, as these Iraqi security forces assume their duties, they replace coalition forces in the roles that generate frustration, friction and resentment, things like conducting searches, manning checkpoints, guarding installations.

Third, this frees up coalition forces for the mobile, sophisticated offensive operations against former regime loyalists and terrorists, for which they are best suited.

And finally, these new Iraqi forces reduce the overall security demands on coalition forces and speed the day when we can bring our troops home.

Now, security is the first and indispensable element of the president's plan for Iraq. It is not, however, by itself sufficient to ensure success, because a security system resting only on arms is a security system that will fail. Recreating Iraq as a nation at peace with itself and with the world, an Iraq that terrorists will flee rather than flock to, requires more than people with guns.

A good security system cannot persist on the knife edge of economic collapse. When Saddam scurried away from coalition forces, he left behind an economy ruined not by our attacks, but by decades of neglect, theft and mismanagement. Imagine the effect on the economy of operating without a budget for a quarter century. Saddam, who came to power in 1979, Mr. Chairman, never prepared a national budget. Ill-conceived and clumsily-executed policies left Iraq with an oil industry starved nearly to death by under-investment, thousands of miles of irrigation canals, so weed-clogged as to be almost useless, and an electrical system that can, at best, meet only two-thirds of demand.

Reflect, Mr. Chairman, if you will, on that last item. As millions of households, including my own, this past weeks discovered, it is almost impossible to live in the modern world without dependable electricity. Think of what we would be asking of Iraqs were we to suggest they fashion a new economy, a new democracy, while literally in the dark eight hours a day.

The Iraqis must refashion their economy. Saddam left them a Soviet-style command economy. That poor model has further hobbled -- was further hobbled by cronyism, theft and Pharaonic self-indulgence by Saddam and his intimates.

The good news is that important changes have already begun.

The Iraqi minister of finance yesterday announced a set of market- oriented policies that is among the world's boldest. These policies include a new central bank law, which grants the Iraqi Central Bank full legal independence, makes price stability the paramount policy objective, gives the Central Bank full control over monetary and exchange-rate policy, and broad authority to supervise Iraqi banks. This is rare enough anywhere in the world and unique in that region.

The Iraqi government council proposed and on Thursday, Mr. Chairman, I had the great joy to sign into law a program opening Iraq to foreign investment. Foreign firms may now own wholly open -- owned companies or buy 100 percent of Iraqi business. Under this law, foreign firms receive national treatment and have an unrestricted right to remit profits or capital.

Iraq's new tax system is admirably straightforward. The highest marginal tax rate, as announced by the minister of finance yesterday, on personal and corporate income tax is -- get this -- 15 percent, 1-5 percent.

Tariff policy is equally simple. There is a two-year reconstruction tariff of 5 percent on all but a few imports.

Foreign banks are free to enter Iraq and will receive equal treatment with Iraqi banks.

On October 15th, Iraq will get a new dinar, new currency, which will float against the world's currencies.

Iraq's pro-growth policies should bring real sustained growth and protect against something we've all seen and regretted in the past: economic assistance funds disappearing into a morass of poverty.

Mr. Chairman, the Iraqi government has put into place the legal procedures for encouraging a vibrant private sector, but those policies will come to nothing if Iraq must try to establish itself on an insufficient and unreliable electrical grid or in a security environment that puts a stick in the spokes of the wheel of commerce. Iraq, in short, cannot realize its potential to return quickly to the world stage as a responsible player without the services essential to modern society.

We have made significant progress restoring these essential services. The widely predicted humanitarian crisis did not occur. There was no major flow of refugees. All of Iraq's 240 hospitals and 90 percent of its health clinics are open today. There is adequate food, and there is no evidence of epidemic.

We have cleared thousands of miles of irrigation canals so that farmers in these areas have more water than they've had for a generation. Electrical service will reach prewar levels within a month.

But the remaining demands are vast, and that is why the president is requesting almost $15 billion for infrastructure programs in Iraq. Here are some of the main areas in which the president plans to use the supplemental to bring essential services to the Iraqi people: $5.7 billion for the electrical system; $2.1 billion for the oil infrastructure; $3.7 billion for potable water, sewer systems and related public works; $3.7 billion for water resources, transportation, telecommunications, housing and construction, health and private sector development.

Mr. Chairman, on another front, there is already good news. The democratization of Iraq, on which so much global attention is focused, is further advanced than many people realize. Encouraging a quick political transformation, we have laid out a clear seven-step process leading to sovereignty. Three of the seven necessary steps have already been completed.

First, an Iraqi Governing Council, the most broadly representative governing body in Iraq's history, took office in July. In August, the Governing Council took the second step by naming a preparatory committee to determine the mechanism for writing Iraq's new constitution. Earlier this month, the Governing Council appointed ministers to run the day-to-day affairs of Iraq. The fourth step will be writing a constitution which sets the framework for all that follows. This will occur after the Iraqi Governing Council decides how to act on the recommendations of the preparatory committee. This constitution, Mr. Chairman, will be written by Iraqis and for Iraqis. The fifth step -- the constitution will be ratified by the popular vote of the entire adult population. This will give Iraq its first popularly-approved constitution. Next, after the constitution is ratified, elections for a new government will be held. The seventh and final step comes after elections, when we transfer sovereignty from the Coalition Authority to the new government.

And Mr. Chairman, I mentioned that the Governing Council had appointed ministers, and it's my great pleasure to note for you and the members here the presence of two of the ministers of the new Iraqi government. I would like to introduce the minister of public works and municipalities, Nesreen Berwari, and the minister of electricity, which is the power industry, Mr. al-Samaraie.

They are here in Washington this week for meetings and discussions, and I consider it an honor that they would take the time to come up here and hear my opening statement. They are indicative of the quality of people in this new cabinet. Mr. Chairman, the cabinet has 25 members, 17 of whom have PhDs, which must make it one of the most -- best educated governments anywhere in the world. Extremely able group of people.

Mr. Chairman, that's our seven-step plan. Some suggest that we should move soon to give full sovereignty to an Iraqi government. I firmly believe that such haste would be a mistake. Iraq has spent a quarter-century under a dictatorship as absolute and abusive as that of Nazi Germany. As a result, political distortions and inequities permeate the fabric of political life. No appointed government, not even one as honest and dedicated as the Iraq Governing Council, can have the legitimacy necessary today to take on the difficult issue Iraqis face as they write their constitution and elect a government. The only path to full Iraqi sovereignty is through a written constitution ratified and followed by free democratic elections. Short-cutting the process, in my view, would be dangerous.

Mr. Chairman, members of the committee, as you examine the president's plan, I'm sure you will see that it is an integrated and thoughtful whole. Every part depends on every other part. As the Congress knows, sweeping political reforms cannot be separated from sweeping economic reforms. It is equally obvious that a population beleaguered by the threat of terrorism and endless insufficiencies in water, electricity and telephones finds it hard to concentrate on the virtues of a new constitution and market-oriented policies. The need to protect the coalition and populace alike against terrorists and common criminals is obvious and indispensable. This entire program requires the help of Congress. The United States must take the lead in restoring Iraq as a friend and democratic model. There is a donors conference in Madrid in late October. The United States must set the example for other countries of good will. Other nations who do not wish to see Iraq become a terror-supporting tyranny or a landscape of factions should join us. We set an example and work with other donors to avoid the near-anarchy in which terrorists would feel right at home.

When we launched military operations against Iraq, we assumed a great responsibility that extends beyond defeating Saddam's military. We cannot simply pat the Iraqis on the back, tell them they are lucky to be rid of Saddam, and ask them to go find their place in a global market to compete without the tools of competition. To do so would invite economic collapse followed by political extremism and a return to terrorism. If after coming this far, we turn our backs and let Iraq lapse into factional chaos, some new tyranny and terrorism, we will have committed a grave error. Now only will we have left the long-suffering Iraqi people to a future of danger and deprivation; we will have sown the dragon's teeth, which will sprout more terrorists and eventually cost more American lives.

You may think I exaggerate. I ask you to look at what happened in Afghanistan, another country which, after being debilitated by decades of war and mismanagement, become easy prey for the Taliban and al Qaeda. The reconstruction of Iraq may seem distant from American concerns today. Eight time zones and two continents separate the East Coast of the United States from Iraq.

The West Coast is effectively half a world away.

Two years ago, on September 11th, terrorists brought their threat home to us. From a faraway corner of the world, they showed us that we must fight terrorism globally.

Iraqis only seemed far away. Today Iraq is a focal point in our global war on terrorism. Failure there would strengthen the terrorists morally and materially. Success tells not just Iraqis, but the world that there is hope; that the future is not defined by tyranny on one side and terrorism on the other.

Mr. Chairman, members of the committee, we respectfully ask you to honor the president's supplemental request, which responds to urgent requirements. The administration and I look forward to working with you to achieve the vision of a sovereign, stable, prosperous and democratic Iraq at peace with us and with the world.

Mr. Chairman, I'd be happy to take your questions.

SEN. STEVENS: Well, thank you very much for your statement, Mr. Ambassador. And we thank you for bringing the Iraqi citizens with you. Perhaps we'll have a chance to visit with them later.

Now, this supplemental will be the subject of hearings more than any supplemental I'm aware of. And we've gone back and checked the history. In the past, we've had a supplemental request for Operation Desert Shield and Storm; we had only one hearing. That was true for Bosnia and Kosovo, too. The House and the Senate will conduct, I'm told, seven hearings regarding this supplemental, where administration officials will appear before the Congress. And, Ambassador Bremer, I'm informed that you will appear at six of those hearings. You're going to have a busy week.

MR. BREMER: Yes, sir.

SEN. STEVENS: I believe this supplemental is necessary to protect the lives of our people who are there now in Iraq. That includes our troops, as well as Americans who will be working there. We need to help rebuild their infrastructure, as you have said, and get the Iraqi people back to work. Mr. Ambassador, from my point of view, you will have my full support for this important task, and your colleagues in the Coalition Provisional Authority, known as CPA.

Liberation of the Iraqi people from the repressive rule of Saddam Hussein is no small feat, nor is the task of helping the Iraqi people craft a nation rooted in freedom, free markets, and the rule of law. With our help, America's help and leadership, the Iraqi people should become a stable nation with a promising future.

Last week, as you said, the administration sent us an $87 billion supplemental request, of which $71 billion is for Iraqi-related programs. Of that amount $20.3 billion is for activities under your jurisdiction.

That includes $5.1 billion for security-related programs, including costs necessary to stand up a new Iraqi army, 5.7 billion (dollars) for the electricity repair and reconstruction, and 2.1 billion (dollars) for repair of oil infrastructure and oil products. You expanded that in your statement.

The nexus between support for our troops and ongoing reconstruction efforts in Iraq, for me, is undeniable. The sooner a new Iraqi government is formed and effectively functions, the quicker our soldiers, sailors and all Americans can come home.

Throughout this week, staff on the Defense and Foreign Operations Subcommittees of this committee will continue to meet with relevant administration officials, including members of your CPA, to better understand the details and assumptions of your supplemental request. And I look forward to your further comments.

Through this hearing today, we are going to have a policy, if there's no objection, of recognizing each member, one from each side of the aisle, as we go down the line, for -- not to exceed eight minutes the first time around. And then we will continue along and as long as we can continue the hearing.

Senator Byrd.

SEN. ROBERT BYRD (D-WV): Now when you -- may I ask you a question without its being taken from my time?

SEN. STEVENS: Yes, sir.

SEN. BYRD: When you say eight minutes, does that include our opening statements, as well as our questions?

SEN. STEVENS: Yes, sir. Eight minutes, which each member can use as they wish as we go through the first round. And then we'll have -- we'll go through another round, as long as we can.

SEN. BYRD: Well, Mr. Chairman, it'll take me more than eight minutes for my opening -- for my statement. Could the chairman and the ranking member have some time for a statement, at least those two members, to begin with, without its being taken out of the time which we need for questions?

(Off-mike conferral.)

SEN. STEVENS: Well, Senator, I think -- they tell me I used four minutes. I'll let you have the rest of my statement -- my time.

SEN. BYRD: Well, now, Mr. Chairman, you say you'll let me have -- I'm here on behalf, as you are, of millions of Americans. This is a very serious matter that we are going to be studying. It seems to me that our time is going to be extremely limited if we pursue this, as I envision it, under the chairman's proposal.

SEN. STEVENS: Senator --

SEN. BYRD: I'm not trying to be argumentative. I have a statement which will require at least eight minutes. I'll try to move through it. But also, if I'm only to be allowed eight minutes, then I'll use the full eight minutes on my statement, without getting to the questions which I have.

SEN. STEVENS: Senator, there are 29 members of this committee. If we give each one of them eight minutes, it will be almost 3 hours -- a little over three hours before we get back to me.

SEN. BYRD: I understand. Now, how many sessions are we going to have in this committee?

SEN. STEVENS: We're going to have this hearing today and we're going to have another hearing on Wednesday, and maybe one on Thursday. We're considering having an additional meeting on the Afghanistan portion of this, but there are several portions of this supplemental. The Defense one is the largest one. It will be the subject of the Wednesday hearing. And hopefully, we can go to other aspects. I've not discussed with members of the committee what other aspects they might -- we're thinking perhaps of having one portion of our hearing cover the question that's been raised by Ambassador Bremer, and that's the question of the contracts for reconstruction, which, as he indicated, will be subject to competition. I think that's a matter that should be explored.

But we're going to have as much time as we possibly can. As I said --

SEN. BYRD: (Inaudible) -- second round today --

SEN. STEVENS: -- Senator Bremer -- Ambassador Bremer has scheduled six separate hearings, and as I understand, he is also returning to Iraq at the last part of the week, with the House Appropriations Committee. So, we've got a lot to do in a short period of time.

But Senator, I'm not trying to be arbitrary, either. I do believe I've been told that every member of the committee will be here today. And each one of them is entitled some time, though in order to be entitled to some time, we have to limit all of us, at least as we go through the rounds.

But Senator, I agree we would not take this time out of your statement. I'd be glad to recognize you, and I hope that you'll make your statement as short as you can. And I certainly will allot you the balance of my time.

SEN. BYRD: Well, Mr. Chairman, does the time used by the witnesses come out of the eight minutes when we get to our questions?

SEN. STEVENS: Yes, it does, sir.

SEN. BYRD: You see, that's not the way we ought to do things. And I'm not blaming you for that. That's the way we're doing things around here anymore. But it used to be that we opened a line of questions, and then we were permitted to pursue that line for much more time than we now are allowed to do.

And I'm not faulting you for that. We have the same situation in the Armed Services Committee. But this is --

SEN. STEVENS: See, Senator, I remember when I first came here, new senators were seen and not heard. We didn't get a chance to ask questions until the senior members had exhausted their questions. That policy changed about midway through my 35 years, and I think we're conducting this hearing in a manner that you conducted yours, sir, when you were chairman.

SEN. BYRD: Well, I don't remember having any hearings on a matter of this kind. And we had five days of hearings when I conducted this -- when I was chairman of this committee last -- I believe it was last -- at the beginning of last year. We had five days of hearings. You participated in those hearings. I'm simply saying that we're going to need more time than it appears is going to be provided.

SEN. STEVENS: The senator's correct. We did have hearings on the subject of the new Department of Homeland Security. It was a brand new issue, and I did sit through all those hearings with you. There's no question about it.

This is on the question of a supplemental appropriations bill, which the president and Ambassador Bremer said is absolutely necessary that we get this matter settled as quickly as possible, and there are other committees involved, both in the Senate and the House.

So all I can do is be as fair as I can, Senator.

SEN. BYRD: Well, Mr. Chairman, you are always fair. No question about that. But this is a different matter from any that I've dealt with in quite a while, and it takes more time -- it's going -- it really requires more time than it appears is going to be given.

You and I can talk about this to some extent after the hearing. But I hope that we'll have more days of hearings, because it's obvious that with an $87 billion request, that's a thousand dollars for each Iraqi, man, woman, boy and girl. That's a lot of money. And I hear my friends on the other side of the aisle saying, "This is your money," to the people, you see, when we have these tax cuts. "It's your money." Well, here again, it's your money. And I'm just arguing that we really need more time. And I hope you'll think about it.

So I'll begin then.

SEN. STEVENS: Yes, sir.

SEN. BYRD: Mr. Chairman, I thank Chairman Stevens for convening these hearings, and I thank Mr. Bremer for his testimony today.

Mr. Bremer, you have a tough job. You've been handed an extremely difficult job under critical and dangerous circumstances. Now, I've been following you in the press as best I could. I think that you're doing the best you can do with what you have. And you have a terrible situation on your hands. It means life and death every day for you and our soldiers.

And so, the questions I ask are not going to be -- intended to be personal or unfriendly, but the chairman talks about his 35 years here. I've been in this Congress -- this is my 51st year. And there are people -- the people who are most affected can't be here today to ask questions -- our children and our grandchildren. They can't be here to ask questions. The American people out there, the voters, cannot be here today to ask questions. That's our responsibility.

We passed a supplemental earlier this year. We didn't have extensive hearings on that supplemental. We passed a bill providing for $40 billion within three days after September 11. No questions asked.

Now, this is a lot of money, and I understand the need to expedite the action. But this does not shield us from the responsibility to ask questions. We haven't had -- this administration, I have to say, has not been -- has not wanted to ask questions -- not wanted to answer questions. This is a bill -- this is a request in which I think we have to ask the questions. And so, I hope you'll accept my questions in the spirit in which I ask them. I don't mean to be contentious or combative, but the questions need to be asked. And so, I recognize your problems as best I can, as looking through a glass darkly. And I appreciate your coming here.

The president's request for an additional $87 billion for the military and for the reconstruction of Iraq is eye-popping -- E-Y-E -- eye-popping. This request comes at a time when the American people are expressing serious reservations about the president's go-it-alone occupation of Iraq. The American people are asking questions about the reconstruction plan. They are questioning the wisdom of a policy that has our soldiers serving as sitting ducks in an Iraqi shooting gallery.

The committee has before it the president's request for $87 billion for Iraq. The request arrived late Wednesday, without detailed justification or explanation. That's not your problem -- that's not your fault. That explanation arrived over the weekend, and we're gathered here today with a committee vote on the supplemental expected as early as September 30th.

Is that what you're proposing, Mr. Chairman? A markup by September 30th?

SEN. STEVENS: I would hope to have it passed before the recess, yes, sir.

SEN. BYRD: I hope that we will not be in such a rush. This is a complicated, controversial and incredibly costly request that has enormous, long-range funding and policy implications. It's not something that this committee should rubberstamp. We ought to examine this request line by line and see if the high-minded rhetoric coming out of the White House matches its proposal.

I believe that two days or three days, or whatever the chairman has said, are not sufficient, and I hope that the committee will take more time to consider this request. We need expert witnesses and we need independent analyses to advise us on these matters.

In his $87 billion request, the president asks future generations of Americans to pay for his war in Iraq. By refusing to pay for this war today and, instead, exacerbating the largest deficit in the nation's history, President Bush is forcing those young Americans who are now in kindergarten to pick up the tab for his war in Iraq.

If the president's $87 billion request is approved, the deficit for fiscal year 2004 could reach $535 billion. That assumes spending the $164 billion Social Security surplus in the streets of Baghdad. Such a deficit totals nearly $2,400 for every person in this country; almost $10,000 for every family of four.

Just a few short years ago, we had eliminated annual deficits and were on a glide path to wiping out the debt by 2008. But that financial security has been destroyed in this administration's fiscal "shock and awe" campaign. The president's unsubstantiated justification for his war in Iraq has left the nation questioning the White House's current efforts.

The administration was wrong, it seems, on its claims of an Iraqi broad-scale advanced weapons of mass destruction capability.

It's not your fault.

The administration was wrong on its claims that American soldiers would be welcomed with open arms as liberators. And the administration remains wrong in its refusal to share authority and responsibility for the restoration of Iraq with the rest of the world.

We obviously cannot accomplish this task alone. I think that's becoming more and more clear every day. Yet that is exactly what we continue to attempt. It is no wonder that the country is losing confidence and patience in the president's Iraqi program.

Many of us on this panel have seen what a loss of public confidence and trust can do to a war effort, to a government and indeed to the fabric of a nation. I saw it in Vietnam. Have we not learned the lessons of our own past?

Despite the best hopes for an Iraqi democracy, we have begun to realize the worst fears of occupation: hit-and-run murders of American soldiers, guerrilla tactics, sabotage. We have forged a cauldron of contempt for America that may poison the efforts of peace throughout the Middle East and indeed the world.

Winning the war has proved, by comparison, a far easier task than winning the peace. We had the weapons to win the war, but we have not shown the wisdom to win the peace.

What has become tragically clear is that the United States has no strong plan for reconstruction and no clear concept for maintaining order. America is stumbling through the dark, hoping by luck to find the lighted path to peace and stability in Iraq.

The Bush administration's single-minded focus on Iraq has ignored, in large respect, the terrorist threat that produced the attack of September 11, 2001. The leader of that attack on our shores has not been found. Eyes have been trained solely on Iraq while we remain vulnerable here at home.

Many of us on this committee have tried to better protect the American people from future terrorist attack, but time after time, the administration has actively opposed efforts to boost homeland security funds. In this request, however, the Bush administration seems very willing to back Iraqi homeland security dollars. The administration fought against a $200 million boost for America's police officers, firefighters and paramedics, but Iraqi first responders would get $290 million through this supplemental.

Last Wednesday I, along with representatives David Obey and Martin Sabo, offered an amendment to the homeland security appropriations conference report that would have provided $125 million to hire 1,300 Customs inspectors on America's borders.

That amendment was rejected as too expensive. Yet on the exact same day, the president sent Congress this emergency request for $150 million for 5,350 border inspections personnel, including 2,500 customs inspectors, in Iraq.

The cost of the president's war in Iraq grows by the day. And even when the supplemental requests stop and our soldiers do finally come home, the American people will continue to pay for this war for years to come.

In essence, American faces two wars at once: the war brought against us with the attacks of September 11, 2001 -- that's one war; and the war that we brought to Iraq on March 19, 2003. The Iraqi war was the wrong war for the wrong reasons against the wrong enemy. It is a tragedy of American foreign policy that the sympathy which most of the world had for the United States after 9/11 has been squandered by the Bush administration's head-long pursuit of an unnecessary preemptive war against a sovereign country, a country which posed no imminent and direct threat to our national security. I don't blame you for that.

Mr. Bremer, you are the president's point man for Iraqi reconstruction. You have been placed in an almost untenable position by a flawed policy and a nondescript plan that some have called "compassionate colonialism."

I believe that the best approach for this administration is to garner more dollars, more men, and more expertise from the United Nations. It is painfully obvious that despite the best efforts of Mr. Bremer and those in charge of the American occupation of Iraq, we cannot continue on this path alone. We ought to seek help before we completely alienate the international community and give Iraq a future of chaos instead of stability.

Five months ago, Congress provided more than $70 billion in funds for military and reconstruction activities in Iraq and Afghanistan. Now we learn that the administration needs far more money for Iraq far sooner than it either anticipated or admitted. When it came to the president's last supplemental bill for Iraq, Congress could not get straight answers from the administration on the expected cost or the expected duration of the Iraq operation. We cannot afford to settle for evasions this time around.

Again, Mr. Chairman, I thank you for calling these hearings, and I look forward to the testimony from the witnesses.

SEN. STEVENS: Thank you very much, Senator. Senator Domenici.

SEN. PETE DOMENICI (R-NM): Thank you very much, Mr. Chairman.

First of all, the last I remember, the vote in the United States Senate for this war was 77 senators "aye" and 23 "no." I would think that we could at least say that the Congress of the United States declared this war. And it's not the president's war, it's our war.

Now, I have so many things that I disagree with the distinguished senator from West Virginia on, but I am going to -- in fact, I might say I disagree with his entire statement. And let me leave it at that. I think it's -- it has things in it that aren't true, it has accusations in it that are invalid. But I had another reason for coming today, and I will not let the distinguished Senator Byrd distract me from what I wanted to establish here today with you.

(To Mr. Bremer.) First, let me say your statement is a superb statement. As a matter of fact, the more I think about it, the more I perceive it to be a brilliant analysis of the current situation. Secondly, I believe it sets forth in great detail what you are going to use the money for. And thirdly, I am pleased that you choose to mention a plan, the Marshall Plan. And I come here today because I want to ask you -- and this is all asked in terms of trying to be positive, trying to be helpful and trying to answer what my constituents want to know about Iraq. They're not so interested in many of Senator Byrd's attacks, but they would like to know if we have a plan. And I have to answer that more often than anything else: Does the administration have a plan?

Now, Mr. Ambassador, today in your statement, you mentioned a great American achievement called the Marshall Plan. I read about it, only because of this. I am thoroughly amazed. I thought it must have been something huge and it must have lasted forever. It was $13 billion and lasted four years, and it was -- it is thought to be the reconstruction -- that's somewhere around 150 (billion dollars) today, Mr. Leader -- and it is seen as the instrument for the revitalization of 21 countries who are our friends.

Now, you talked today about specifics, but I want to ask you: Do you have a definite plan, with a timetable, with guideposts, for the rehabilitation of Iraq's economy, infrastructure and the turning over to the country, with its full political strength?

Do you have one that is -- that can be viewed by the American people, can be presented as a plan to the Congress, to the public, so that we will know what it is and how you are going to implement it?

Can I stop there and ask you to please answer that question?

MR. BREMER: Thank you, Senator. We do have a plan. The plan addresses four major areas: restoring security, restoring essential services, giving Iraq a vibrant private economy, and transforming Iraq's political structure to provide for a sovereign, democratic Iraq. Each of those four areas is then enlightened by a serious of particular steps.

And to answer your question, there are timelines and metrics on every single one of those steps. The plan, which I released -- the latest version was released here to Congress on July 23rd, the plan runs now to, I think, some 98 pages, and has some 300 or 400 individual tasks, each of which has a metric to measure over the next year to see how we're doing. It's a very comprehensive plan.

SEN. DOMENICI: Yeah. Mr. Ambassador, is that plan a plan which is going to be followed and which -- is it transparent? Can we see it? Can it be viewed and understood?

MR. BREMER: Yes. The answer is yes to all those questions, Senator. I think I have a copy of it with me here, but -- and I'd be happy to provide copies again to the committee. It is an unclassified plan. It's available to anybody on our website and can be read and studied by people and used however they wish.

I will say this, that in the kind of circumstances we're in, which is a -- obviously a rather fluid, complicated situation, we have to be flexible about the plan. We have -- my motto is: Strategic clarity and tactical flexibility. We've got to be clear where we want to get in all four of those areas, we've got to be clear about the end state we want, and we have to be flexible how we get there. But that plan drives our work every day in Baghdad.

SEN. DOMENICI: I'm not looking for a plan that cannot be changed.

MR. BREMER: Clearly.

SEN. DOMENICI: I mean, obviously --

MR. BREMER: This is the plan, Senator. It's here.

SEN. DOMENICI: That's it?

MR. BREMER: Yeah.

SEN. DOMENICI: I wonder if there's some way that you might, when you leave here, ask some of your experts to reduce that plan to some simple propositions that can be presented to a committee like ours, where you say it's four parts; here's the part on the political and here's the start, and here's how it goes. Here's the part on economic.

Could you do that, do you think?

MR. BREMER: That's an excellent idea, Senator. We'll do that.

SEN. DOMENICI: I think you should have it ready the next time you testify, and it should be put up there where people can ask you questions from it. That's too cumbersome and too difficult for us.

Now, it has been said that we intend to do this seeking help from no one. Is that true?

MR. BREMER: No, sir.

This is already a rather broad international effort. Sixty-one countries are already -- have already pledged to the reconstruction of Iraq. The troops of 30 nations are already on the ground fighting alongside our soldiers. And I have on my staff representatives from 25 other nations. It's already an international operation.

SEN. DOMENICI: Aren't we about to or have we just completed a mechanism for an international bank that will handle the international banking transactions of Iraq? And did not somebody named Peter McPherson leave Michigan State University or Michigan and come to help you with that?B. BREMER: Yes. Mr McPherson's been my top economic adviser the last four months. He's just finished his tour. He was instrumental in putting together the proposal for a trade bank to finance imports into Iraq that you just mentioned.

SEN. DOMENICI: And what would be the purpose of a trade bank?B. BREMER: The purpose of that bank is to provide finance for Iraqis who wish to import materials -- could be a General Electric or a Siemens engine of some kind -- for which they need trade credit.

SEN. DOMENICI: Now, most countries immediately after a war have trouble with banking. This country already has a banking system, does it not?B. BREMER: After a sort. It has two state-owned banks which ran rather on Soviet style and therefore were not really banks as much as mechanisms to push money to favored people in the economy. We do have them reopened now. Most of their branches are open, so we do begin to get some activity. But as I said in my statement, a more important element is that the minister of finance announced yesterday that we're going to allow international banks to come and compete. And that will give us a real modern banking system.

SEN. DOMENICI: But are you not going to have a central banking system with --B. BREMER: Yes, sir.

SEN. DOMENICI: -- central monetary system?B. BREMER: Yes, sir. We established the central bank as the first independent central bank in Iraq's history in July.

SEN. DOMENICI: And that exists already?B. BREMER: That exists, yes, sir. That's up and running.

SEN. DOMENICI: What is it modeled after?B. BREMER: It's really modeled more or less after the Federal Reserve here.

SEN. DOMENICI: Right. And -- my time up? Sorry, Mr. Chairman. Excuse me. My time is up.

SEN. STEVENS: Yes, sir. Thank you very much, Senator.

SEN. DOMENICI: Thank you.

SEN. STEVENS: Senator Domenici (sic). Pardon me, Senator Inouye. You're Senator Domenici. Senator Inouye.

SEN. DANIEL INOUYE (D-HI): Thank you very much. I thank you very much, Mr. Ambassador, for your statement. In listening to your statement, sir, you mentioned the words "coalition forces" seven times. How many troops are in the coalition forces?B. BREMER: I think as of today, it's about 16,000.

SEN. INOUYE: Of that number, the United States is how many?B. BREMER: Oh, I'm sorry. I thought you were talking about the non-American. The total number is about 160,000, of which all but 16,000 are American. I may be off by a couple of thousand, because the numbers change from day to day, and I've been away from Baghdad for two days.

SEN. INOUYE: And there are 31 non-American countries there?B. BREMER: That's right.

SEN. INOUYE: That includes the British?B. BREMER: That's right.

SEN. INOUYE: With how many?B. BREMER: The British have about 8,000, I think, Senator.

SEN. INOUYE: And the next largest group?B. BREMER: Next largest group would probably be the Poles, who are heading a multinational division based in -- based south of Baghdad. They have, I think, a reinforced brigade, probably 3- to 4,000.

SEN. INOUYE: What about the others, the small ones? There must be small ones.

MR. BREMER: Well, the numbers depend. There is a Spanish-led brigade as part of the Polish division, which has battalion-level troops from countries like El Salvador, Honduras and Nicaragua. But there -- I mean, I could submit for the record or I could have the Pentagon submit for the record the full list, Senator. I just don't have it at (sic) the top of my head.

SEN. INOUYE: I would like to see that, because I've never seen this.

MR. BREMER: Okay.

SEN. INOUYE: When one speaks of the coalition forces, you get an impression of huge armies there. But I would gather from this that there are some countries that have provided what, a hundred troops?

MR. BREMER: Well, there will be some with company level. That's right.

SEN. INOUYE: Now you spoke of 60-plus countries that have provided aid for reconstruction.

MR. BREMER: Yes, sir.

SEN. INOUYE: What is the total amount that you are anticipating from all sources?

MR. BREMER: It's a bit hard to tell right now. Those 61 countries, according to our information, have pledged just under $1.5 billion. As I mentioned in my statement, we are working with the World Bank and the U.N. for a donors' conference in Madrid at the end of next month. And I think that will be the point at which we hopefully will see some substantial contributions by other countries and by international financial institutions.

SEN. INOUYE: We will be providing in this bill roughly 20 billion (dollars) for reconstruction?

MR. BREMER: Yes, sir.

SEN. INOUYE: In this $87 billion, do we anticipate assistance from other countries --

MR. BREMER: Yes. The --

SEN. INOUYE: -- or is this all American?

MR. BREMER: Well, the 87 billion (dollars), of course, is all American. The World Bank has just about completed an assessment of the needs of Iraqi economy. They judge that the Iraqi economy needs something between $60 (billion) and $70 billion in the next four to five years. Our 20 billion is part of that needed 60 to 70 billion (dollars).

SEN. INOUYE: So the heavy load at this moment in personnel and money is borne by the United States?

MR. BREMER: That's correct.

SEN. INOUYE: Now I gather from reading the press that much work has been done. As you've pointed out, schools are open, hospitals are open. The water is running.

We have electricity for 16 hours a day, et cetera, and oil seems to be pumping. Who has done that work?

MR. BREMER: Well, that work has been done by Iraqis, often financed -- almost always financed by the Coalition Provisional Authority, using in some cases appropriated funds that the Congress appropriated earlier this year. And in other cases -- in fact, now the majority of the funds come from Iraqi sources, Iraqi oil revenues, frozen assets and so forth.

SEN. INOUYE: Do we have -- this is a question that is asked of me quite often -- do we have major American corporations involved in the reconstruction?

MR. BREMER: Yes, we've had a number of contracts. I think the total now is 92 contracts have been let. And under U.S. law the contract, the prime contractor in those cases must be an American corporation.

SEN. INOUYE: How much are the contracts worth?

MR. BREMER: I would have to -- I would have to get back to you, but they are certainly worth 2.4 billion, because that's the amount that was appropriated. And then there will be other contracts that we have let using Iraqi funds that will have gone to American companies also. But I would have to get back to you with a precise number, senator. It's certainly at least 2.4 billion.

SEN. INOUYE: How are the contractors selected?

MR. BREMER: Contractors are selected on an open and fair bidding process, consistent with U.S. law.

SEN. INOUYE: Were we prepared for the terrorism and guerrilla activities that are now occurring? Did we anticipate that when the president announced the fight was over?

MR. BREMER: I think we anticipated that there would be resistance by remnants of the former regime. The degree to which we are now threatened by terrorists I think has been an unwelcomed surprise to some of us. You will recall that at the beginning of the war we attacked an Ansar al Islam base in the north of Iraq. We killed quite a few of the terrorists, but a number of them escaped into Iran. Those terrorists have since infiltrated back into Iraq, and now there are scores of them in Iraq, many of them in Baghdad, who pose a threat that I think is important to both the coalition and to the Iraqi people, as we have seen in the terrorist attacks, including the one today.

SEN. INOUYE: Would this be unfair to say, that we should have learned something in Afghanistan that there the war never ends?

MR. BREMER: Well, I'm not enough familiar with the precise circumstances in Afghanistan to make a comparison, senator, but I think it is clear that we have got to now continue the process we have started of imposing a sense of security in Iraq, and that the key to that, as I've suggested, is to get Iraqis more involved in it. And I think we will find more success as we get Iraqis more involved in it.

SEN. INOUYE: Some of my colleagues have been discussing the possibility of dividing this $87 billion in two parts, military and reconstruction. What would be the effect or the impact if this Congress passed the military portion, the 50-plus billion, and left the remaining 20-plus (billion dollars) for debate, awaiting the president's presentation of his case before the United Nations?

MR. BREMER: Well, senator, as I suggested in my opening remarks, I think this $87 billion is an integral part. We cannot secure security in Iraq in the long run. We cannot find a path to withdraw our troops there unless we can provide Iraq and Iraqis with the essential economic infrastructure which will give them a sense of security and let them move forward. And, as was noted, five billion of the 20 billion dollars is directly related to security, to the new Iraqi army, to the police, to the justice system. Those are inseparable, it seems to me, from the security of our forces and providing security there. So I think it would be -- of course the Senate should have whatever debate it needs to have on the supplemental, but I think it would be a mistake to separate parts of these out. This is extremely urgent. We need to get this $20 billion going quickly.

SEN. INOUYE: I notice my time is up. I thank you, Mr. Ambassador.

SEN. STEVENS: Thank you very much, senator. Senator Bennett?

SEN. BENNETT: Thank you, Mr. Chairman. Ambassador Bremer, thank you for your appearance here and for the clarity of your statement. Reference has been made to the Marshall Plan. I think that's an appropriate reference, and I would make this comment in response to earlier comments that were made in the committee. At the head of the Second World War, our national debt stood 150 percent of GDP. In other words, the national debt was half again larger than the total amount of goods and services produced in the United States. Today the national debt owed to the public is 38 percent of GDP. We are not endangering our children and our grandchildren financially with an $87 billion supplemental. I know $87 billion sounds huge, compared to 15 billion or 13 billion for the Marshall Plan, but I also remember when you could buy a decent lunch for 35 cents, and you can't do that today.

So in constant dollars, measured as a percentage of GDP, the point I would make is that this is not a terrifying amount of money that you have asked for.

Second, I would point out that the Marshall Plan began in 1948. The war ended in 1945. We cannot afford to wait three years to deal with the economic and infrastructure reconstruction of Iraq, as was done in Europe. So I applaud you on the speed with which you have moved to get this job done much more rapidly than was done in a previous circumstance.

Senator Burns had to leave. He handed me a note as he left and asked me to raise this issue on his behalf, which I am happy to do. Senator Burns, as you know, is very much concerned with telecommunications issues in the Senate Commerce Committee, and he believes strongly that the ability to communicate will be a cornerstone of the reconstruction. He has been trying to find a name of someone on your staff with whom he can communicate on this issue. And on his behalf I would ask you to provide that name to Senator Burns. He points out there are $322 million for telecom and postal corporation internal communication. He would like more information about how that 322 million would be used. And, again, the name of someone on your staff with whom we could talk. Could you respond to that?

MR. BREMER: Yes, I will get him a name this afternoon.

SEN. BENNETT: Do you agree that telecommunications and postal service is an essential part of this?

MR. BREMER: Absolutely. Iraq needs its economy brought quickly into the 21st century, and we are working already to restore the telecommunications system that existed before the fiberoptic system, and we are trying to get a mobile cellular system up. But it's quite clear that if Iraq is going to have a modern business -- and we hope it will -- a vibrant private sector -- and we hope it will -- we are going to have to spend several hundred million dollars on putting together a modern telecommunications system. It's a vital part, as you know, of this proposal.

SEN. BENNETT: I applaud the four statements that you are -- or the four areas that you are concentrating on, and I agree with the priority -- security first, and then essential services, working to get the economy under control, and then ultimately the political structure that will preserve these things.

One of the statements that have been made -- one of the accusations that has been made with respect to this is that we are doing things in Iraq that need to be done in the United States, and why are we spending money to build schools and pave roads and do all these wonderful things in Iraq, when we need more schools and roads, et cetera, in the United States? As I look through your presentation, there is none of that. You are not talking about building schools or providing anything that might be considered above the very basic survival kinds of levels. We have just gone through the experience with the hurricane, and four million people out of power, and we are focusing in this committee, as I am sure emergency monies come through, and the speed with which we get back to a certain base line. As I read your plan, you are talking about establishing a base line. You are not talking about constructing anything on top of that that might be something that the Iraqis themselves could construct. Do I have it correct in my examination here?

MR. BREMER: Yes, senator. The main thrust of what we are trying to do here is get the fundamental preconditions, the economic and essential service preconditions, that will allow Iraq to create a vibrant private sector which can then pay for itself. And I should say that if one looks forward in the budgeting process our estimate is by 2005 Iraq's oil revenues should be more than sufficient to pay for the Iraqi government and provide an extra amount that could be used for capital investment in other areas, either more electricity or more schools. It's also the case that we think the donors conference will probably focus on some of the things you just mentioned -- education, health care and so forth. So we have tried to focus on the essential services.

SEN. BENNETT: But we are not trying to do anything in Iraq other than to provide simply the absolute base line plain-vanilla kinds of security and services that are necessary, and then we look to the Iraqis to build beyond that?

MR. BREMER: The Iraqis and the international community.

SEN. BENNETT: The international community. I held a hearing as chairman of the Joint Economic Committee on this issue of the cost of reconstruction of Iraq, and in that hearing discovered something that I had not known before: Iraq has fertile soil and Iraq has water, and prior to Saddam Hussein's incredible mismanagement Iraq was a net exporter of food in the region. I had not realized that.

MR. BREMER: Right.

SEN. BENNETT: I'm concerned that a single product economy is a shaky economy. As you look down the road, are you looking at things that can be done, and does your plan help provide a base line for things that can be done by the Iraqis to build an economy based on something other than total reliance on oil, specifically agriculture? To have a net exporter of food in that region would be a very significant thing.

MR. BREMER: Yes, senator, it's a good point. Many people when they think about Iraq's wealth think only about the oil. But the fact is it has great water and very fertile soil -- when the water is put together with the soil, it was after all the fertile crescent, and it was an exporter of agriculture, and there's no reason why it can't be. We are spending something like $900 million on -- particularly on the irrigation, which is the main problem -- so that we can put that agriculture back on its feet as an export earner and as a new source of revenue. I think there are other sources of revenue, which are obvious -- they are taxation, and in the end tourism. But he focus here is on agriculture, about $900 million.

SEN. BENNETT: Thank you very much. I have one quick final comment, Mr. Chairman. I remember in this Congress when we approved an action in Haiti, went into as it now turns out to replace a brutal dictator, much beloved with American conservatives, with a brutal dictator much beloved of American liberals. (Laughter.) We turned the reconstruction responsibility over to the United Nations and left, and the people of Haiti are now worse off economically and politically than before we went in. We do not want another Haiti in Iraq.

SEN. STEVENS: Senator Leahy.

SEN. LEAHY: Thank you, Mr. Chairman. And I also welcome the ambassador. After the president, he probably has the most difficult job these days in the federal government, and he's doing it under very dangerous and difficult conditions. I want to thank you, ambassador, for your office, and OMB for the detailed materials you sent up with the supplemental request. You mention your July 23rd plan. I'd ask you to send a copy of that to the Congress, so that we can see what it is too, please. I'll assume that's a yes. And you may want to double-check your answers to Senator Inouye's question about the first $2.4 billion being in open and competitive bids. I'm not sure that's accurate. But if you --

MR. BREMER: I'm sorry, no, I can correct -- there was one bid that was not open, that is correct, before the war. That is correct. But I was answering the question on the future of the 20 billion.

SEN. LEAHY: I'll let you look at the question --

MR. BREMER: I'll get you -- I understand.

SEN. LEAHY: I do appreciate you telling me your answer to the letter I sent you several months ago answered today -- you mentioned you did not have a fax machine. I sent it to your office here in Washington, and I assume that every few months that they do -- find somebody to correspond with you, or at least with all the people that we are sending back and forth over there.

Now, I don't know the way this bill is written whether I'm going to vote for or against the supplemental. But I want to take this time to make our point. The president has got us into a costly and dangerous situation in Iraq. We're at a crucial juncture. American lives, our resources -- also our credibility -- are on the line. I think the next 12 months are going to have consequences for decades to come -- long after all of us are out of whatever offices we are holding now. Since the fall of Baghdad, practically everything the White House and the Pentagon predicted about Iraq has turned out to be wrong. You wouldn't know it when you listen to some of the officials here in Washington, make these overly optimistic assessments -- or when people raise questions about whether they're wrong -- instead of an answer we're told that we are not really true patriots, and we have the patriotism question of people -- many of whom have served with distinction in our military.

Now, we get a different picture from those in Iraq in the field. Vice President Cheney said Saddam Hussein had reconstituted nuclear weapons. There's no weapons of that nature or any weapons of mass destruction have yet been found. Last week, even though we were told that -- by some in the administration -- that there was a link between Saddam Hussein and 9/11, President Bush continued there was none. The vice president said our troops would be treated as liberators. I am sure most Iraqis are grateful that we moved Saddam Hussein -- I'm grateful that he's gone. But it's clear the Iraqi people increasingly don't want us there. The New York Times article last week entitled "Iraqis' Bitterness Is Called Bigger Threat Than Terror" described this program. You may disagree with this, but it's hard to overlook such warnings when our soldiers, who have performed so bravely, so admirably, are ambushed and killed. There seems to be too much jubilation in the streets -- not just by remnants of Saddam's regime.

Initial cost. Five months ago we passed a wartime supplemental, that I believe, Mr. Chairman and Senator Byrd had two and a half billion dollars for reconstruction of Iraq in it. We were told that's all the U.S. taxpayers would be asked for this year. But that was a gross miscalculation. Former OMB Director Daniels said the total cost could be between 50 and 60 billion. The deputy Defense secretary said we're dealing with a country that can finance its own reconstruction. They said the oil revenues of the country would bring between 50 and 100 billion over the course of the next two to three years. Those are wildly off course. I'd say I agree with Senator Byrd: When the Americans saw the $87 billion price tag, it gave Americans sticker shock and awe -- it's had the same effect up here.

Counting the supplemental, we'll spend more than a hundred billion dollars in the first year to rebuild Iraq -- this in a country -- and the administration said they're not in the business of country- building. And it's clear we're going to be back for a lot more. We don't have the money in the bank. It is red ink. We are heading for a trillion dollar deficit that our children and grandchildren will pay off. I'd question whether such fiscal spending, responsible or otherwise, of this magnitude, would bring to our current economy, to our national priorities -- our schools, our health care, our ability to fix Medicare and Social Security just is one instance.

Now, one of the reasons many of us disagree with the administration's decision to attack Iraq without the support of the United Nations -- it would be harder to do it on our own. As one senator, I feel it would have been better if the administration had not alienated our allies through arrogance, or snub Mexico and Canada, among others, only to find ourselves needing their support today.

I haven't heard anything about how this supplemental is going to take care of the situation in Iraq, or bring our soldiers home. We are told the security problems would be solved by rebuilding the Iraqi army . That's going to take years, as we have seen in Afghanistan, another country where we are doing nation-building, where crime and violence today are on the rise. And I worry that our soldiers, the relief workers, will continue to die. The tents we build will continue to be thwarted by saboteurs and the Iraqi people's will will subside. It's a long road on the Iraqi Governing Council, even with some of the superb people you have on it, to a viable democracy. And even if that's possible, guess who is going to be there until the job is done? We are. Our soldiers, our aid workers, well qualified and motivated diplomats like yourself -- and of course our money. I want to know how much it is going to cost, when the Iraqis can take over. I don't think we can drift along spending more than a billion dollars a week with no plan, no time table. Every week another four or five Americans killed or wounded, growing resentment of the Iraqi people. I think it's time to abandon the same old go-it-alone strategy that has squandered on wholesale magnitudes the good will, the tangible support of the international community. I think we have got to get the community behind us.bassador Bremer, I hope you don't take these criticism personally. You inherited a policy without a strategy. We want you to succeed, and we were told the two and a half billion the president wanted for the Iraqi relief and reconstruction fund was all you'd need back in April. Five months later you asked for another two and a half billion, just for 2004. Now, do you believe you are going to need another 75 billion or are we really going to see donations -- because the amount of donations -- we talk about 30 countries. I mean, some of them have got forces in there the size of some of the rural police forces in Vermont. You can't really count that. And the kind of money that some are getting -- I know we are going to get a request for more foreign aid then they sent in this. So are you going to be back here next year asking for another 25 or 50 billion?

MR. BREMER: Well, senator, the amount we are asking for here represents what we think is urgently needed now, and for immediate needs, and we don't anticipate coming back for another supplemental of this magnitude. That's all I can say at the moment. I think we found -- the reason that the 2.4 billion initially was not sufficient was that we found the infrastructure in the country was in a lot worse shape than we thought, and that's the problem we've got. We have got to redo that infrastructure. It's expensive.

SEN. LEAHY: Mr. Chairman, I'll submit my other questions.

SEN. STEVENS: Thank you. Senator Brownback.

SEN. BROWNBACK: Thank you, Mr. Chairman. Thank you, Ambassador Bremer, for being here today. I appreciate your testimony. I thought your statement was quite good and eloquent, and very captivating on the current situation. It really describes something quite different than we read in the press it seems like on a daily basis, where most of the news seems to be pretty negative.

I think it's important to go back and look at this situation and some of the history of how we as a body got here, because as Senator Domenici pointed out, I think there were 77 senators, or somewhere around that voted for the Iraqi war conflict.

In the House, the vote was 296 to grant the administration the authority to go to war and move forward, versus 133 against: strong, bipartisan -- nearly 300 votes in the House out of the 435 were there. So, I mean, strong, bipartisan support.

And if you go back prior to September 11th, probably wouldn't have been there, but after September 11th, we changed. And that same week of September 11th, we appropriated nearly $40 billion for reconstruction and war efforts and gave the president and the administration the authority to go to war in Afghanistan with about an hour's debate, so moved was the country that we needed to do something about the terrorism threat. And then, when that moved forward, and after that, there was a continuing threat in the war on terrorism that we're experiencing in the world today, and the administration comes forward with a proposal on dealing with Iraq.

Now, I've been dealing with the issue of Iraq and Iraqi opposition for some time. I've been on the Foreign Relations Committee since I've been in the U.S. Senate -- 1996. I've worked with Dr. Chalabi, that you work with now, for some period of time. We've had him up for a number of hearings, the Iraqi opposition, and talking about the horrific situation that the Iraqi people were experiencing. And also, the three different areas of Iraq: and the north was basically governing itself separate from Saddam; in the south, Saddam was pillaging the countryside and draining the wetlands areas that I hope we're working on getting restored; and they came forward and put forward for us a bill, the Iraqi Liberation Act, that passed the Congress, was signed into law by President Clinton. And it called for regime change in Iraq. Signed by President Clinton. This was passed probably in 1998 -- I'm thinking somewhere through that period of time -- allocated $100 million, which I wished we had spent it at the period of time in working and building up the opposition.

The whole point that I'm putting forward here is that Saddam has been a problem for a long period of time, and any allegations or assertions that were coming up that the Bush administration came up with new claims about Saddam Hussein -- I was getting the same intelligence reports under President Clinton as I was under President Bush about the Iraqi threat and the nature of the threat. And these were not -- you can't know in intelligence reports for certain, because you're gathering information; unless you've got somebody in the room, you're not certain what is taking place, but the best estimates. And we did know that he had used chemical weapons against his own people and against the Iranians. We knew that. And we knew he had terrorists operating on his soil. And so, you had that mixture of terrorists and the ability to constitute weapons of mass destruction. And we were in dependency on Saddam Hussein that he wouldn't mix the two and use them against us. So, when the vote comes up for the Congress, most of us said: I'm not willing to depend on Saddam Hussein that he's not going to use -- find some way to get chemical weapons, give a pickup truck full of them to terrorists, and find them here on our soil, as we did on September 11th.

We moved forward on Iraq. The war moved, I think, much more quickly than most people thought it would, surprisingly so, and we were very happy about that. But now we're at a point in time, do you go ahead and move forward and conclude and deal with the situation that we're in, or do you pull out, like we did the prior time in Afghanistan in the 1980s. And I think everybody's concluded you can't pull out at this point in time, you have to work in reconstructing and building back Iraq up.

I do get two pointed questions often from my constituents on this, and they're this. Number one is, we hate the loss of any life, particularly an American life. And is there -- are there any other things that we can do to protect these American lives? Or how can we move forward with protection of those American lives? That's the thing that just strikes at the very nerve of Americans, is that issue.

And then, the second one that I'd like for you to address is a number question -- say, Iraq has the second-largest reserves of oil in the world. Can't they pay for this in the reconstruction effort? And you've addressed a portion of that, that by 2005 they'll be able to pay for their government and some capital investment. Project me on out a little bit further on that point, if you would.

MR. BREMER: Thank you, Senator. Just before I answer your questions, two points. We have about $100 million in this supplemental request to begin the reconstitution of the marshlands that Saddam Hussein drained.

And you mentioned the chemical attack. The secretary of State and I, a week ago today, visited the site of the chemical attack in 1988 in Halabja, up in the north. And it was a very moving thing to see this village where more than 5,000 people were killed by Saddam's chemical attack in 1988. I met a man there who was the only member of a 24-member family who survived the chemical attacks. And it's quite a moving thing.

On the question about protecting lives, there basically are three things we're doing to try to deal better with security. Number one, we're trying to improve our collection of intelligence against the people who are attacking us, whether they are former regime loyalists or terrorists. We have a fusion cell that we've established in Baghdad, under my direction, which is trying to focus our intelligence more closely.

Secondly, we are in the process of reconfiguring our forces to make them more mobile and lighter so that they can move around and respond more quickly to threats.

And thirdly, as I mentioned in my statement, and as is very prominent in the president's request, we need to get Iraqi forces more involved in their own security. That's why you have $2 billion in here to speed up the training of an Iraqi professional police, and $2 billion to train an Iraqi army. And contrary to one of the earlier comments, with the president's supplemental, we will be able to train a full three divisions by next summer of the Iraqi army.

That's a significant force for Iraq.

On the question of the oil reserves, the problem is this. The oil infrastructure was severely run down over the last 20 years, and partly because of sanctions over the last decade. Iraq has a theoretical production capability of about 3 billion (sic) barrels a day. We hope to get back to that level by the middle of next year, roughly, some time in the late summer next year.

Once Iraq reaches that level -- that's its maximum production level -- it should be able, assuming a price of about $18 a barrel, to generate in the neighborhood of $20 billion a year in oil revenues.

To get substantially beyond that level means increasing their production, which means exploiting new fields. And that will involve a substantial investment, presumably from outside Iraq, into the development of new fields, so that resources can be brought forward.

But even with just getting back to 3 billion -- 3 million barrels a day by the year 2005, they should be producing a surplus on their cash budget, which will allow the Iraqis to begin to pay for some of the less urgent things that we've got to pay for over the next 12 to 18 months.

SEN. BROWNBACK: Thank you.

Thank you, Mr. Chairman.

SEN. STEVENS: Senator Dorgan.

SEN. BYRON DORGAN (D-ND): Mr. Chairman, thank you very much.bassador Bremer, thanks for being here.

There's no doubt that the money that you are requesting is needed, and let me describe my reaction this way. First of all, with respect to the military funding that you are requesting, I think that the Congress will move quickly. I don't think we will withhold one dollar that's needed to support the troops who we have asked to fight for this country. And so I believe that is going to be appropriated fully by this Congress.

I want to go through with you, however, the issue of reconstruction funding. The campaign that was initiated in Iraq, called "shock and awe," exclusively and specifically did not target infrastructure. We didn't target their electric grid. We didn't target the dams and the basic infrastructure of Iraq.

My colleague from Kansas made the point that Iraq has the second- largest oil reserves in the world, next to the Saudis. You made the point that by next summer Iraq will be able to produce 3 billion -- 3 million barrels per day. And at that level of production, with about 80 percent available for export, the way I calculate it, using reasonably conservative prices, the Iraq oil fields will produce about $16 billion a year of net revenue. That's $160 billion in 10 years or $320 billion in 20 years.

When I take a look at what you want to do in Iraq with respect to reconstruction, basic investment in water, sewer, irrigation; developing marshlands; improving power plants; developing communications plans, including Wi-Fi; housing projects, 3,500 new housing units in seven communities, and so on, this occurs to me not a reconstruction based on damage done by the war but reconstruction that you believe is necessary for the long-term welfare and economic health of the country of Iraq.

The question for me is, why would we not use the Iraq oil revenue to collateralize loans from the IMF or the World Bank to pay for the reconstruction of Iraq? Three hundred and 20 billion dollars over the next 20 years. It seems to me collateralizing loans from the International Monetary Fund, which, I read this weekend, just provided $13 billion to Argentina -- why is it that you have chosen to say that rather than moving in that direction, the American people should provide 20-plus billion dollars in grants for reconstruction?

Could you identify, or at least address, that piece? Because I think that no doubt the reconstruction is necessary, no doubt it is urgent, but there's also another way to pay for this. And I don't understand why you have chosen grants from the American taxpayers, and incidentally told us in your testimony that the new tax rate in the country of Iraq will have a top rate, and you beamed apparently when you said 15 percent. So, we will have taxpayers in this country paying a much higher tax rate on income taxes than you have, or the council has, created in Iraq, and then use the money to invest in exactly the sort of things we're debating about in this country: water, communications, transportation, infrastructure. Might you address that, Mr. Ambassador?

MR. BREMER: Yes, thank you, Senator.

We, of course, considered the question of whether this supplemental should be done in the form of loans of some kind, which is effectively what you're mentioning. And as I said in my testimony, and I feel quite strongly about it, I believe it would be a mistake to lay any more debt onto the backs of the Iraqis. They are under a burden, an extraordinary burden, of about, roughly, $100 (billion) to $120 billion of debt, entered into by Saddam's regime over the last 20 years or so, and another $90 (billion) to $100 billion in claimed reparations from countries because of Saddam's wars. That means that Iraq has something like $200 billion in debt outstanding. There is no way the Iraqi government is going to be able to pay that, even if you took all of the excess amounts projected.

And I answered earlier, in answer to Senator Brownback's question, the math is roughly as follows: Starting in 2005, the cost of running the Iraqi government with no major capital investments is about $15 billion a year. The revenues, as you rightly point out -- we think they will come to roughly $20 billion a year by then, because they will have some tax revenues, they will have some tariff revenues, in addition to the oil revenues. So, you have revenues of roughly $20 billion and expenses of roughly $15 billion. You could imagine roughly $5 billion a year, in other words, available for capital.

If the debt is assumed to be $200 billion, and if you assume, just for sake of math, an average interest rate of 6 percent a year, the debt service alone on that debt would come to $12 billion a year, just for the debt that they have now. Therefore, it has been our view that we need to help carry them across the bridge of 2004, which is the year when they are going to not be generating enough excess income to pay any extra capital by themselves.

SEN. DORGAN: Mr. Ambassador, I frankly don't understand that. You say that the country of Iraq has accrued a debt of $200 billion roughly. Did you, then, developing a new government in Iraq, inherit the responsibility for the debt it created by Saddam Hussein? It's a rather peculiar thing to inherit, it seems to me, number one.

Number two, it seems to me the first obligation would be to begin seeking debt forgiveness, and I'd like to ask, who is the largest holder of that debt?B. BREMER: Of course, we do inherit the debt -- that's international law -- until something is done about that debt by a sovereign government, which will come into being after the elections.

SEN. DORGAN: And who is the largest holder of that debt?B. BREMER: The largest holders, and there is some imprecision as to exact amounts, are France, Russia, Germany and Japan.

SEN. DORGAN: And we can talk about risk-free encumbrances at some point later. I have rather limited time. But I do want to make the point, if you're saying that you and the administration decided to seek grants for reconstruction in Iraq rather than collateralize their oil production, and I think we have a disagreement of about $5 billion a year, and we'll go over that later as well in this calculation, but if you're saying you made that decision because of overhanging debt, it seems to me that if one works hard at debt-forgiveness, and certainly one should -- Saddam Hussein is gone; --B. BREMER: Yes.

SEN. DORGAN: -- good riddance -- whatever debt burden the Iraqi people now have around their neck, it seems to me, ought to be forgiven. And especially those countries who did business with the country of Iraq during a time when there was an embargo, there ought not be any obligation for you or anybody else in the governing council to accept that debt. I understand international law, but look, I really think, as this committee begins to strategize and think through what we do here, I think first and foremost, we provide the money for the troops. That's essential. We do it quickly.

Second, we think through a policy, a cogent policy on behalf of this country, what should we do with respect to the reconstruction in Iraq? Not whether we do it, because we must, but who pays for it? Should that be the burden of the American people? And I don't -- frankly, I don't think so, especially when you're dealing with a country that has the second largest oil reserves in the world.

And I do want to make one additional point, and I'll pursue this at a later time. There was a newspaper story, a rather lengthy story in the Washington Post about two days ago that gave me great pause. Ambassador Bremer, you talked about the opposition in Iraq being guerrillas and insurgents and the Fedayeen and so on. This was a story that I read and I put the paper down and thought a lot about it. It was about a family holding a picture of their son. Wasn't part of Saddam's operation. Wasn't part of the Fedayeen. Wasn't part of anything. He was just a guy that became incensed and angry and part of the local group in his town and decided to go out and kill some Americans. And I don't know whether that's happening over there in large degree or not. I mean, you described the insurgent movement as guerrillas associated with Saddam's old regime, but some of what we're ready, Mr. Ambassador, suggests that it is more than that. And if it is more than that, that we really need to address that as well in a very significant way.B. BREMER: Well, let me -- I know your -- our time is up here, but let me just answer that question, Senator. I saw the story, and there are no doubt isolated cases of people meeting that -- meeting that definition. This fellow went out and fortunately he was killed and did not kill any of our soldiers, so it had a happy ending as far as I'm concerned. There are no doubt isolated cases like that, but by far the majority -- and we know this from our intelligence; we know it from the people we catch; we know it from the people we kill -- the people who are attacking and killing our soldiers, our men and women, are Fedayeen Saddam, former regime loyalists, Ba'athists, members of the former intelligence community. That is a fact. Now, there -- I don't say there are aren't people like that story, but they are not what is driving the situation.

SEN. DORGAN: Well, Mr. Ambassador, that is helpful. And might I ask as you're here this week, if we could exchange some information about oil revenues, potential oil revenues, expenses, so that I can at least pursue the issue of whether we ought not collateralize the oil capability of that country to invest only in that country, by the way.

SEN. STEVENS: Senator DeWine?

SEN. MARK DEWINE (R-OH): Mr. Ambassador, thank you very much. This is a ton of money, but I don't think there is any doubt that it is necessary. I don't think there's any doubt this Congress will approve it.

I thank you for your testimony, I thank you also for your service. We appreciate it very much.

You have outlined a plan which, as you have testified, puts a great deal of emphasis on security and infrastructure as the beginning of the prosperity and return of Iraq, and I think that is certainly understandable.

I would like to talk about something that I think also is important to Iraq, and that is the confidence of the people that things are improving. And that's one area, and that is the health care for children. Saddam Hussein's government spent virtually nothing on health care and nothing on -- virtually nothing on the health of its children; ignored the children, with devastating results. The under-5 mortality rate, we're told, has more than doubled in the last decade, with one in eight children now dying before their 5th birthday. Of those deaths, 70 percent are due to preventable illnesses such as -- common things such as diarrhea or respiratory infections.

We have seen presented to us -- you have presented to us the Coalition Provisional Authority plans to rehabilitate the health care system, which does include a new children's hospital, which I applaud that.

My question to you is whether or not in this plan there is sufficient money that's been allocated to meet the health needs of children in a timely manner? In other words, will we -- is there enough in there for this, and are we going to see some results based on this plan? Because I do think it is important -- you know, people need to see some results. It's important from a humanitarian point of view. What's happened to these kids is just absolutely atrocious, in a country that should have been able to provide for their children. And I think if we want to see -- let people see some results and some changes, which is what they want to see, people need to see some changes, that the health care of their own kids is a pretty good place for them to be able to see it.

MR. BREMER: Well, I agree, Senator. We do have something like $850 million in here for health. I