Review Finds Issues with Iraq Reconstruction Funds

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An audit by a special inspector general for Iraq reconstruction cites misuse of funds for training and other purposes. Michael O'Hanlon, senior fellow at the Brookings Institution, talks with Scott Simon the progress of reconstruction.

SCOTT SIMON, host: The rebuilding of Iraq is far from over. But the Bush administration reportedly does not plan to ask for more money from Congress in the new budget. The U.S. has spent all but 20 percent of the $18.4 billion originally allocated for reconstruction. But a significant amount of the money that has already been spent has gone to security, not Iraq's electrical, water, sewage, oil, education and health systems. And without a new infusion of cash, the money will run out by the end of 2006.

A new report this week from the special inspector for Iraq reconstruction adds to earlier evidence of fraud, incompetence and disarray in how money has been spent. Michael O'Hanlon is a senior fellow at the Brookings Institution in Washington D.C. and joins us from there. Mr. O'Hanlon, thanks for being with us.

Mr. MICHAEL O'HANLON (Senior Fellow, Brookings Institution): My pleasure, Scott.

SIMON: $18 billion is a lot of money. It compares favorably with the Marshall Plan after World War II. People say, look, this was never considered to be a continuing budget item. It's time for other sources of support to step forward. Where are they hoping they will be?

Mr. O'HANLON: Well, the number one alternative for Iraq is, of course, its oil trade. It's totaling somewhere in the range of one to two billion dollars a month right now. So it's a substantial amount of money. But of course, it's not a huge amount of money compared to the needs in that country.

SIMON: There were other nations that at one point over the past three years have vowed up their commitments. Has that quite panned out, and will they increase?

Mr. O'HANLON: Other countries are helping a little bit, but most of their help has been in the form of loans, and Iraq doesn't necessarily need more loans. We are seeing some of the World Bank IMF system contribute here. But that's not really an alternative, because, again, it's a more modest amount of money, and it's primarily in the form of loans, not grants.

SIMON: What's your assessment, Mr. O'Hanlon, of the report that was received this week about fraud and incompetence? To your mind, does it meet or exceed the scale that I'm afraid we get used to excusing in big international reconstruction efforts?

Mr. O'HANLON: I think it's not unusual. Therefore, it's more or less meeting the standard that we've been accustomed to. Of course, there have been a lot of individual cases of abuse, misappropriation of funds. And it's appropriate that people be held accountable, and of course, that's necessary. But as you said earlier, we've had to redirect a lot of the original money. And leaving aside the issue of charity towards the Iraqis, there's the question of the safety of American troops. How are we going to get them home if the Iraqi infrastructure is not working very well; Iraqis don't have jobs and they blame us for it and join the resistance as a result?

SIMON: Mr. O'Hanlon, what would you say to an American citizen or taxpayer who says, look $18.4 billion is a lot of money. I'm sorry, it's not a permanent fact of our lives. It's time for other people to go on.

Mr. O'HANLON: Really, in terms of philanthropy or our moral commitment to the Iraqi people, there is no strong argument that we haven't done enough. We have tried incredibly. Obviously, our troops have tried most of all and those who are over there supporting them. But in terms of the American taxpayer, there has been quite a contribution.

SIMON: And conversely, what might you say to an individual Iraqi who would say, look, things are a mess, and you guys have said you'd make it better.

Mr. O'HANLON: Well, many of the people in that country are obviously still optimistic about the future, but they are confronting a much more violent present, even than under the latter years of Saddam's rule. And we have not demonstrably improved their lives yet as a result of the invasion. So the question is now, what specific things can we still usefully do if we put more money at the problem? And I think there are a lot, starting with job creation and replenishing the infrastructure repair accounts that we originally had developed after the invasion. So, in that sense, I do think we owe an answer to that hypothetical Iraqi questioner, even as we also ask that Iraqi to keep working hard, especially if it's a Sunni Arab, because right now, they're going to have to accept that the new Iraq is going to be built one way or another, and we really need their help to make it successful.

Many of them have not yet reached that kind of a mental adjustment to their new circumstances, and they're going to have to.

SIMON: Michael O'Hanlon, senior fellow at the Brookings Institution, thanks very much.

Mr. O'HANLON: Thank you, Scott.

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