Retrieve in: | ![]() ![]() |
June 25, 2004 Honorable Kent Conrad
Dear Senator: At your request, the Congressional Budget Office (CBO) has estimated the cost of the occupation of Iraq and other operations associated with the global war on terrorism (GWOT) for fiscal year 2005. CBO has also projected the potential 10-year costs of such operations under three scenarios that you specified. Assuming that the force level and pace of operations associated with the occupation of Iraq and other GWOT operations will remain at current levels throughout fiscal year 2005, CBO estimates that the Department of Defense (DoD) will likely require $55 billion to $60 billion in new budget authority to carry out those operations. If the disposition of forces or pace of operations were to differ from the assumed levels, the cost of operations would, of course, change accordingly. The estimate includes only the costs that DoD would incur above amounts budgeted for routine military operations, and does not include the costs for reconstruction activities carried out by DoD or other U.S. government agencies. CBO's estimate of such costs is uncertain for a number of reasons. DoD has provided little detail on actual costs to date. Standard models and cost factors used by CBO in preparing its estimate, though widely accepted, may not fully reflect the unique circumstances of each particular operation, and those circumstances change over time. It is also difficult to estimate the costs that DoD will attribute to those operations for support activities in the United States. CBO's past estimates of the cost of occupying Iraq and carrying out other GWOT operations have generally been lower than the amounts requested and obligated by DoD for those activities. For fiscal year 2004, DoD's obligations are likely to exceed CBO's estimate by more than 10 percent. If a similar difference occurred in fiscal year 2005, costs in that year could be a bit more than $60 billion. On the other hand, the reported obligation data for 2004 may include one-time costs for items such as base construction and procurement activities that will not be required in 2005. If so, obligations in excess of CBO's estimate would be less likely. CBO also estimated the cost of three scenarios for the occupation of Iraq and GWOT operations using assumptions about the length of each operation and force levels specified in your request letter. Under the first scenario, the occupation force in Iraq would increase to 190,000 servicemembers for the 2005-2006 period and then decline so that all U.S. forces would be removed from Iraq by 2009. At that point, the only troops deployed overseas in support of the GWOT would be those stationed in and around Afghanistan. CBO estimates this scenario would require about $64 billion in budget authority in 2005, declining to about $10 billion a year from 2009 through 2014. Budget authority associated with this scenario would total about $266 billion over the 2005-2014 period. Current force levels would be maintained in Iraq and other GWOT locations through 2006 under the second scenario. After that, the force levels would gradually decline to a steady-state level of about 69,000 deployed personnel by fiscal year 2010. Budget authority required for scenario two would total about $392 billion over the 2005-2014 period, CBO estimates. Finally, the third scenario assumes that troop levels in Iraq would steadily decline beginning in 2005, so that by 2010 about 15,000 personnel would be deployed overseas in support of the GWOT. CBO estimates that total budget authority under that scenario would total about $179 billion over the 2005-2014 period. The attachment to this letter provides additional detail about the cost estimates, including a discussion of differences between CBO's estimates and cost figures reported by DoD. If you wish further details on this analysis, we would be pleased to provide them. The staff contacts are Matthew Schmit and David Newman of CBO's Budget Analysis Division, and Adam Talaber of CBO's National Security Division. Sincerely, Douglas Holtz-Eakin
Attachment
SUMMARYAt the request of Senator Conrad, the Congressional Budget Office (CBO) has estimated the costs of military operations in Iraq and Afghanistan and other operations associated with the global war on terrorism (GWOT) for fiscal year 2005. CBO has also projected the potential 10-year costs of such operations under three scenarios that the Senator specified. Assuming that the force level and pace of operations associated with the occupation of Iraq and other GWOT operations will remain at current levels throughout fiscal year 2005, CBO estimates that the Department of Defense (DoD) will likely require $55 billion to $60 billion in new budget authority to carry out those operations. If the disposition of forces or pace of operations were to differ from the assumed levels, the cost of operations would, of course, change accordingly. That estimate encompasses the costs Operation Iraqi Freedom, Operation Noble Eagle, and Operation Enduring Freedom.(1) It includes only the costs that DoD would incur above amounts budgeted for routine military operations, and does not include the costs for reconstruction activities carried out by DoD or other U.S. government agencies. CBO's estimate of such costs is uncertain for a number of reasons. DoD has provided little detail on actual costs to date. Standard models and cost factors used by CBO in preparing its estimate, though widely accepted, may not fully reflect the unique circumstances of each particular operation, and those circumstances change over time. It is also difficult to estimate the costs that DoD will attribute to those operations for support activities in the United States. CBO's past estimates of the cost of occupying Iraq and carrying out other GWOT operations have generally been lower than the amounts requested and obligated by DoD for those activities. For fiscal year 2004, DoD's obligations are likely to exceed CBO's estimate by more than 10 percent. If a similar difference occurred in fiscal year 2005, costs in that year could be a bit more than $60 billion. On the other hand, the reported obligation data for 2004 may include one-time costs for items such as base construction and procurement activities that will not be required in 2005. If so, obligations in excess of CBO's estimate would be less likely. CBO also estimated the cost of three scenarios for the occupation of Iraq and GWOT operations using assumptions about the length of each operation and force levels specified in the request letter from Senator Conrad. Under the first scenario, the occupation force in Iraq would increase to 190,000 servicemembers for the 2005-2006 period and then decline so that all U.S. forces would be removed from Iraq by 2009. At that point, the only troops deployed overseas in support of the GWOT would be those stationed in and around Afghanistan. CBO estimates this scenario would require about $64 billion in budget authority in 2005, declining to about $10 billion a year from 2009 through 2014. Budget authority associated with this scenario would total about $266 billion over the 2005-2014 period. Current force levels would be maintained in Iraq and other GWOT locations through 2006 under the second scenario. After that, the force levels would gradually decline to a steady-state level of about 69,000 deployed personnel by fiscal year 2010. Budget authority required for scenario two would total about $392 billion over the 2005-2014 period, CBO estimates. Finally, the third scenario assumes that troop levels in Iraq would steadily decline beginning in 2005, so that by 2010 about 15,000 personnel would be deployed overseas in support of the GWOT. CBO estimates that budget authority under that scenario would total about $179 billion over the 2005-2014 period.
Obligations Through March 2004 For Operation Iraqi Freedom and the Global War on TerrorismThrough March 2004, the Department of Defense had obligated $114 billion for Operation Iraqi Freedom and the other GWOT operations in the two and one-half years since September 11, 2001 (see Table 1). Data on obligations come from cost reports prepared by the Defense Finance and Accounting Service (DFAS). The reports present the obligations broken down by major operation (Iraqi Freedom, Enduring Freedom, Noble Eagle) and service (Army, Navy, Air Force, Marines, and Defense Agencies). Obligations for Operation Iraqi Freedom constitute the largest fraction of the obligations to date--$71 billion. After comparing the obligations presented in these reports with funding provided by the Congress to date, CBO estimates that of the funding provided to DoD in supplemental appropriations for 2004, approximately $28 billion remains unobligated as of March 2004.(2) Assuming those remaining funds are obligated during this fiscal year, obligations for these operations will total $64 billion in fiscal year 2004 and almost $142 billion cumulatively since September 11, 2001. The figures discussed above and presented in Table 1 exclude obligations for certain classified activities, which are not included in the DFAS reports, and obligations of funds for reconstruction activities administered by other executive branch agencies. Based on language in appropriations acts for 2002, 2003, and 2004 and information contained in briefings from DoD, CBO estimates that the Congress has appropriated at least $10 billion for classified activities since September 11, 2001, but CBO does not know how much has been obligated for those purposes. Amounts appropriated for reconstruction activities in Iraq and Afghanistan have so far totaled about $24 billion.
Estimate for Fiscal Year 2005Assuming that the force levels and pace of operations associated with the occupation of Iraq and other GWOT operations will remain at current levels throughout fiscal year 2005, CBO estimates that DoD will likely require $55 billion to $60 billion in budget authority for that year to continue the occupation of Iraq and other GWOT operations during that year. The detailed components of that estimate are shown in Table 2; they sum to about $56 billion. CBO's estimate represents the incremental amount that DoD would incur above the budgeted cost of routine operations. For instance, the estimate excludes items such as basic pay for active-duty military personnel but includes the monthly pay of reservists recalled to full-time duty. The exception is basic pay for active-duty personnel in excess of the current authorized endstrength level, which is included because those personnel are being retained in the military as a direct result of overseas operations and DoD has been compensating them mostly with supplemental appropriations. Of the estimated amount, at least $35 billion will be required for Iraqi Freedom, and about $4 billion and $5 billion will be required for Operation Noble Eagle and Operation Enduring Freedom, respectively. CBO also estimates costs of about $13 billion for a category labeled "undistributed." This category includes the costs for mobilized reservists stationed in the United States who are tasked with supporting Operation Iraqi Freedom and Operation Enduring Freedom and the cost to maintain active-duty forces above authorized endstrength levels. CBO includes those costs in an "undistributed" category because it lacks the information needed to allocate the personnel and costs to each operation. Within the "undistributed" category, CBO also includes $5 billion for certain classified activities and coalition support.(3) That estimate is based on amounts appropriated for those purposes in previous years.(4) Allocating costs among the various military services is difficult because all of them provide some form of support for all aspects of Operation Iraqi Freedom and the other GWOT operations. CBO expects that about three-quarters of the budget authority required for 2005 will be needed to sustain ground operations (primarily the Army and Marine Corps), and the remainder will be needed for air and sea operations, classified activities, and coalition support. Estimating Force LevelsCBO's assumption that the force level and pace of operations associated with the occupation of Iraq and the GWOT will remain at current levels through 2005 is consistent with DoD's recently announced plans for those operations. If the size of the forces deployed overseas were to change, the cost of operations could be significantly different from the estimates presented here. DoD published a rotation plan in the fall of 2003 that envisioned the majority of U.S. forces in Iraq being replaced by a smaller number of forces between January and April 2004. However, in April, the U.S. Central Command requested permission to extend the tours of some units that had been scheduled to leave Iraq, and DoD is now preparing to deploy additional units to Iraq (to replace the units whose tours were extended). The effect of these decisions has been to reverse the planned reduction and maintain the January 2004 force level for the indefinite future. To date, DoD has not provided CBO with detailed information about the size of the force supporting the occupation of Iraq and the GWOT. However, based on information from various sources, CBO estimates that U.S. forces deployed overseas for these operations will average about 129,000 active-duty personnel and about 51,000 reserve-component personnel in 2005. About 127,000 reserve-component personnel will be mobilized in support of these operations (including the reservists who will be deployed).(5) In addition, CBO estimates the active components of the services will be about 38,000 personnel above their currently authorized endstrength levels in 2005. To estimate the size of the forces that are likely to be involved in Operation Iraqi Freedom and other operations, CBO tracks the major combat units (divisions and brigades) that are deployed or scheduled for deployment in DoD's rotation plans. However, the personnel in these major units represent only a portion of the troops that will be involved in military operations, requiring CBO to estimate other relevant categories of personnel. These other categories include troops deployed to the theater to support the combat divisions and brigades, reserve-component personnel training in preparation for deployment, and reserve personnel mobilized to fill in for deployed active-component units. Published accounts of the number of personnel involved in Operation Iraqi Freedom often include only the number of military personnel in Iraq itself. However, large numbers of support personnel are associated with this operation, including those at Army logistics and maintenance facilities in Kuwait and those at Air Force bases throughout the Persian Gulf. Consequently, CBO's estimates of the number of personnel deployed to Operation Iraqi Freedom are generally larger than many published reports of the size of the force in Iraq. For example, DoD has recently decided to maintain (rather than reduce) the current force levels in Iraq through the second (and possibly third) rotation.(6) CBO estimates that this plan will involve maintaining a deployed force of over 160,000 personnel in the Persian Gulf region, although only 135,000 of those personnel will actually be in Iraq.(7) Not all of the mobilized reserve-component personnel will be deployed overseas. Some will be engaged in Operation Noble Eagle, and will remain within the United States. Others will remain in the United States in support of Operations Enduring Freedom and Iraqi Freedom. Also, most mobilized reserve units will spend some period of time training before they deploy. Thus, the number of reserve-component personnel deployed overseas in support of Operation Enduring Freedom and Operation Iraqi Freedom will always be smaller than the total number of mobilized reserve-component personnel. Estimating MethodologyCBO estimated costs in five categories: personnel, personnel support, operations support, transportation, and classified activities/coalition support. The costs of personnel, which account for 30 percent of the estimated cost, include the pay for reserve personnel called to active duty, as well as special payments, such as hazardous-duty pay, for both reserve and active-duty personnel. They also include costs associated with providing food and water. In addition, the personnel category includes the cost for basic pay associated with keeping the level of active-duty forces above authorized endstrength levels. Personnel support, estimated to total about $5 billion, includes the costs of clothing, medical care, and other similar items. It also includes support costs associated with maintaining active duty forces above authorized endstrength levels. Operations support, at 44 percent, is the largest component of the estimate. It includes the incremental costs related to the operation and maintenance of air, land, and sea forces involved in these operations. It also includes the cost of contracts with companies like Kellogg, Brown, and Root for logistics support, base support, and other services, as well as the cost to buy replacement equipment for units returning from these overseas operations. The fourth category--transportation--includes the cost of moving personnel and equipment between the United States and the various theaters of operation as well as moves within each theater. CBO estimates transportation costs will total about $5 billion for fiscal year 2005. Finally, as noted above, CBO included $5 billion for classified activities and coalition support. CBO used data from a variety of sources to prepare its estimate. Estimates for personnel and personnel support are based primarily on cost factors developed by the Institute for Defense Analyses. CBO adjusted those factors to account for pay raises, changes in special payments, and inflation. Estimates for the operation of equipment, command and control, and some support services are based largely on data from operations and support cost models developed by the Army, adjusted for the pace of operations and the impact of the desert climate. CBO estimated most of the costs for facilities and logistics support using obligations and planning data (April 2004) from DoD for relevant logistics support contracts. Estimates for equipment procurement are based on CBO's analysis of procurement spending associated with previous overseas operations. Finally, the estimates for transportation costs are based on data provided by the United States Transportation Command. Except for a few instances, CBO did not use the data reported by DFAS on 2004 obligations in preparing the estimate of 2005 costs. Obligations for Operation Iraqi Freedom and the other GWOT operations vary widely from month to month, making it difficult to discern trends. Those data provide no information about the pace of operations or the force levels underpinning those costs, nor do they segregate one-time costs from recurring or day-to-day costs. Some obligations are recorded months after the actual activity occurred because of the time needed to establish proper billing and reimbursement. Without more detailed information, it is difficult, if not impossible, to use the reported obligations to estimate future costs. For example, the cost data reported for 2004 show significant obligations for equipment procurement and base support. CBO believes that many of those activities are one-time in nature and will not require additional resources in 2005.
Comparison to Previous CBO Estimates and Other DataOn October 28, 2003, CBO transmitted a letter to the Honorable John M. Spratt Jr. in which it estimated that maintaining an occupation force of 106,000 military personnel in Iraq would cost about $23 billion in 2005.(8) The cost estimates presented in this analysis are substantially higher than that October estimate for several reasons. First, the estimate done for Congressman Spratt included only costs associated with Operation Iraqi Freedom, whereas the estimate in this report also includes the costs of Operations Enduring Freedom and Noble Eagle. Second, it now appears the size of the occupation force in Iraq in 2005 will be more than 50 percent larger than the 106,000 hypothesized last October. Finally, CBO has refined or reevaluated some of the methodologies used to estimate the costs of these operations. Even with the recent refinements in estimating methodologies, those methods produce estimates for fiscal year 2004 that are lower than DoD's reported obligations for Operations Iraqi Freedom, Enduring Freedom, and Noble Eagle. It appears that, in 2004, DoD will obligate almost all of the $65 billion appropriated for those three operations. By comparison, CBO's methodologies and assumptions produce a point estimate of about $57 billion, 12 percent below the expected obligations from 2004 appropriations. It is therefore possible that DoD's obligations in fiscal year 2005 for those three operations could exceed CBO's point estimate of $56 billion by several billion dollars. On the other hand, the 2004 obligations may include one-time costs for base construction and procurement that would not be required in 2005, making obligations in excess of CBO's point estimate less likely. With only limited information from DoD, CBO has not been able to identify the specific reasons for that difference. They appear to be concentrated in two areas:
Some observers have indicated that the tenuous security situation in Iraq has led to an unexpected increase in the pace of operations (also known as operational tempo), and that this has led to increased costs for such things as spare parts, fuel, and ammunition. However, most costs for overseas operations such as Iraqi Freedom are associated with personnel compensation and base support, which are not usually correlated with the pace of operations. According to DoD reports (and in CBO's estimate), the costs associated with operational tempo comprise only about 10 percent of the total obligations to date for Operation Iraqi Freedom and the other operations associated with the GWOT.
Estimates of Occupation ScenariosCBO has estimated the 10-year cost of three scenarios for the occupation of Iraq and GWOT operations using assumptions about the length of each operation and force levels specified by Senator Conrad. Those scenarios involve future costs for Operation Iraqi Freedom as low as $52 billion and as high as $233 billion over the next 10 years (excluding some costs that cannot be allocated to specific operations). Other costs--for Noble Eagle, Enduring Freedom, classified activities, coalition support, and activities that cannot be allocated to specific operations--would add another $130 billion to $160 billion over the 2005-2014 period. Assumptions about air operations, force rotations, and the number of reservists mobilized are based on the most recent data provided by DoD, as well as an analysis of past contingency operations. The cost estimates were done using the methodologies that CBO applied in developing its estimate for 2005. They include costs for classified activities and coalition support based on prior-year appropriations but do not include costs associated with reconstruction activities. The costs for each of the three scenarios vary based on the assumptions made about the length and force levels associated with Operation Iraqi Freedom. All scenarios assume operations in Afghanistan will remain at current levels throughout the 2005-2014 period and that activities associated with Operation Noble Eagle will decrease to half the current level by 2009. Scenario One. Under this scenario, the occupation force in and around Iraq would increase from the current level of 160,000 personnel to about 190,000 in fiscal years 2005 and 2006, and then decline steadily so that all forces would be out of the Iraq theater of operations by the beginning of fiscal year 2009. This scenario assumes that a total of 212,000 military personnel would be deployed overseas in 2005, with an additional 84,000 reservists supporting operations from the United States. Once all forces left Iraq, about 15,000 personnel would be deployed overseas in support of the GWOT, with an additional 18,000 reservists mobilized in support. CBO estimates that this option would require about $64 billion in budget authority in 2005, declining to just over $9 billion by 2010, after which the annual costs would increase with inflation. Budget authority associated with the occupation of Iraq and the GWOT under this scenario would total about $266 billion over the 2005-2014 period. (See Table 3 for year-by-year personnel levels and Table 4 for the estimated costs for each scenario.) The size of the force in and around Iraq described in this scenario would be well above the number of personnel that CBO's previous analysis indicates would be sustainable over the long term.(10) Under this scenario, all of the Marine Corps' and the Army's major active component combat units would be fully committed and would be deployed overseas more than six months out of every year. All of the Army National Guard's Enhanced Separate Brigades would likely be mobilized and deployed as well. Since units require some time after returning from a deployment to recover (to allow personnel to take leave, perform maintenance on equipment, and to retrain and requalify in skills they may not have used while deployed), this scenario would leave the United States with only a minimal number of available combat units to respond quickly to unforeseen contingencies over the 2005-2006 period. Scenario Two. Under this scenario, the size of the force in the Iraq theater of operations would remain at current levels (which CBO estimates at about 160,000 personnel) through fiscal years 2005 and 2006 and then decline to a steady-state level of about 54,000 personnel by 2010, which would then remain in and around Iraq indefinitely. This scenario assumes that a total of 180,000 military personnel would be deployed overseas in 2005, with an additional 76,000 reservists supporting operations from the United States. After the drawdown of forces in Iraq, about 69,000 personnel would be deployed overseas in support of the GWOT, with an additional 38,000 reservists in support. CBO estimates this option would require about $56 billion in budget authority in 2005, declining to about $28 billion by 2010, after which the costs would increase with inflation. Budget authority associated with the occupation of Iraq and the GWOT under this scenario would total about $392 billion over the 2005-2014 period. Maintaining the current size of the force in the Iraqi theater for two more years, as assumed in this scenario, would require personnel levels that could not be sustained without raising concerns about adverse effects on U.S. forces (such as personnel retention and the ability to conduct training). Under this scenario, the force levels in Iraq would begin to decline after two years to a level that could be sustained using only active component Army combat forces. (Army National Guard and Marine Corps forces would no longer be required for combat or peacekeeping operations in Iraq, although National Guard units would still be needed for support activities.) Scenario Three. Under this scenario, the occupation force in Iraq would decrease to about 84,000 personnel in fiscal year 2005 and continue to decrease so that all forces would be out of the Iraq theater of operations by the beginning of fiscal year 2009. This scenario assumes that a total of 102,000 military personnel would be deployed overseas in 2005, with an additional 55,000 reservists supporting operations from the United States. Once all forces left Iraq, about 15,000 personnel would be deployed overseas in support of the GWOT, with an additional 18,000 reservists in support. CBO estimates this option would require about $38 billion in budget authority in 2005, declining to just over $9 billion by 2010, after which the costs would increase with inflation. Budget authority associated with the occupation of Iraq and the GWOT under this scenario would total about $179 billion over the 2005-2014 period.
|