The Cable

Harry Reid’s fuzzy math on defense savings

Senate Majority Leader Harry Reid's (D-NV) newest plan to cut the deficit includes $1 trillion in "savings" from winding down the wars in Iraq and Afghanistan, but the numbers just don't add up.

Reid's plan, unveiled in a press conference today, claims to save $2.7 trillion over 10 years, including $1.2 billion in cuts to discretionary spending, $400 million in "interest savings," and over $1 trillion from "winding down the wars in Iraq and Afghanistan."

The $1 trillion in defense "savings" that Reid is claiming his plan provides is based against a projection the Congressional Budget Office put out last March that said war costs would top $1.67 trillion over the next ten years. However, that projection was never meant to accurately forecast the costs of the wars over the next decade. The report just took this year's costs for Iraq and Afghanistan ($159 billion) and added inflation for every year in the future.

The CBO made its projection based on simple math and it never had any connection to policy realities, as the Congressional Research Service explained in a new report today.

"The CBO baseline reflects CBO's March 2011 estimate of FY2011 overseas funding with increases at the rate of inflation in subsequent years," said the new report, which was crafted for congressional offices but obtained by The Cable. "It is important to note that the administration projection is not really a policy-based estimate -- CBO takes the most recent number and that becomes their baseline."

In other words, the CBO number, which puts the cost of the wars at $1.7 trillion over the next ten years, was the projection if the U.S. kept the current number of troops in Iraq and Afghanistan until 2020. However, nobody ever thought that was the plan. The CBO was required to do the math that way, as they do with all such projections.

The reality is that it is impossible to estimate the costs of the wars, because fundamental questions about U.S. policy toward both countries remain unanswered. For example, will the Afghanistan drawdown be complete by 2014, and what will be the pace of the drawdown? Will all U.S. troops be out of Iraq by the end of the year?

The CBO also put out numbers for war costs that assumed a gradual drawdown of troops. In fact, they put out two numbers, based on two different possible policy options. If U.S. policymakers decided to drawdown to 45,000 troops in both countries by 2015, the CBO projected that the cost of the wars would be $624 billion over 10 years. A steeper drawdown to 30,000 troops by 2013 would make the projection $422 billion over the next decade.

Reid appears to be counting the difference between the CBO's $1.7 trillion projection and its estimates of the cost of the wars after a steep drawdown as "savings." But that's problematic, because the base figure is simply a very high projection that has no connection to policy. Either way, the actual future drawdown plan is unknown.

A fact sheet issued by Reid's office only said, "Winding down the wars in Iraq and Afghanistan will save $1 trillion. Paul Ryan's budget also included this savings in its deficit reduction calculation, which was supported by 235 House Republicans and 40 Senate Republicans."

It's ironic that Reid defends his $1 trillion figure by pointing to the Ryan budget, because that document took its projections of future war costs from the Obama administration's February budget.  In that report, OMB budgeted an annual sum of $50 billion for the both wars. But that estimate was also made without knowing future U.S. policies toward Iraq and Afghanistan, and it's doubtful that the wars will cost $50 billion each year until 2020.

Gordon Adams, who led OMB's national security division during President Bill Clinton's administration, wrote that the $50 billion estimate was "what budget folks (like me) call a ‘plug' -- we know something will go there, but we don't know what it is."

By comparing fake numbers to each other, politicians can appear to be saving money, he claimed, without having to make actual defense cuts. Meanwhile, there's no real impact on the deficit.

"It abuses the budget process because the savings are mythological, not real, so they enforce no discipline on the Defense Department," Adams wrote. "And they are a fraud on the public, who will think a budget deal has cut the defense budget, when it has done no such thing."

In an interview today, Adams told The Cable that the whole episode is just another example of our leaders focusing on optics rather than getting down to the hard work of actually fixing our fiscal situation.

"Because it's too hard to really tackle the defense budget, first Ryan and now Reid have reached for these pseudo savings," he said. "The bottom line here is these are not budget savings. It doesn't make any sense."

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The Cable

Another task for Crocker: Fix relations between embassy and USAID

Ambassador Ryan Crocker was sworn in today as U.S. ambassador to Afghanistan. One of his first tasks in his new job will be to repair the dysfunctional relationship between U.S. diplomats in Kabul and Afghanistan-based USAID officials, which has hampered U.S. development assistance in the country.

The Kabul embassy -- which Crocker as interim charge d'affaires was tasked with reopening in January 2002 after the fall of the Taliban -- has an office to manage all development projects in Afghanistan called the Coordinating Director for Development and Economic Affairs (CDDEA). The office was meant to oversee USAID's efforts in the country, but according to a recent report by the State Department Inspector General's office, the relationship has suffered from bureaucratic and communications issues between aid workers and diplomats.

The report found that the problems between the embassy and USAID in Kabul stem in part from the State Department's idea that chiefs of mission should be in charge of all development issues in their country, as envisioned by the Quadrennial Diplomacy and Development Review (QDDR) that State released earlier this year.

"CDDEA's oversight of USAID in Kabul has highlighted differences in bureaucratic culture that exist between the Department and USAID at missions throughout the world," the report stated. "Although the QDDR envisions chiefs of mission as the ‘chief executive officer' of a multi-agency organization, this remains a work in progress and unresolved questions remain about their roles, authorities, and oversight responsibilities for assistance programs largely implemented by other agencies."

The report went on to say that bureaucratic differences "exacerbate feelings of professional misunderstanding" between CDDEA and USAID, and that officials in Washington need to step in to impose a resolution to these problems.

The IG said that Crocker should work with the office of the Special Representative for Afghanistan and Pakistan (SRAP) Marc Grossman, Deputy Secretary Tom Nides, and the Office of the Director of Foreign Assistance to explain to USAID exactly how they should work with the embassy.

USAID personnel in Kabul chafe at the embassy's demands for lots of briefings and explanations of their financial management. They also feel like second-class citizens because the embassy doesn't provide them with the best housing and office space, the report said.

On the other hand, the embassy folks don't believe the USAID personnel are on board with the "whole of government" approach, the report states. They think USAID withholds information from them and sometimes creates political messes they are then forced to clean up.

The USAID mission has responsibility for a large portion what will reportedly be over $71 billion of U.S. assistance to Afghanistan by the end of 2011, making it a significant player in the largest U.S. development mission in the world.

It's been a rough few weeks for the USAID mission in Afghanistan. A report last week by the Government Accountability Office found that USAID is failing to properly oversee aid dollars.

"Direct assistance to the Afghan government involves considerable risk given the extent of corruption, the weak institutional capacity of the Afghan government to manage finances, the volatile and high-threat security environment, and that the U.S. funds may be obligated months or years after they are awarded," the report said. "Although risk assessment is a key component of internal controls, current USAID policy does not require preaward risk assessments of all Afghan government recipients of U.S. direct assistance funds."

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