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October 2, 2003
In his Tuesday column in the New York Times, Paul Krugman socked it to the White House for its cronyism in doling out Iraq reconstruction contracts to industry pals. He said the reconstruction of Iraq has become a windfall for the old-boys club, and a disaster in the making for Iraqis:

"Cronyism is an important factor in the Iraqi debacle. It's not just that reconstruction is much more expensive than it should be. The really important thing is that cronyism is warping policy: By treating contracts as prizes to be handed to their friends, administration officials are delaying Iraq's recovery, with potentially catastrophic consequences.

The cost of the occupation is exploding, and military experts warn that our army is dangerously overcommitted. Yet officials are still allowing Iraqi reconstruction to languish, and the disaffection of the Iraqi public to grow, while they steer choice contracts to their friends. What makes you think they will ever change their ways?"
The same day Krugman's column appeared, Michael Scherer of Mother Jones, and Douglas Jehl of the New York Times broke the news that lobbyists with close ties to the White House are well established in Baghdad, connecting Western businesses with the American and Iraqi power brokers overseeing the reconstruction. Having left the Bush administration just weeks before the war in Iraq, Joe Allbaugh, Bush's former campaign manager, and director, until March, of the Federal Emergency Management Agency, set up a lobbying firm in Baghdad, called New Bridges Strategies. As Scherer writes, "The firm has already attracted companies looking to sell Iraq everything from new phone lines to catering services." New Bridges' Web site explains its mission:

"[New Bridges Strategies'] activities will seek to expedite the creation of free and fair markets and new economic growth in Iraq, consistent with the policies of the Bush Administration. The opportunities evolving in Iraq today are of such an unprecedented nature and scope that no other existing firm has the necessary skills and experience to be effective both in the United States and on the ground in Iraq."
The recent revelations won't help the Bush administration this week as the House and Senate cobble together an appropriation in response to the president's $87 billion emergency war funding request. On Wednesday, the Senate Appropriations Committee unanimously approved $66.7 billion to support U.S. troops and $20.3 billion for Iraqi reconstruction. The measure now goes to the Senate floor for full approval. This might not prove easy, if comments like Senator Arlen Specter's are any guide. In the committee proceedings Specter mused, "We ought not be too fast to give away $20 billion if we can find a way not to."

As the House enters its fourth day of debate, it looks like the Republicans might not be able to deliver as Bush would like. Momentum has been building for Iraqis to pay a larger sum of the reconstruction cost with oil revenue, as promised by vice president Dick Cheney promised before the war. Some House members say that rather than send Iraq a blank check, the country could be issued loans to be repaid once their oil industry is up and running. Senator Byron Dorgan (D-ND) proposed something along these lines in a debate:

"American taxpayers should not be required to pay for rebuilding Iraq's infrastructure, especially when the American 'shock and awe' (bombing campaign) deliberately avoided damaging Iraq's infrastructure."
Members of the House and the Senate are now poring over Bush's itemized $87 billion wish list. As the Washington Post reports, Congressman Henry Waxman of California recently sent a letter the White House budget director accusing the administration of favoring American companies over their inexpensive Iraqi counterparts. Waxman writes, "requesting huge dollar amounts for complex projects that will be awarded to well-connected U.S. contractors operating at expensive premiums." As the Senate opened their first day of debate on Wednesday, some were skeptical as to whether the G.O.P. will be able to deliver Bush's request in the full amount.

Even before the war began, critics of the Bush administration have long expressed alarm that Cheney, the former CEO of Halliburton, which stands to make about $2 billion in Iraq, and other White House officials are so closely tied to companies making big bucks in Iraq. San Francisco's anti-war activists targeted the politically-connected Bechtel Group before the war, suspecting the company stood to gain from any military campaign. Well, guess what? Bechtel is doing very nicely in postwar Iraq, having quickly secured an initial $680 million reconstruction contract, recently topped up with an additional $300m.

Calls for reform are getting louder. On Wednesday, the New York Times editorial board followed Krugman's lead:

"The real problem is that without strong legislative safeguards and oversight, billions of taxpayer dollars are sure to be wasted through insufficiently competitive contracts to politically connected firms like Halliburton and Bechtel. That has largely been the pattern until now. Congress also needs to make sure that reconstruction programs do not fritter away their resources by relying on expensive American workers and supervisors when qualified, reliable and currently unemployed Iraqis could easily do the work.

Unless Congress puts an end to this kind of profiteering, American taxpayers are almost certain to be saddled with much higher long-term reconstruction costs. The rebuilding of Iraq's shattered public services and vital infrastructure, already behind schedule, will be subjected to further dangerous delays. As the elections approach, Mr. Bush will find himself facing even louder demands than he's now getting from the conservative right and the liberal left to cut the nation's financial and military losses. Bowing to these pressures could have disastrous results. The faster Iraq's economy and society are restored, the sooner American troops can safely return home without leaving behind a new breeding ground for terrorism."


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