LOANS FOR IRAQ

Most Americans, polls said, were supportive of President Bush’s overall performance until he made the mistake last month of leveling with them on Iraq. He then watched his poll numbers slide to near the lowest rating of his time in office. What shook the public perhaps was that his Sept. 7 speech confirmed what his critics had been saying, that the occupation of Iraq would be long and costly. How long isn’t known, but he was clear about the cash needed soon: $87.3 billion, including $20.3 billion for reconstruction.

Now it appears the president suffered for his honesty only to find his number was inadequate. Recent assessments from the World Bank and the United Nations put the reconstruction cost at $55 billion. The higher number serves as a warning of more large requests to come and strengthens the idea that long-term loans, rather than outright gifts, to the oil-rich nation of Iraq must be part of the aid package.

Congress is now going over the president’s request and, while finding some questionable expenses, seems largely to agree with the necessity of spending $65.6 billion of the total for supporting U.S. troops. But there is considerable disagreement over the remainder. Many in Congress are legitimately asking why, with so many unmet domestic construction demands – for schools, bridges, roads, libraries, etc. – is the United States making the reconstruction money a gift? Why not loan all or part of the money and expect payment based on the sale of oil?

Sen. Kay Bailey Hutchison, a conservative Texan and a member of the Senate GOP leadership, is asking these questions and finding bipartisan support for an amendment that would put half the $20.3 billion into a fund used to leverage matching foreign donations, a useful way to prod allies. The remaining would be offered as loans and loan guarantees. The GOP coalition forming behind her is broad. Co-sponsors include Sen. Susan Collins, a moderate, and Sen. Lindsey Graham of South Carolina, a conservative Republican, while Democrats can be counted on to line up to sign something that denies the president what he wants. Sen. Collins draws an important distinction between aid to Afghanistan, which lacks natural resources to turn into cash and has much less infrastructure on which to build, and to Iraq, which in a couple of years could be able to produce enough revenue on its own.

The White House has at least the possibility of a real concern about making the construction money a loan – Iraq already has a lot of debt. It owes Saudi Arabia $25 billion, banks in Russia as much as $16 billion; France, up to $8 billion; Japan, $7 billion. It also owes U.S. banks billions of dollars from before the first gulf war in ’91, but those loans have been largely written off. And that’s what should happen with at least some of these other debts. If Saudi Arabia wants to help bring stability to the region, forgiving Iraq’s debt would be a useful way to start. For France, which has been vocal about its concerns over Iraq’s future and says it wants to do more, forgiving its loans would be an empowering step. But even if this were not to occur, Iraq was not paying off its debt before the war and wouldn’t be expected to in the near future. A loan from the United States might include repayment schedules that Iraq could meet.

The new estimates of how much reconstruction in Iraq may cost should cause Congress to establish a pattern with the $87 billion request and ensure loans are part of the package.

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An editorial on this topic Sept. 30 inadvertently referred to the amount of money then being considered as a loan as $15 million. The number, of course, should have been $15 billion.