Congressional critics of the Bush administration's request for approximately $20 billion for reconstruction of Iraq are asking why this should be provided largely in grants, as was the case with much of the Marshall Plan aid to war-devastated Europe, rather than in loans to be repaid by oil revenues. Such critics are reflecting, or appealing to, Americans' longstanding -- and not unjustifiable -- skepticism about foreign aid. The skepticism is heightened when, as now, American government budgets are rationing pleasures and imposing pains.
Furthermore, some critics are reasoning under the influence of yet more instances of faulty prewar estimates, this time concerning postwar Iraq's oil-exporting capacity. The administration spoke of a self-financing reconstruction, with oil revenues paying for everything ``relatively soon.''
Whether the administration should have known better -- it did have in hand a more cautious analysis -- is not today's pertinent point, which is: Oil revenues will not be as abundant as was hoped, as early as was hoped. Paul Bremer, head of U.S. nonmilitary operations in Iraq, says that for at least the next two years, oil revenues will at best match Iraq's operating expenses.
Iraq already has $127 billion of debt, not counting approximately $100 billion of reparations owed, mostly to Kuwait, from the 1991 Gulf War. This unadjudicated reparations sum may and should be radically reduced. Still, McPherson says that external debt equal to 100 percent of annual GDP is ``not sustainable.'' Germany's debt after World War I, which may have helped put that nation on the path toward World War II, was twice its GDP. Iraq's debt is now four to five times that level.
It would be fun to forgive the debts contracted by a regime that ruled against the interests of the Iraqi people, money owed to nations that opposed the liberation of those people who are saddled with the debt. Fun, but improvident: Chaos in international finance would result from making the validity of nations' debts contingent on the virtues, or continuity, of nations' regimes.
Besides, McPherson says he has spoken with many Iraqis, and ``they do not say we came to steal their oil. But if we load them with debt payable by oil revenues ...'' Enough said.
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