The Thief of Baghdad

Missing: One giant generator owned by the United States military. Estimated cost: $734,863

Last seen: Somewhere in Iraq.

While much of the media is focused on the pitched battle over the control of the holy shrine in Najaf, a bigger scandal is brewing in Iraq that may well have an equally important effect on the future of the U.S. occupation.

A team of auditors was dispatched to Iraq in late January this year after a string of internal reports showed that the military was wasting billions of dollars of taxpayer money. They have issued eleven reports since June 25, almost all of which have pointed to the misuse of the money allocated for reconstruction, be it Iraqi or Congress-appropriated funds.

According to two of these reports issued in late July by Stuart Bowen, the auditor-inspector general of the Coalition Provisional Authority (CPA), not only have a full one-third of the items purchased by the Pentagon gone MIA (including the pricey generator), but a whopping. $1.9 billion or more of Iraqi oil revenue has also mysteriously disappeared.

Embarrassed military authorities did eventually track down the missing generator and much of the money, both of which seemed to have ended up with none other than Halliburton. As it turns out they weren't missing after all; it's just that Dick Cheney's former employer had misplaced or conveniently forgotten to turn in the receipts to the correct people.

But the Pentagon was not able to explain just how Halliburton gained possession of Iraqi funds when neither the United States Congress nor the Iraqi government authorized their transfer to Halliburton in the first place. Worse yet, the man who authorized the allocation – CPA chief Paul Bremer – had already quietly left Iraq just as the reports were being released.

Yet days after the much-touted "transfer of sovereignty," the White House revealed an even more startling detail about the reconstruction effort: In over a year, the CPA had managed to spend just 2 percent of the $18.4 billion earmarked for the immediate reconstruction of Iraq. And not a penny was spent on the two areas where the Iraqi people were suffering the most: healthcare or water and sanitation.

So what is really going on? Is the United States spending too much or too little money in Iraq?

To answer that question, we need to separate the apples from the pears and the oranges.

Other People's Money

There are three treasure chests that the Occupation authorities are allowed to dip their hands into. The $87 billion appropriation that Congress granted to the Bush administration in September 2003 was divided into two funds: the bigger chunk, some $65 billion, for military operations and $18.4 billion for reconstruction. The Development Fund of Iraq (a.k.a. the revenues accrued from the sale of Iraqi oil) is the third treasure chest.

Treasure Chest No. 1 was quickly spent after the invasion on hiring Halliburton to supply the soldiers. In fact, the Pentagon has reportedly exceeded this allotment by an estimated $12 billion. This appropriation has been the source of most of the money spent in Iraq. It is also the money that has been subjected to a series of careful audits by the Defense Contract Audit Agency, the General Accounting Office (the investigative arm of Congress), and Stuart Bowen's team of auditors in Baghdad – all of whom have fiercely criticized Halliburton for its pricing and spending practices.

The CPA barely touched the $18.4 billion allocated by Congress for reconstruction (Treasure Chest No. 2)because of stringent bidding and oversight requirements to prevent fraud or waste. Many of the reconstruction bills were instead paid for with revenue from the sale of Iraqi oil (Treasure Chest No. 3). Some of this money was spent on Halliburton for the repair of the oil infrastructure; some was simply handed out in cash to local people by soldiers in return for favors such as rebuilding offices or building football fields.