Democrat says Libya costs run much higher

By Seth McLaughlin, Washington Times

A Democratic lawmaker says the White House is “dramatically underestimating” the true cost of the military’s involvement in Libya by relying on accounting that obscures the total financial burden being saddled on taxpayers.

Rep. Brad Sherman, a lawyer and accountant, told The Washington Times on Thursday that more accurate accounting of the mission would provide a clearer picture of just how much money the U.S. pours into this and other U.N.-backed missions while putting Congress in a better position to silence critics who say the nation is shortchanging the global body. The Californian also said the cost of the U.S. involvement in Libya should be covered with the estimated $33 billion in Libyan assets that have been frozen by the Treasury Department.

“As much fun as I find cost accounting, the reason I raise these issues is because I think those Libya assets ought to be available to pay for what goes on over and in Libya, and because I think in negotiating with other countries over whether we are doing enough for the U.N. we should not hesitate to point out the high cost of what we are doing [with U.N. support],” he told The Times.

Last week, Secretary of Defense Robert M. Gates testified that the nation’s initial involvement in establishing a no-fly zone over the skies of Libya — Operation Odyssey Dawn — carried a $550 million price tag and that the cost of the support role to NATO going forward would be about $40 million a month. Mr. Gates also assured lawmakers that he had enough money in his budget to absorb the costs, though he wasn’t ready to reveal the source of the money.

But in a House Foreign Affairs Committee hearing on U.N. funding Thursday with Susan Rice, the U.S. ambassador to the U.N., Mr. Sherman said the Pentagon’s estimates of the mission in Libya are based on what’s known as “marginal-cost” accounting, which doesn’t consider such things as overhead costs from the development of the weapons systems and equipment being used, or the salaries of the military men and women flying airplanes in the skies and floating on ships in the seas around Libya.

“That effort is costing us billions a week,” Mr. Sherman told his colleagues, while arguing that “full-cost” accounting is a more “legitimate system of accounting” that would generate a more accurate snapshot of the financial burden shouldered by the United States. By doing so, he said, the country would gain the “diplomatic advantage of telling the world the enormous burden the taxpayer absorbs in order to make available to such actions as Libya our unique military capacity.”

In a testy exchange, Mrs. Rice said that the “Libya mission is not one that falls under U.N. accounting or U.S. budgeting. It is something we are undertaking in a national capacity.”

Last month, President Obama authorized U.S. forces to help enforce a U.N. resolution calling for the international community to protect civilians in Libya. After a week and a half of the U.S. leading the operations, control was turned over to NATO. Army Gen. Carter F. Hamm, the U.S. general in charge of Africa Command, told the Senate Armed Services Committee on Thursday that the ongoing civil war between Libyan leader Moammar Gadhafi and rebel forces had reached a stalemate, which is “not the preferred solution.”

Meanwhile, on the other side of the Capitol, Rep. Ileana Ros-Lehtinen, Florida Republican and chairwoman of the House Foreign Relations Committee, said she plans to introduce a bill next week that would make all U.S. contributions to the U.N. voluntary.

With the country facing trillion-dollar deficits, Ms. Ros-Lehtinen and other committee Republicans said U.S. payments to the U.N. should be contingent on the world body making serious efforts to reform the Human Rights Council and stopping what they said amounts to an anti-Israel agenda.

As it stands, the U.S. is the largest contributor to the U.N., paying 22 percent of the U.N.’s regular budget and 27 percent of the money for peacekeeping operations.

After the Foreign Relations Committee hearing, Mr. Sherman told The Times that marginal cost accounting is rarely — if ever — used in private industry, where overhead, research, training and salaries are used to determine cost.

“I think they have lowballed it by using marginal cost,” he said, alluding to the Pentagon’s estimate. “And as far as I can tell they have computed the narrowest definition of marginal cost accurately, but marginal cost is a small percentage of the full cost of anything.”

“From my experience in private industry, marginal cost is 10 to 20 percent of full cost,” he said. “I have never seen a circumstance where marginal cost was even half of full cost.”

April 8, 2011 | 3 Comments »

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  1. Am I missing something? Isn’t the oil supply in a glut situation right now? And what about the oil that’s lying dormant under Canadian, US (and Israeli) soil right now? And what about Obama’s pontificating on how nasty that dirty Alberta oil is? It almost looks as if he doesn’t want any oil, no matter where it’s from…

    Naw… I must be dreaming…

  2. The peak oil crisis: 2011 – a pivotal year?
    by Tom Whipple

    Wall Street is getting nervous. As oil prices continue to creep up and as more evidence accumulates that the age of ever-growing energy production and economic growth is coming to an end, a specter is haunting the great investment banks and brokerage houses of New York. For five years now Wall Street and its chorus in the financial media have ignored or denied that global oil production has reached a plateau after 150 years of steady growth. Those who did admit to a problem were quick to assert that the markets would find substitutes first in the form of endless quantities of coal waiting to be exploited and more recently 100 years’ worth of shale gas would come seamlessly to the rescue.

    The nervousness of course is that once global energy production starts to decline, capitalism as we have known it for the last few centuries will no longer be the same. While some new form of an economic system will evolve, the transition is likely to be long and painful. Many, if not most, jobs in the financial industry will simply melt away. Hence, for many, putting off the fateful day when we have to admit the inevitable is much preferred solution.

    The events of 2008 when oil shot up briefly to $147 a barrel and the global economy trembled for months are still fresh in many minds. The western world’s banking system and Detroit had to be bailed out by the increasingly insolvent U.S. and European governments. Had not oil prices quickly reversed as demand for oil products faltered and oil plunged to $32 a barrel, we would have been living in a different world right now.

    As we enter 2011, the denials that significant change is coming continue. Oil prices continue to rise, but until recently they have been met with the idea oil that could go up a bit more, but certainly not enough to damage the economic recovery. Oil may get to over $100 a barrel shortly it certainly will not go much further. In the last few weeks, however, a few as yet faint voices in the media have been adding a sentence or two to the effect that all might not be as well as hoped. Read more

    WTI oil
    trading over $111, IMF joins the peak oilers party

    IMF Warns on $150 Plus Oil Prices

    The IMF said if tensions between oil demand and supply factors intensified there could be price spikes rivaling the 2008 price surge that drove crude oil futures to nearly $150 a barrel.

    Basically, the IMF report suggests that oil demand is going to be higher than oil supply, otherwise know a the peak oil theory.

  3. Sherman is hyper-populistic venting here and I would never choose him for an accountant.

    The American military is in place with no increase or extra expenditures today than they had before they attacked a sovereign nation ,Libya! Only the cost of war material expended and replaced like cruise missiles and extra air sorties should be counted as a specific operational expense as well as planes shot down like the F-15. I think all things considered since the US, is the main aggressor along with Britain and France that they should pay the costs, oh yes, NATO as well but here that still falls mainly on America.

    He wants the aggressor war criminals to steal the assets of the nation whom they are aggressing to pay the cost of that aggression. Nice, very American of him. How come he didn’t suggest and demand the same in Iraq? There the American tax payer is on the hook for well over a $ Trillion and still climbing but not a drop of oil money coming back to Americas treasury. In Iraq the Chinese got all the new oil leases not the sucker Americans. How come all those right wing conservatives are quiet about Iraq??? I know…Iit is hypocrisy compounded by gross criminal stupidity.

    I wonder if Gaddafi throwing out western oil companis from Libya and inviting the Russians and Chinese to come in to replace them has anything to do with the angst against Gaddafi ? Naw!! Couldn’t be greed and oil?

    Anybody heard of the Ivory Coast?

    Ivory Coast: mass graves found
    The scale of ethnic massacres in Ivory Coast began to emerge yesterday after UN investigators found over 100 dead bodies, some burned alive and others thrown down a well in the space of 24 hours.

    Why is it I find myself siding with a Cretan like Gaddafi against the West and America? Because this time Gaddafi is in the right. America is leading the charge in a classical Imperialist oil Grab.

    What’s really behind he ME upheavals? It’s Peak Oil