Hans Nichols
The Hill
September 30, 2003

A bipartisan congressional proposal to forgive the – odious debt – racked up by the former Iraqi regime is encountering resistance from unlikely quarters.

The debt-relief proposal, which its congressional backers seek to attach to the $87 billion supplemental bill, is receiving a cool reception from two political entities that rarely find themselves in agreement: the House Democratic leadership and the White House.

Reps. Carolyn Maloney (D-N.Y.) and Jim Leach (R-Iowa) have introduced legislation, the Iraqi Freedom Debt Act that encourages the International Monetary Fund (IMF) and World Bank to waive the $150 million holdover debt from Saddam Hussein’s years in power.

The proposal also includes “a sense of Congress” provision that separate debts owed to France and Russia should be forgiven, too.

keri rasmussen Minority Leader Rep. Nancy Pelosi (D-Calif.) thinks the debt relief proposal is “a bad idea,” an aide said.

Its proponents argue that the Iraqi people should not be saddled with the cost of Saddam’s palaces and wars.

Officially, the House Democratic caucus hasn’t taken a position on the proposal. But a senior Democratic leadership aide said Minority Leader Nancy Pelosi (D-Calif.) is not inclined to support the proposal. “She thinks it’s a bad idea,” the aide said.

Meanwhile, the Bush administration appears divided on the idea. Two weeks ago, at a meeting between House GOP leaders and White House aides Dan Bartlett and Josh Bolten, House Majority Leader Tom DeLay (R-Texas) expressed enthusiasm for the idea. DeLay was outraged by the idea that any of the supplemental funds might repay French or Russian loans, a participant said.

But Bartlett and Bolten said the issue was a complicated one, and asked Republican leaders to hold their fire. They argued that debt cancellation would send the wrong message as the United States asks the international community to help defray the costs of rebuilding Iraq.

In late October, the Spanish government will host a United Nations-organized donor conference in Madrid to seek billions of dollars to finance Iraqi reconstruction.

But Ambassador L. Paul Bremer III, the U.S. administrator of Iraq, has supported the concept of relieving Iraq’s outstanding debts, much of which were generated as war reparations from the first Gulf War.

At a Department of Defense press conference Monday, Bremer said, “We are on the record as saying that there needs to be a very substantial reduction in that debt.”

The difference between Bremer’s public support and the advice Bartlett and Bolten are giving GOP House leaders could amount to one of timing.

Testifying before the House International Relations Committee last week, Bremer asked for some breathing room to deal with the debt forgiveness issue. “Give us a year and a half to essentially find a way to renegotiate substantial reductions in those debts,” he said.

Neither Republicans nor Democrats seem willing to stifle their opinions until after the Madrid conference, an event that could further inflame international political sensitivities.

A House GOP leadership aide said that the supplemental proposal would likely include a provision that would prevent France from benefiting from any of the additional disbursements.

Bremer also has written to Maloney that he supports the idea, and she is working to attach her proposal to the supplemental with Republican help.

“What are we going to do? Rebuild a country so that they can pay back odious debt to countries like France and Russia?” Maloney told The Hill.

Maloney, a member of the House Financial Services Committee, which has jurisdiction over the IMF and the World Bank, argued that the case for debt relief was more compelling because most of the debt in Iraq qualifies as “odious” debt that the previous, corrupt regime incurred without the consent of the people. Maloney raised her proposal with party leaders at last Thursday’s Democratic whip meeting. She said she was unaware that her leader didn’t back the bipartisan proposal.

“Everybody is listening at this point,” she said.

Estimates of the old regime’s outstanding debt range from $80-$360 billion, said Rick Barton, co-director of the Center for Strategic and International Studies Post-Conflict Reconstruction Project.

A broad ideological range of think tanks and advocacy groups – from the Heritage Foundation to Oxfam – have called for the cancellation of Iraq’s pre-war debt.

Some House conservatives are using the issue of Iraq’s outstanding debt to argue that the $20 billion in reconstruction money should be made in the form of loans and not direct grants, as the administration has requested.

Rep. Mike Pence, (R-Ind.) said, “If nothing else, insisting on a loan will get a us a seat at the table when we figure out how to reconfigure all this debt. We’ll have some leverage with the other debtor countries.”