Exclusive: Democrats seek up to $3 trillion budget savings (Reuters)

WASHINGTON (Reuters) – Democrats are proposing up to $3 trillion in measures to slash the U.S. budget deficit, including revenue increases and significant cuts to the Medicare health insurance program for the elderly.

The plan was unveiled on Tuesday at a closed-door meeting of a 12-member congressional panel -- the so-called "super committee" that is assigned the task of finding at least $1.2 trillion in deficit reduction over 10 years, congressional aides told Reuters.

It was the first formal proposal by Democrats on the committee and is aimed at galvanizing closed-door talks that are quickly running up against a November 23 deadline.

The plan proposes cutting the deficit by $2.5 trillion to $3 trillion through a roughly equal mix of spending cuts and revenue increases.

It calls for between $200 billion and $300 billion in new economic stimulus spending that would be paid for with lower interest payments from reducing deficits.

It also seeks around $400 billion in Medicare savings, with half coming in benefit cuts and the other half in cuts to healthcare providers. Details of that proposal were scant but tackling the popular Medicare program is always politically risky for politicians.

The congressional aides were not immediately able to say how the revenue increases would be achieved.

One of the congressional aides noted that parts of the Democrats' proposal are similar to long-term spending cuts that President Barack Obama discussed with House of Representatives Speaker John Boehner, the top Republican in Congress, a few months ago when they were struggling to get a "grand bargain" to raise the U.S. debt ceiling.

Those talks faltered and the White House and Congress ended up agreeing to a smaller, $917 billion deficit-reduction package that also raised the U.S. borrowing authority and averted a government default on its debt.

One of the congressional sources said Republicans on the committee did not react favorably to the new Democratic plan.

Republicans have long been opposed to more economic stimulus spending and increasing revenues in deficit-reduction efforts.

RATING AGENCIES WATCHING CLOSELY

But with U.S. budget deficits topping $1 trillion annually, ratings agencies are watching closely for how the committee advances toward a credible long-term solution to restore the U.S. fiscal health.

Standard & Poor's cut the U.S. AAA rating by one notch in August after the fractious negotiations between Republicans and Democrats on raising the debt ceiling failed to agree on a comprehensive deal.

Rating agencies say Washington needs to find a total of about $4 trillion in savings, including the amount agreed to in August. That total is far beyond the $1.2 trillion minimum the super committee must find by November 23.

The congressional aides did not say why Democrats were proposing such a big deal, but Democratic congressional leaders have repeatedly called on the committee to go beyond its mandate to fix the country's fiscal mess.

While sources portrayed the proposal as a Democratic plan, they also noted that at least one Democrat on the super committee, Representative James Clyburn, had reservations about the move to cut Medicare spending.

(Editing by Will Dunham)

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Half a trillion dollars of broken Afghan dreams (Reuters)

KABUL (Reuters) – In the decade since U.S.-led troops streamed into Afghanistan, girls have gone back to school, elections have been held, clinics have been built and shops and media empires have sprung up. There is even a property boom in Kabul.

To the nations that poured money, lives and hope into rebuilding the country, after the September 11, 2001 attacks on the United States propelled it back onto the international agenda, progress like this is proof of time and money well spent.

"We just have to continue the process, and recognize again: you don't build Rome or Kabul in a day, or a decade," U.S. Ambassador Ryan Crocker said in a recent interview, discussing improvements in education and healthcare.

But corruption is rampant, violence is spreading fast even in once-peaceful areas, and every month an average of over 200 civilians die in the conflict.

Safety fears stop people traveling to hospitals, or even to schools -- so much so that some conservative Afghans still hark back to the security and values that the Taliban offered.

And looming over any development gains is the prospect, for a country that has already endured nearly 30 years of war, of a slide back into chaos once foreign troops hand over to Afghan forces -- which they have promised to do by the end of 2014.

"The most striking thing that stands out, whatever people feel about what has happened, whether it was good or bad, is they aren't sure about their future," said Martine van Bijlert, co-director of the Afghanistan Analysts' network.

"There have of course been achievements, but it doesn't balance out the sense that everything could fall apart. And there is a strong sense that the achievements are not proportionate to all the money and focus that has been given to Afghanistan."

At stake is not just Afghanistan's future, but U.S. security. A country engulfed in civil war could easily become a refuge again for groups looking to attack America.

"HERE FOR THEIR OWN BENEFIT"

The rivers of cash that have flooded through Afghanistan have left many wondering why they still live in one of the poorest countries in the world, and questioning where it went.

"The foreigners are here for their own benefit. They came here by force and they will leave here by force," said Sayed Mujtaba Mahmoddi, a Kabul university student who says the September 11 attacks have overall been bad for his country.

"Afghanistan has developed a lot during the past years, but the development does not match the money spent. So I think the international mafia, together with the Afghan government, spent all this money improperly."

For the nearly $450 billion Congress estimates the U.S. alone has spent waging war there, every Afghan man, woman and child could have been handed $15,000. That sum is 10 years' earnings for an average Afghan, according to U.N. estimates.

Life expectancy is under 45 years, and around a quarter of children don't even live to see their fifth birthday. Even for those who survive, expectations are low.

Just one in four adults can read or write and, while unemployment is hard to measure in a rural country beset by an insurgency, it is believed to run as high as 40 percent.

The West's aid and military spending, while well-intentioned, was overwhelming for Afghanistan -- with its security problems, tiny pool of educated workers, and infrastructure devastated by years of war.

"The enormous ambition to get quick results has led us to pour in more external resources than society can absorb," said one senior Western diplomat working in Kabul.

So instead of funding growth, much of it has been diverted -- into the pockets of both the elite and insurgents -- helping to fuel a culture of rampant corruption. Everything from justice to electricity supply is tangled up in demands for bribes

Graft costs Afghans $2.5 billion a year, according to U.N. estimates; Transparency International rated it the world's third most corrupt country, behind only Myanmar and Somalia.

DEATH AND HATRED

For some, the war has spelt not just uncertainty, but catastrophe. Abdullah, from eastern Nangarhar province, dreamt of being an interpreter and got good grades until U.S. soldiers arrived at night and shot his father and elder brother.

Village elders and a local member of parliament say the men were not insurgents; now Abdullah, who was also detained briefly, works in a brick kiln to support his family.

"The U.S. troops freed me and they said that your brother and your father were innocent. What they said to me did not satisfy me. If I had the power I would behead them all," he told Reuters in the courtyard of the family's mud house.

Nationwide, the toll on civilians is getting higher. The first six months of this year were the deadliest since the overthrow of the Taliban; 368 were killed in May alone.

The vast majority of the deaths were caused by insurgents, but it is the foreign killings that most often spark outrage.

"Afghans don't expect not to be killed by the Taliban, but they do expect not to be killed by international forces," said Heather Barr, of Human Rights Watch Afghanistan.

"So even if only 20 percent of the deaths are caused by foreigners, it can still be a public relations loss."

Not only does that anger sap support for the war among voters back home, it is also helping prolong the conflict.

There is a common perception that Western forces seeking quick results have been used by commanders to settle personal scores, or by given false tips by informers seeking payment.

"They have killed and detained many innocent people; they raided and searched ordinary people's houses based on wrong intelligence," said Afghan political analyst Waheed Mojda.

"As a result people...felt that sooner or later we will get killed or detained by foreign troops so they decided to get guns and fight against the foreign troops."

A decade ago, after 9/11, many welcomed those troops for helping overthrow the Taliban.

But although the West rushed into Afghanistan with money, forces and talented officials, years of relative neglect meant they lacked one critical commodity: understanding of the complexities of the country they wanted to transform.

"The huge optimism, the sense of a clean state, the idea that you could build a country and a government from zero -- that was the biggest mistake," van Bijlert said.

(Additional reporting by Mirwais Harooni)

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U.S. cost of war at least $3.7 trillion and counting (Reuters)

NEW YORK (Reuters) – When President Barack Obama cited cost as a reason to bring troops home from Afghanistan, he referred to a $1 trillion price tag for America's wars.

Staggering as it is, that figure grossly underestimates the total cost of wars in Iraq, Afghanistan and Pakistan to the U.S. Treasury and ignores more imposing costs yet to come, according to a study released on Wednesday.

The final bill will run at least $3.7 trillion and could reach as high as $4.4 trillion, according to the research project "Costs of War" by Brown University's Watson Institute for International Studies. (http://www.costsofwar.org)

In the 10 years since U.S. troops went into Afghanistan to root out the al Qaeda leaders behind the September 11, 2001, attacks, spending on the conflicts totaled $2.3 trillion to $2.7 trillion.

Those numbers will continue to soar when considering often overlooked costs such as long-term obligations to wounded veterans and projected war spending from 2012 through 2020. The estimates do not include at least $1 trillion more in interest payments coming due and many billions more in expenses that cannot be counted, according to the study.

In human terms, 224,000 to 258,000 people have died directly from warfare, including 125,000 civilians in Iraq. Many more have died indirectly, from the loss of clean drinking water, healthcare, and nutrition. An additional 365,000 have been wounded and 7.8 million people -- equal to the combined population of Connecticut and Kentucky -- have been displaced.

"Costs of War" brought together more than 20 academics to uncover the expense of war in lives and dollars, a daunting task given the inconsistent recording of lives lost and what the report called opaque and sloppy accounting by the U.S. Congress and the Pentagon.

The report underlines the extent to which war will continue to stretch the U.S. federal budget, which is already on an unsustainable course due to an aging American population and skyrocketing healthcare costs.

It also raises the question of what the United States gained from its multitrillion-dollar investment.

"I hope that when we look back, whenever this ends, something very good has come out of it," Senator Bob Corker, a Republican from Tennessee, told Reuters in Washington.

SEPT 11, 2001: THE DAMAGE CONTINUES

In one sense, the report measures the cost of 9/11, the American shorthand for the events of September 11, 2001. Nineteen hijackers plus other al Qaeda plotters spent an estimated $400,000 to $500,000 on the plane attacks that killed 2,995 people and caused $50 billion to $100 billion in economic damages.

What followed were three wars in which $50 billion amounts to a rounding error. For every person killed on September 11, another 73 have been killed since.

Was it worth it? That is a question many people want answered, said Catherine Lutz, head of the anthropology department at Brown and co-director of the study.

"We decided we needed to do this kind of rigorous assessment of what it cost to make those choices to go to war," she said. "Politicians, we assumed, were not going to do that kind of assessment."

The report arrives as Congress debates how to cut a U.S. deficit projected at $1.4 trillion this year, roughly a 10th of which can be attributed to direct war spending.

What did the United States gain for its trillions?

Strategically, the results for the United States are mixed. Osama bin Laden and Saddam Hussein are dead, but Iraq and Afghanistan are far from stable democracies. Iran has gained influence in the Gulf and the Taliban, though ousted from government, remain a viable military force in Afghanistan.

"The United States has been extremely successful in protecting the homeland," said George Friedman, founder of STRATFOR, a U.S.-based intelligence company.

"Al Qaeda in Afghanistan was capable of mounting very sophisticated, complex, operations on an intercontinental basis. That organization with that capability has not only been substantially reduced, it seems to have been shattered," Friedman said.

Economically, the results are also mixed. War spending may be adding half a percentage point a year to growth in the gross domestic product but that has been more than offset by the negative effects of deficit spending, the report concludes.

COMPREHENSIVE STUDY

Some U.S. government reports have attempted to assess the costs of war, notably a March 2011 Congressional Research Service report that estimated post-September 11 war funding at $1.4 trillion through 2012. The Congressional Budget Office projected war costs through 2021 at $1.8 trillion.

A ground-breaking private estimate was published in the 2008 book "The Three Trillion Dollar War," by Linda Bilmes, a member of the Watson Institute team, and Nobel-winning economist Joseph Stiglitz. That work revealed how much cost was added by interest on deficit spending and medical care for veterans.

The report draws on those sources and pieces together many others for a more comprehensive picture.

The report also makes special note of Pakistan, a front not generally mentioned along with Iraq and Afghanistan. War has probably killed more people in Pakistan than in neighboring Afghanistan, the report concludes.

Politicians throughout history have underestimated the costs of war, believing they will be shorter and less deadly than reality, said Neta Crawford, the other co-director of the report and a political science professor at Boston University.

The report said former President George W. Bush's administration was "shamelessly politically driven" in underestimating Iraq war costs before the 2003 invasion.

Most official sources continue to overlook costs, largely because of a focus on just Pentagon spending, Crawford said.

"Over the last decade, we have spent a trillion dollars on war," Obama said in last week's speech on reducing U.S. troop levels in Afghanistan. At the very least, he was rounding down by $200 billion to $300 billion, when counting U.S. congressional appropriations for the post 9/11 wars.

"I don't know what the president knows, but I wish it were a trillion," Crawford said. "It would be better if it were a trillion."

ELUSIVE NUMBER

In theory, adding up the dollars spent and lives lost should be a statistical errand. The U.S. Congress appropriates the money, and a life lost on battlefield should have a death certificate and a casket to match.

The team quickly discovered, however, the task was far more complicated.

Specific war spending over the past 10 years, when expressed in 2011 dollars, comes to $1.3 trillion, the "Costs of War" project found. When it comes to accounting for every dollar, that $1.3 trillion is merely a good start.

Since the wars have been financed by deficit spending, interest must be paid -- $185 billion of accumulated so far.

The Pentagon has received an additional $326 billion to $652 billion beyond what can be attributed to the war appropriations, the study found.

Homeland security spending has totaled another $401 billion so far that can be traced to September 11. War-related foreign aid: another $74 billion.

Then comes caring for U.S. veterans of war. Nearly half of the 1.25 million who have served in uniform in Iraq and Afghanistan have used their status as veterans to make health or disability claims at an expense of $32.6 billion to date.

Those costs will soar over the next 40 years as veterans age. The report estimates the U.S. obligations to the veterans will reach $589 billion to $934 billion through 2050.

So far, those numbers add up to a low estimate of $2.9 trillion and a moderate estimate of $3.6 trillion in costs to the U.S. Treasury. No high estimate was offered.

"We feel a conservative measure of costs is plenty large to attract attention," said report contributor Ryan Edwards, an economist who studied the war impact on deficit spending.

Those numbers leave out hundreds of billions in social costs not born by the U.S. taxpayer but by veterans and their families: another $295 billion to $400 billion, increasing the range of costs to date to some $3.2 trillion to $4 trillion.

That's a running total through fiscal 2011. Add another $453 billion in war-related spending projected for 2012 to 2020 and the total grows to $3.668 trillion to $4.444 trillion.

THE HUMAN TOLL

If the financial costs are elusive, so too is the human toll.

The report estimates between 224,475 and 257,655 have been killed in Iraq, Afghanistan and Pakistan, though those numbers give a false sense of precision. There are many sources of data on civilian deaths, most with different results.

The civilian death toll in Iraq -- 125,000 -- and the number of Saddam's security forces killed in invasion -- 10,000 -- are loose estimates. The U.S. military does not publish a thorough accounting.

"We don't do body counts," Tommy Franks, the U.S. commander in Iraq, famously said after the fall of Saddam in 2003.

In Afghanistan, the civilian death count ranges from 11,700 to 13,900. For Pakistan, where there is little access to the battlefield and the United States fights mostly through aerial drone attacks, the study found it impossible to distinguish between civilian and insurgent deaths.

The numbers only consider direct deaths -- people killed by bombs or bullets. Estimates for indirect deaths in war vary so much that researchers considered them too arbitrary to report.

"When the fighting stops, the indirect dying continues. It's in fact worse than land mines. The healthcare system is still in bad shape. People are still suffering the effects of malnutrition and so on," Crawford said.

Even where the United States does do body counts -- for the members of the military -- the numbers may come up short of reality, said Lutz, the study's co-director. When veterans return home, they are more likely to die in suicides and automobile accidents.

"The rate of chaotic behavior," she said, "is high."

(Additional reporting by Susan Cornwell, Missy Ryan, Brett Gering, Laura MacInnis and Sharon Reich; Editing by Doina Chiacu)

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