PRESIDENT GEORGE W. BUSH: Over the course of this war we have learned that winning a battle for Iraqi cities is only the first step. We also have to win the battle after the battle by helping Iraqis consolidate their gains and keep the terrorists from returning.
As improvements in training produce more capable Iraqi security forces, those forces have been able to hold on to the cities we cleared out together.
With help from our military and civilian personnel, the Iraqi government can then work with local leaders and residents to begin reconstruction with Iraqis leading the building efforts and our coalition in a supporting role. This approach is working.
As soon as the fighting in Najaf ended, targeting reconstruction moved forward. The Iraqi government played an acting role, and so did our military commanders and diplomats and workers from the U.S. Agency for International Development. Together, they work with Najaf's governor and other local officials to rebuild the local police force, repair residents' homes, refurbish schools, restore water and other essential services.
Construction jobs are putting local residents back to work. One man from Najaf put it this way: Three years ago we were in ruins. One year ago we were fighting in the streets. Now look at the people -- shopping and eating and not in fear.
There's still plenty of work left to be done in Najaf. Like most of Iraq, the reconstruction in Najaf is preceded with fits and starts since liberation. It's been uneven. Sustaining electric power remains a major challenge.
Another area that has seen tremendous gains is the ancient city of Mosul. As security in Mosul improved, we began working with local leaders to accelerate reconstruction. Iraqis upgraded key roads and bridges over the Tigris River, rebuilt schools and hospitals and started refurbishing the Mosul airport.
Police stations and firehouses were rebuilt, and Iraqis have made major improvements in the city's water and sewage network. Mosul still faces challenges.
Like Najaf, Mosul's infrastructure was devastated during Saddam's reign. The city is still not receiving enough electricity, so Iraqis have a major new project under way to expand the Mosul power substation.
Terrorist intimidation is still a concern. The progress of these cities is being replicated across much of Iraq, and more of Iraq's people are seeing the real benefits that a democratic society can bring.
We're helping the new Iraq government reverse decades of economic destruction, reinvigorate its economy, and make responsible reforms. We're helping Iraqis to rebuild their infrastructure and establish the institutions of a market economy. The entrepreneurial spirit is strong in Iraq.
Our policies are aimed at unleashing the creativity of the Iraqi people. Iraqis who were disillusioned with their situation are beginning to see a hopeful future for their country. Many who once questioned democracy are coming off the fence. They're choosing the side of freedom.
This is quiet, steady progress. It doesn't always make the headlines in the evening news. But it's real. And it's important. And it is unmistakable to those who see it close up.
MARGARET WARNER: Now two assessments of how reconstruction efforts in Iraq are faring. We start with Rhode Island Senator Jack Reed, a Democrat and a member of the Senate Armed Services Committee. He's visited Iraq six times since the war began, most recently in October.
Senator, welcome. What's your reaction to the picture President Bush presented today of how the reconstruction effort is going?
SEN. JACK REED: Well, the president, I don't think, presented a picture consistent with the whole country of Iraq. The overall total suggests that electrical production is barely at prewar levels. The significant unemployment, there are serious economic problems.
He focused on two communities, Najaf and Mosul, and they're not in the Sunni heartland. They're not in the areas where the decisive battles will take place.
It would have been more hopeful -- or helpful, rather, if he could have talked about Fallujah, and what we've done there. That's where I think the critical issues will be decided. Najaf is an interesting case.
We battled a year ago, but not with Sunni insurgents. It was with Shia militia, Muqtada Sadr's Mahdi Army. And we ended with a truce, and he's still active in that area. There has been progress there, but that's not the critical point.
In Mosul, that's a Kurdish area, and we have got a little more, I think, presence there, and also more support by the Kurdish forces.
MARGARET WARNER: But if we just stick with reconstruction, now, he said what's happening in Najaf and Mosul is being replicated across Iraq. You're saying, well, he wasn't talking about the Sunni triangle. But which is the exception? I mean, is the Sunni triangle the exception, and is the president right that throughout the rest of Iraq there really is all this reconstruction under way, or is it the reverse?
SEN. JACK REED: Well, frankly, Margaret, it would have been helpful to me and to the American public if he had pointed to those places where it is being replicated.
My trips there suggest that there is fitful progress. There is some progress, but it's not consistent across the country, and also that the resources that we need to ensure it does take hold in other places aren't adequate in terms of support by civilian components of the United States government and international agencies, and also the security situation is challenging.
So I think it is telling that he's simply he made an assertion that it's taking hold without pointing to where this replication is taking place.
MARGARET WARNER: Well, on your trips what have you seen that doesn't jibe with what he portrayed?
SEN. JACK REED: Well, I was in Fallujah last March, and I was shocked to learn we had just one young Foreign Service officer that was charged with helping the military organize these efforts. That might have changed.
I went up to Mosul the same trip, and colonels and the armored cavalry squadron up there said they needed more civilian help. I've seen, I think, spotty progress. And the progress is, in those cases, obviously, which has the less-threatening security situation.
That's why places like Mosul and places like Najaf are doing better, but the real area of contention is in that Sunni triangle with al-Anbar Province and other places.
MARGARET WARNER: So from the U.S. end, the reconstruction end, is the problem not enough money and personnel being spent, or that it's being misspent in your view or both?
SEN. JACK REED: I think it's both. I think the needs are vastly greater than what was estimated, principally because of the security. Literally, there's a security tax on all these projects.
I think also we've seen situations where the planning was inadequate, situations where there has been outright stealing of funds and misappropriations of funds. And so this has been a situation where it's been very problematic about getting the construction done. And that I think is still with us today.
Hopefully progress is being made to address those points, but still a very challenging situation.
MARGARET WARNER: You said earlier today that only about half of the money that had been -- I think it's roughly half or less than -- that had been appropriated has actually been spent. What is the problem there?
SEN. JACK REED: I think the problem is, first, in terms of security, of getting the money out on the street. It's also other problems of finding competent contractors of design work, deciding how the money should be spent.
But we appropriated initially significant sums of money, and we're still waiting for those sums to be deployed, and those monies that have spent, there's real criticism; GOA published a report about a water purification system, suggesting a portion of that money has not been spent well or wisely.
MARGARET WARNER: Now, the president did acknowledge that some of the early U.S. approaches really weren't effective. For instance, the projects taken on were too big -- I'll just use one example -- and he said, "We have adjusted."
In your travels there, have you seen an improvement in effectiveness, an adaptability or adaptation on the part of US AID officials in terms of the way it's approached?
SEN. JACK REED: Well, I have seen adjustments, obviously. And I think when you're there on the ground, you get a sense that people do understand these issues, but it took an awful long time.
I think one of the key faults that we're still paying for today is the fact that there was virtually no really good planning for what the military refers to as "phase four," the post hostility operations.
It took months for the administration to understand they had serious challenges. And still, I think, there is not yet a fully developed and fully implemented sort of plan to provide the kind of reconstruction that's necessary.
MARGARET WARNER: Finally, and briefly, if you can, please, how much of this is ultimately going to be the U.S. responsibility? In other words, are there certain reconstruction benchmarks that have to be met before U.S. troops can leave, or will most of this ultimately be an Iraqi responsibility?
SEN. JACK REED: Well, I think our departure will be accelerated to the extent we can get this reconstruction correct. It very well might be that because it's so difficult that we don't fully complete our intended projects. But that is an important complement of defeating this insurgency. And I hope we can accomplish that.
MARGARET WARNER: All right, Sen. Jack Reed, thank you so much.
SEN. JACK REED: Thank you, Margaret.
MARGARET WARNER: Now a response from one of the U.S. Officials overseeing much of the reconstruction effort. James Kunder is an assistant administrator for the U.S. Agency for International Development. He is in charge of U.S. AID's reconstruction efforts in Iraq. And, Mr. Kunder, welcome.
JAMES KUNDER: Thank you, Margaret.
MARGARET WARNER: Let's take the critique offered by Sen. Reed. He said that President Bush today, focusing on Najaf and Mosul, really was not painting a very accurate picture of what was going on in the country as a whole. Is that right?
JAMES KUNDER: Well, I hope every American reads or views the president's entire speech because he talked about three things. One, he talked about the targeted response in places like Najaf and Mosul. Second he talked about a broader effort across the country to deliver better services to the Iraqi people. And third, he talked about a focused effort to improve the capacity of the new Baghdad government -- that is to say, the government that will be elected in December.
MARGARET WARNER: But he was saying that real progress has been made and he used these two cities as his examples, and I guess my question to you is parallel to the one I asked Sen. Reed: Where else is that being replicated in Iraq?
JAMES KUNDER: It's been widely reported, and it's perfectly accurate, that probably in 60 or 70 percent of the countryside, there is enormous economic activity and progress taking place.
There are more than 30,000 new businesses that have started since the military action commenced, and I'd like to point out the fact that while we do have a problem in not being able to meet electricity demand in Baghdad and across the country, part of the problem is -- the problem, if you call it that -- is that there have been so many new Iraqi businesses started in many parts of the country, that we can't keep up with demand.
Clearly, there are parts of the country, as has been widely reported in al-Anbar Province in the West that are hot spots; clearly it's difficult to do reconstruction work in those parts of the country. But I think what the president described today in Najaf and Mosul generally characterizes the -- what he called quiet, steady progress that's been taking place across the country.
MARGARET WARNER: If Sen. Reed is correct -- and I'll ask if he is correct -- that, you know, up to half of Iraqis are still unemployed; that the economy, he said earlier today, isn't market-based at all. There are all kinds of fuel and food subsidies, is that because just the Sunni triangle is having difficulties, and that's dragging down all the numbers, or is this a problem countrywide?
JAMES KUNDER: I think in defining and designing any reconstruction program like we're doing in Iraq, you have to begin where you started from. And where we started from was an economy and a polity that Saddam Hussein had ruined. It was a Stalinist state. He had drained the investments in electrical power and schools and hospitals from average Iraqis to build the palaces.
And so what we started with was a massive rebuilding program. Now, many of us would question whether it's a cup half full or a cup half empty. But, from my perspective, where we started from, we've made enormous progress in just two and a half years.
MARGARET WARNER: Now, how about the fact that -- again, I'm going to refer to Sen. Reed -- that not enough money is being spent, that not even what Congress has appropriated has been spent, what's the problem there?
JAMES KUNDER: There's not a problem. What happens in any kind of program like this, whether it's a highway project in the United States or an engineering project, an electrical power generation system in Baghdad or in Iraq, is you do some of the design work up front; you scope the project, you design what you want to do, and that as the construction takes place, the money is paid to the contractor.
And when we hear this regular critique that the money hasn't been spent, what's really happening is the money is being paid out as the construction work is done.
MARGARET WARNER: But how about the critique that there is a kind of security tax, that some of this money is being siphoned off to pay for security?
JAMES KUNDER: Well, there's no question, and there is absolutely no complaint or no disagreement with the Congress on this. Probably 23 percent of the taxpayer dollars that are going into reconstruction in Iraq are, regrettably, diverted into security.
And the reason is that we have sadists who are willing to blow up schoolchildren when water projects are dedicated, and we have to invest in security in order to deliver those water services and those inoculation services against disease. So it's enormously costly because of the insurgency.
MARGARET WARNER: Now, the senator also was faulting the U.S. Government and your agency for essentially poor planning and poor performance. And he cited the GAO report that came out a couple of months ago and just one example, which was that a quarter of the water and sanitation projects, or the money spent for that, that the projects, they found, either didn't work at all or were way underperforming. Do you have a problem with basic performance, and if so, what is it?
JAMES KUNDER: The problem at its core is that, again, because this was a centrally planned economy and because so many -- so much money was wasted on palaces and things for the elite, they simply didn't invest in operations and maintenance.
So what we're having to do is build a whole new operations and maintenance mentality so that when the taxpayers build a plant, it's going to function the way it should function.
MARGARET WARNER: But I mean, the GAO was referring to projects that apparently had already been completed.
JAMES KUNDER: And because we've discovered -- and this is why the president mentioned today, Margaret, that we are having to adjust our program, we have got to build up a capacity that simply didn't exist for the Iraqis to take care of these investments. That wasn't done in the past under the Saddam Hussein regime. We're now building that capacity.
MARGARET WARNER: And finally, I'll ask you the same question I ended with, with Sen. Reed, how much of this do you think ultimately the U.S. is going to be responsible for, and do you agree that it's part of defining success in Iraq, that that's going to make it -- the more success you have in reconstruction, the faster U.S. troops can leave?
JAMES KUNDER: I think there's clearly a connection between the two. One of the things that the president did say today, we are rebuilding the capacity of the central government. Ultimately we want to shift the burden to the Iraqi oil revenues for the reconstruction of the country.
MARGARET WARNER: But how much more money do you think it's going to take of U.S. taxpayer dollars?
JAMES KUNDER: I think if we continue to spend the $18.6 billion that the Congress has thus far made available and modest additional investments in the coming years, we're going to be able to tip the balance so that the Iraqis can take over this reconstruction effort.
MARGARET WARNER: James Kunder of AID, thank you.
JAMES KUNDER: Thank you.