During the 2008 campaign, we repeatedly called out then-candidate Barack Obama for complaining that the U.S. was spending billions in Iraq while the Iraqi government sat on a projected $79 billion surplus. We said that Obama’s projection didn’t account for updates to the Iraqi budget. But things were slightly more complicated than we originally thought: On paper, Iraq’s budget showed a surplus of up to $57 billion, but the U.S. Government Accountability Office pointed out that the Iraqi government had shown little ability to spend all that it had budgeted. So, assuming history repeated, a $79 billion surplus was a reasonable projection.
Turns out that history did repeat, just not in the way that anyone expected.
Last week, the Associated Press reported that revenue shortfalls have forced the Iraqi government to slash its budget by over $25 billion. The projected surplus is gone, and the government may not have sufficient revenue to cover even its now-reduced budget.
So what happened? According to the AP, the Iraqi government derives more than 90 percent of its funds from the sale of oil. And oil prices have dropped dramatically. In July 2008, just a month before the GAO released its projections, oil prices closed as high as $145.31 per barrel, according to the Energy Information Administration. But prices cratered, reaching a low of $30.28 in December, before recovering slightly to around $42.
President Obama does at least get his wish: The U.S. is no longer funding Iraqi reconstruction while Iraq sits on a large budget surplus. We suspect, however, that this isn’t exactly the way that candidate Obama wanted that wish to play out.