Congressional demands that Iraq increasingly fund its own reconstruction will be a prime focus of the upcoming defense authorization debate next month, bolstered by new financial estimates provided by the Government Accountability Office.

The report, released Tuesday, found that Iraq is capable of shouldering more of its own domestic obligations.

“Iraq’s large oil reserves coupled with surging oil prices offer the government of Iraq the potential to contribute to the country’s reconstruction efforts and thereby enhance essential services to the Iraqi people,” the report said.

According to the GAO, the Iraqi government took in $96 billion in revenue between 2005 and 2007, 94 percent of which came from oil sales. In 2008, Iraq could earn as much as $86.2 billion, assuming oil prices of about $125 per barrel and export near 2 million barrels per day.

Furthermore, the GAO found that in 2007, the Iraqi government spent only 65 percent of its total budget allocation and 28 percent of its $12.2 billion investment budget. Only about 1 percent of Iraqi expenditures last year went toward maintaining projects initiated jointly by the U.S. and Iraqi governments, the report stated.

Iraq also holds $29.4 billion in a development fund.

In contrast, Congress has appropriated $48 billion for Iraqi reconstruction since 2003, the report said.

“The Iraqi government now has tens of billions of dollars at its disposal to fund large scale reconstruction projects. It is inexcusable for U.S. taxpayers to continue to foot the bill for projects the Iraqis are fully capable of funding themselves,” said Carl Levin, D-Mich., the chairman of the Senate Armed Services Committee.

Levin and John W. Warner of Virginia, a senior Republican on the panel, said the time has come for Iraq to bear more of the burden. The Senate version of the fiscal 2009 defense authorization bill (S 3001), which they sponsored, contains several provisions aimed at prodding the Iraqis to assume more financial responsibility. The panel approved the bill April 30.

Specifically, the legislation would bar Pentagon spending on reconstruction projects costing more than $2 million and would require the United States to work toward Iraqi funding of smaller-scale projects as well.

The measure would allow the United States, for now, to continue spending on combined U.S. and Iraqi military operations and to build up Iraqi military forces. But the language would set in motion a process that would result in Iraqis increasingly paying for those accounts.

Under the bill, the U.S. government would be required to “take action to ensure that Iraqi funds are used” to pay the salaries of Iraqi security forces, as well as the cost of training, equipping and sustaining them.

The committee’s bill also calls for negotiations with the Iraqis on an agreement to share costs for combined military operations.

These provisions enjoy widespread support among members of both parties.

“Despite Iraq earning billions of dollars in oil revenue in the past five years, U.S. taxpayer money has been the overwhelming source of Iraq reconstruction funds,” Warner said. “It is time for the sovereign government of Iraq, using its revenues, expenditures and surpluses, to fully assume the responsibility to provide essential services and improve the quality of life for the Iraqi people.”

Sens. Ben Nelson, D-Neb., and Susan Collins, R-Maine, want to expand that language to shift all U.S. funding for reconstruction, fuel, and the training of Iraqi security forces into loans instead of grants. They hope to be able to offer an amendment to that effect when the bill reaches the Senate floor in early September.

Levin and Warner are also involved in placing more scrutiny on money delivered through the Commanders Emergency Response Program, an account meant for military personnel on the ground to respond to smaller scale emergencies on an ad-hoc basis.

They wrote Defense Secretary Robert M. Gates on Aug. 1 to complain that $33 million of the program’s funds were obligated to construct a business zone near the Baghdad airport that would include hotels, shops, and an office tower.

“It is difficult to understand why U.S. taxpayer funds should be used to pay for this major infrastructure project in Iraq which will be owned by the Iraqi government,” the senators wrote.

The House version of the defense authorization bill (HR 5658) also contains language seeking to curb the perceived abuse of the emergency program’s funding and push the Iraqi government to bear a greater share of rebuilding costs. The legislation would require the Pentagon to report on how the program’s expenditures are calculated and would require the Iraqi government to bear a greater burden of rebuilding costs. The legislation also would authorize only half of President Bush’s $2 billion request for training Iraqi forces.

Members outside the defense committees also reacted strongly to the GAO report.

“This report is going to make a lot of American families very angry,” said Rep. Henry A. Waxman, D-Calif., chairman of the House Oversight and Government Reform Committee. “The record gas prices they are paying have turned into an economic windfall for Iraq. But the Iraqi government isn’t spending the money on rebuilding. American taxpayers are paying that bill too.”

Several lawmakers referenced the now infamous prediction of then-Deputy Defense Secretary Paul Wolfowitz, who promised in 2003 testimony before the House Appropriations Defense Subcommittee that the United States would not have to foot the bill for rebuilding Iraq.

“The oil revenues of that county could bring between 50 and 100 billion dollars over the course of the next two or three years,” Wolfowitz said. “We are dealing with a country that can really finance its own reconstruction and relatively soon.”

John M. Donnelly contributed to this story.