Monday, September 19, 2005

The bucks start here: Bush's plan raises questions


The bucks start here: Bush's plan raises questions
By Richard Wolf and Judy Keen, USA TODAY

WASHINGTON — President Bush's vow to rebuild the devastated Gulf Coast with a reconstruction program of historic proportions has lawmakers, policy analysts and budget watchdogs debating how much it will cost and who will pick up the tab.

"It's going to cost whatever it costs," Bush said Friday. Allan Hubbard, Bush's economic adviser, was equally blunt when asked who will pay: "The money ... is going to come from the federal taxpayer."

But the economic and political questions raised by Katrina's price tag are complex. The recovery effort is likely to increase the federal budget deficit, intensify pressure on Bush to raise taxes and delay some of his priorities, such as overhauling Social Security. It also is exposing the extent to which the budget already has been squeezed to pay for the Iraq war and calls into question Bush's commitment to the Republican tenet of small government.

Those issues don't change the bottom line: Katrina is not just a Gulf Coast problem anymore. It will affect the federal government and taxpayers for years.

"There's no choice here," says former representative Robert Livingston, a Louisiana Republican who once chaired the House Appropriations Committee.

"The federal government is the only one that can provide immediate assistance," says former representative Jack Kemp, R-N.Y., secretary of Housing and Urban Development from 1989 to 1993.

That raises basic questions:

•How much will it cost? Congress has approved $62.3 billion. The final cost will be much higher, but how much higher is guesswork.

"Early estimates top $200 billion," the conservative Heritage Foundation, a Washington think tank, says in a report posted on its website, "It may cost $300 billion, but a lot of it will be borne by the private sector," former president Bill Clinton, who's helping raise donations, said Sunday on NBC's Meet the Press. "It's not going to be anywhere near $200 billion," Kemp says.

The scale of the disaster suggests the initial billions are just a down payment. Mayor Ray Nagin has said half of New Orleans' 215,000 homes may have to be torn down and rebuilt. Louisiana State University's hurricane center estimates that it could cost $18 billion to rebuild wetlands, enlarge barrier islands and strengthen levees.

On Thursday, Bush proposed $2 billion in incentives to bring businesses back to the region, another $2 billion to cover the costs of educating an estimated 372,000 public- and private-school students displaced by the storm and $5,000 recovery accounts for each job-seeker in the disaster area.

•Where will the cash come from? "We're going to have to make sure we cut unnecessary spending," Bush said without volunteering any specific programs. "We should not raise taxes."

Big cuts in federal spending or tax increases are unlikely in "this climate of fiscal relaxation," says Urban Institute President Robert Reischauer, a former director of the Congressional Budget Office.

That leaves increasing the budget deficit as the most likely option. "It's easy to practice checkbook compassion," says Brian Riedl, a budget expert at the Heritage Foundation, which estimates Katrina's costs could push the federal deficit in 2015 to $873 billion, more than double the record set in 2004. This year's deficit is expected to be $331 billion, the third highest ever.

Some Republicans worry that Bush's willingness to spend whatever it takes betrays conservatives' small-government philosophy. "We simply cannot break the bank of the federal budget that is currently running about an $8 trillion national debt, about $26,000 per family," Rep. Mike Pence, R-Ind., said Sunday on ABC's This Week.

House Majority Leader Tom DeLay, R-Texas, said he's willing to cut unneeded spending, "but no one is able to come up with any."

The libertarian Cato Institute, a Washington think tank, urges cuts in farm price supports, NASA and the Army Corps of Engineers, which is responsible for fixing New Orleans' levees. The Heritage Foundation proposes delaying the Medicare prescription-drug program, which takes effect in January.

The Center for American Progress, a liberal think tank, says a start would be cutting "indefensible spending" in two big bills passed this summer. The energy bill included $1.5 billion for an oil-drilling consortium in DeLay's district, and the highway bill included $223 million for a bridge to a virtually uninhabited Alaskan island.

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