Saturday, September 17, 2005

Hurricane cleanup costs worry conservatives

Hurricane cleanup costs worry conservatives

By Richard Cowan

WASHINGTON (Reuters) - Conservative Republicans on Capitol Hill are worried about the growing costs of rebuilding the storm-ravaged U.S. Gulf Coast, and want to pay for it by cutting domestic spending on programs like a new prescription drug benefit for the elderly.

"It's not an exaggeration to say that we're on the verge of a meltdown," said John Hart, a spokesman for Sen. Tom Coburn, an Oklahoma Republican who has threatened to hold up emergency spending bills to pay for the reconstruction unless offsetting budget cuts are found.

Fiscal conservatives in both the U.S. House of Representatives and Senate are concerned the costs of rebuilding roads, utilities, businesses and homes destroyed by Hurricane Katrina will swell an already large U.S. budget deficit.

Some estimates have put the rebuilding costs at more than $200 billion.

President George W. Bush said on Friday the budget could absorb the costs and promised to find cuts to offset some of the spending. But he said he would still push for an extension of his tax cuts, which Democrats have opposed.

"You bet it's going to cost money, but I'm confident we can handle it and I'm confident we can handle our other priorities," Bush told reporters when asked about Republican complaints over the spending.

"It's going to mean that we're going to have to make sure we cut unnecessary spending. It's going to mean we've got to maintain economic growth, and therefore we should not raise taxes," Bush said.

Bush's economic advisers said on Friday the costs would be covered by borrowing and would raise the deficit.

"It'll end up requiring many years to pay for this," Sen. Majority Leader Bill Frist, a Tennessee Republican, said on a tour of the region, adding "future generations" would end up footing the bill.

"It will mean the deficit goes up probably 150 (billion dollars), maybe even more," Senate Budget Committee Chairman Judd Gregg, a New Hampshire Republican, said in a recent television interview.

That would put the fiscal 2006 budget deficit at $464 billion, and does not count additional funds the White House likely will seek early next year to finance the wars in Iraq and Afghanistan, which already have run up a $300 billion tab.

Congress and the Bush administration already have sent $62.3 billion in emergency funds to Louisiana, Alabama, Mississippi and other states in the days after the hurricane, and expect a request from the administration for a further $50 billion or so in emergency aid in coming weeks.

Cutting spending is always difficult for Congress, which this year has been struggling to agree on a mere $35 billion in reductions spread over five years. The task of cutting spending for the poor became even harder, politically, after the federal government was widely blamed for a slow response to Katrina, whose most visible victims have been poor blacks.

Two conservative House Republicans, still stung by their leaders' refusal to allow the House to debate spending cuts before passing a $51.8 billion emergency hurricane relief bill on September 8, said Congress should consider delaying a Medicare prescription drug benefit for the elderly set to begin next year.

Reps. Jeff Flake of Arizona and Jeb Hensarling of Texas said in a letter to House Speaker Dennis Hastert on Thursday that other targets for spending cuts should include some highway projects authorized by a new law this summer, as well as traditional conservative targets such as Amtrak and the National Endowment for the Arts.

"As we move forward we will of course be looking for opportunities to find savings on top of what we have already proposed," said Scott Milburn, spokesman for the White House Office of Management and Budget.

(Additional reporting by Caren Bohan)