The Battle Over How to Pay In a Post-Katrina World

President Bush and congressional leaders are committed to rebuilding a storm-ravaged New Orleans, but the argument over how to pick up the tab for the region — already estimated to reach at least $200 billion — is just getting started.

Assessing the storm damage and its impact on the federal budget last week, Bush declared that the natural disaster will be addressed without raising taxes or delaying congressional efforts to make permanent several tax cuts implemented earlier in his administration.

He promised to rebuild New Orleans and its environs despite the ultimate expense, insisting that “it costs what it costs.” The funds, he said, can be realized through greater budget austerity without piling up additional debt.

Scott McClellan, the president’s press secretary, acknowledged Monday that Katrina “will have a short-term impact on our national economy” but asserted that “strong and sustained growth” will see the country through the setback. The administration is searching for budget cuts to address the looming fiscal problems.

“There’s a number of savings that we have proposed in our current budget that the Congress has yet to act on,” McClellan said.

The president’s game plan has received some support in Republican quarters. Treasury Secretary John Snow told members of the Financial Literacy and Education Commission on Monday that reconstruction will be costly, “but I want to assure you that this administration is not, and will not stray from our course of federal deficit reduction.”

With a “vibrant economy,” Snow said, the United States can “afford to meet any challenge.”

Members of the House Republican Study Committee, a conservative group led by Rep. Mike Pence of Indiana, are preparing a list of budget cuts to pay for Hurricane Katrina relief and reconstruction _ this despite claims from House Republican leader Tom DeLay of Texas that the budget as currently configured can’t withstand additional cuts.

Citizens Against Government Waste already has offered several proposals to deal with the Katrina aftermath. The budget watchdog group has suggested, among other things, that Congress save $24 billion over five years by ending community development block grants, and another $1 billion by eliminating a White House anti-drug campaign.

“The federal government is fraught with wasteful, ineffective and duplicative programs that can be trimmed or eliminated altogether,” said Tom Schatz, the group’s president.

But some, including a few within the president’s own party, fear that budget cuts won’t prove sufficient to cover the costs of everything from Katrina to the war in Iraq to the Medicare prescription-drug benefit that arrives soon. Sen. George Voinovich, R-Ohio, a veteran deficit hawk, told reporters on Monday that he opposes repeal of the estate tax, a move that would cost the treasury $70 billion a year beginning in 2010.

Voinovich said he might support a compromise that reduces the estate-tax burden, but cutbacks alone are unlikely to cover the costs of the recovery effort and other needs. Asked if budget offsets alone could fund the nation’s needs, the lawmaker said, “I don’t agree with that at all.”

“We’ve got to get real,” Voinovich said. “The truth is, we need more money.”

Rep. Bill Thomas, R-Calif., chairman of the House Ways and Means Committee, told Congress Daily, a Capitol Hill publication, that the “clock is ticking down” on repealing the estate tax and acknowledged that pushing the legislation through the Senate at this time appears impossible _ although a compromise is possible.

House Democratic leader Nancy Pelosi of California told reporters Tuesday that the White House initiative to “go forth with a budget that will give $70 billion in tax cuts to the wealthiest people in America” establishes that Republicans are out of touch with the nation’s needs.

“How in good conscience do these people sleep at night when the health-care needs of the region are going to be so huge?” she asked.

Brian Riedl, a fellow at the Heritage Foundation, a conservative Washington think tank, estimates that once Katrina relief and reconstruction is added to the fiscal picture, along with Iraq-war spending and the tax cut Bush hopes to make permanent, the federal deficit could hit $500 billion by 2008 and $873 billion by 2015, adding to an already burdensome debt load.

“Unless lawmakers make difficult decisions now they will be dumping the largest debt in world history into the laps of the next generation,” Riedl said. “Within a decade, tax increases would need to reach $7,000 per household _ a 37 percent tax hike _ just to balance the budget. And that amount will only grow.”

Rep. John Spratt of South Carolina, the ranking Democrat on the House Budget Committee, said that even before Katrina was figured in, the Congressional Budget Office estimated the deficit could hit $640 billion by 2015.

“The administration has been claiming progress on the deficit, and improved revenues earlier this year did suggest that projections of the 2005 deficit were too pessimistic,” Spratt said.

“But overall, these new deficit figures show that the budget has deteriorated dramatically on this administration’s watch. The administration had no plan or prospect of putting the budget back on track even before Hurricane Katrina hit the Gulf Coast. Now the budgetary impact of Hurricane Katrina will place this goal even further out of reach.”

(Contact Bill Straub at StraubB(at)