Politics with Ron Elving: Paying for Katrina

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Host Alex Chadwick speaks with NPR political editor Ron Elving about the brewing political controversy over paying for post-Hurricane Katrina rebuilding projects.

ALEX CHADWICK, host:

The cost or relief and recovery from Hurricane Katrina may well reach $200 billion. President Bush says the federal government will not shrink from paying that cost. Does that mean that other federal spending will shrink, or will the bill for the storm be borne by bond buyers, the international investors who float the federal deficit with the long-term cost passed on with interest to later generations? The president's ruled out tax increases to pay for Katrina, saying such a move would slow the economy. Republican leaders on Capitol Hill say they're with the president. With us to discuss the cost of Katrina is NPR's senior Washington editor, Ron Elving.

Ron, the last few days the president has been very generous with his promises of relief to these storm victims. Maybe this has something to do with the hit he took for looking less than compassionate in the week of the storm.

RON ELVING reporting:

Well, certainly people are going to look at it that way in many cases. There are going to be those who say we're throwing good money after bad preparedness. And it's fair to say of course that the president wants people taken care of. He's seen the suffering, as everyone has, and he knows that it falls to the federal government now to do so, to shoulder the burden. But he wants to, you know, make sure that people do know that he's paying attention and that he's on the case.

CHADWICK: There are a lot of Republican ideas, conservative ideas, in the plan, incentives for business in the area, relaxed regulations, rewards for job-creating enterprises. Maybe this is an opportunity for conservatives to try to demonstrate their ideas for a government can work.

ELVING: Exactly. There are many things in the plan that have been around, that have been ideas going back to Jack Kemp talking in the 1980s about enterprise zones, about bringing business into an area by relaxing regulations, making it easier for businesses to get started and to flourish in a situation that might otherwise be difficult. And these are in the plan because otherwise I think the amount of money that's being spent here--some conservatives are going to regard this as the second coming of the war on poverty. They want it to look a little different; they want to look more Republican. And if some of these ideas normally don't get tried because they would be too disruptive, we're in a current circumstance where disruption is already present, to put it mildly.

CHADWICK: How about these costs, $1 billion a day, as much as that? I mean, that's phenomenal.

ELVING: Indeed. And in the short run, these costs will have to be simply part of the federal budget deficit. They're already moving $30 billion in extra bonds that will probably be offered here in the short run, and the federal budget deficit is going to go up. It was supposed to fall this year from 412 billion to 330 or perhaps even lower than that--330 billion--but now will be somewhere in between those two figures. And then for the next fiscal year, the cost of Katrina, combined with the cost of the war in Iraq and other things, will probably put us back up in record territory, up above 400 billion, maybe 450 billion. So that, in combination with high energy prices which going to hit us this fall and this winter and might slow the economy down, are all bad news for the federal budget deficit.

CHADWICK: Well, what about the role of taxes in this, Ron?

ELVING: The president could raise taxes, but it is in this sense not realistic to talk about that. Congress doesn't want to. Congress isn't going to give the president tax increases. And the president is right when he says that the economy is the golden goose that produces all the revenues. But there's another question in all this, and that is that Congress has been considering additional tax cuts. Many in Congress want to pass new tax cuts as part of a Katrina stimulus package for the economy. Plus there are tax cuts from 2001 and 2003 that are scheduled to expire in 2010, and the president wants to make those permanent. So that's yet another issue about taxes.

CHADWICK: And do you think Republican congressional leaders are going to do that now at this point with this need for federal cash?

ELVING: It's been postponed but not forgotten. The leaders still think they have the votes to do that, and they're willing to make that move and take the hit that they might take politically even if President Clinton is out there talking about how this administration and this Congress have increased poverty, and Katrina shows that.

CHADWICK: It kind of looks like the 2006 congressional election perhaps is under way?

ELVING: Under way? Absolutely.

CHADWICK: NPR's Ron Elving.

Thank you, Ron.

ELVING: Thank you, Alex.

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