How to Pay for Hurricane Relief

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Hurricane relief is costing the U.S. government nearly $1 billion a day — with no clear end in sight nor a plan to pay for it. We'll explore some options on how to pay for the rising cost of hurricane relief.

BRIAN NAYLOR, host:

This is TALK OF THE NATION. I'm Brian Naylor in Washington, sitting in for Neal Conan.

The city of Bozeman, Montana, received national attention for considering a proposal to give up $4 million for a parking garage in order to help out with relief efforts for Hurricane Katrina. The measure was voted down yesterday, but it's one example of the debate going on around the country and in the halls of Congress about how to fund the massive rebuilding needed to restore the city of New Orleans and other damaged areas along the Gulf Coast. Depending on who you ask, the price tag differs. Louisiana senators say they need an additional $250 billion to fund the recovery; Senator Bill Frist of Tennessee estimated it could cost half as much. Where that money will come from is another question. Republican budget hawks want to take money from other federal programs to pay for Katrina and Rita, but other mainstream moderate Republicans and most Democrats want to hold on to their earmarks, which means more deficit spending.

Later in the program, the feds unveil a colorful new $10 bill. It's the latest bid to stay ahead of counterfeiters.

But first, how to pay for Hurricanes Katrina and Rita? Call us with your questions about how to foot the bill. Would you be willing to give up federal funding for other programs like Medicare to pay for the hurricane damage? Would you be willing to pay more taxes to control the federal budget? Our number here in Washington is (800) 989-8255; that's (800) 989-TALK. Our e-mail address is totn@npr.org.

We're joined now by Mark Zandi, chief economist for Economy.com, a firm which researches economic issues. He's on the phone from his home in West Chester, Pennsylvania.

Welcome.

Mr. MARK ZANDI (Economy.com): It's good to be with you.

NAYLOR: Let's talk about the total price tag for all of this. Originally, estimates were as high as $200 billion. Is that still the case?

Mr. ZANDI: Well, some of the estimates ranged that high, but I think when it's all said and done, the price tag will be measurably less than that, somewhere probably between 100 and 150 billion. The 200 billion was put forth in the immediate wake of the storm when emotions were running high and the political pressures were quite intense, so it's understandable that that very large number was put forward. But I think as time passes and we look to see what exactly we need to spend money on, the price tag will still be very significant but not quite as large.

NAYLOR: Mm-hmm. And already how much as Congress appropriated so far?

Mr. ZANDI: $62 billion has been appropriated so far. Most of that would go to the cost of the search and rescue, the initial cleanup, some income support for the evacuees and other sundry items.

NAYLOR: And obviously, this is all federal funds. I'm wondering, are state and local governments going to be able to do much, or is the federal government going to have to bear the brunt of these costs?

Mr. ZANDI: I think the federal government's saying that they will bear the brunt of the costs. Up to this point, various states across the country and local governments are paying, they're cutting checks, but I think they're doing that with the understanding and belief that they will get some compensation from the federal government at some point down the road.

NAYLOR: And can you give us any kind of a breakdown of where this money is going, how it's being spent? Is it picking up debris? Is it hiring workers? I guess there are a lot of different categories.

Mr. ZANDI: Oh, yeah, it's a real long list of items, as you can imagine. Just FEMA's costs in terms of the search and the rescue, the cleanup is very costly. Many of the evacuees needed some money to help tide themselves over. And, of course, the costs going forward are going to be measurable: rebuilding infrastructure, tax breaks for opportunity zones, vouchers for getting education and Medicaid and just a whole long list of tax breaks have also been passed. For example, if you had a mortgage loan or a credit card loan and your lender discharged that debt, saying, `Well, you don't have to pay me back' or `you don't have to pay back part of it,' then you generally have to pay tax on that, but now you don't if you're in the disaster zone. And that's just one example of many tax breaks that the folks in the region are now able to get.

NAYLOR: So those folks are going to be able to get some tax breaks. The federal government says it's going to bear the brunt of the costs for recovery and rebuilding. Where did the federal government get all this money?

Mr. ZANDI: Well, there's really three ways to finance this. You can cut other spending, and there's proposals to do that. You can raise taxes--there are very few proposals to do that. Or you can borrow money, you can run up a larger deficit. And that is the most likely way we're going to finance this, through a higher budget deficit.

NAYLOR: Mm-hmm. Now the deficit already stands at several hundred billion dollars.

Mr. ZANDI: Right. In the just ended fiscal year--well, it ends in a couple of days--the deficit's going to come in around $335 billion, about 2 1/2 percent of GDP, which is well below the record we got last year, but still a pretty poor performance. And this is probably about as good as it gets. With the cost of the hurricanes and, of course, our mounting other costs, the deficits will rise measurably in the coming fiscal year and every year thereafter.

NAYLOR: Mm-hmm. And so--but this isn't free money. I mean, we're adding to the deficit. What are the economic consequences of that?

Mr. ZANDI: Well, ultimately, the cost will be, I think, higher interest rates. So far, we haven't seen rates rise, but at some point, the investors who are buying our debt, global investors, will grow less willing and interested in buying it and they'll require a higher return, which means a higher rate of interest. And so interest rates ultimately will be measurably higher, and we'll all pay as a result of that.

NAYLOR: Let's take a couple of calls here. Mike, you're on the line from Jacksonville, Florida. Thanks for calling TALK OF THE NATION.

MIKE (Caller): Hi. Are you talking to me?

NAYLOR: Yeah. You're Mike, right?

MIKE: I'm Mike, yes.

NAYLOR: OK. Hi, Mike.

MIKE: Hi, how are you doing?

NAYLOR: Good.

MIKE: Well, I just heard you mention the cuts in Medicare and whatnot, and I'm wondering why aren't they talking about--why aren't we seeing some real guts from especially Republican lawmakers when it comes to things like the recent energy bill or the highway bill, both stuffed with pork? I mean, way stuffed with pork.

NAYLOR: Good...

MIKE: And it's appalling that the Republicans are patting themselves on the back for this and we're not seeing them talk about making any cuts in that. They're wanting to cut things like Medicare and all that, and that's just one part of the very large federal budget.

NAYLOR: All right. Good question, Mike.

MIKE: So there's something wrong with that.

NAYLOR: Mark Zandi, what are the chances that Congress will take a look at some of these other bills--for instance, the highway bill? There's a lot of different projects in there that might be sacrificed. Is that going to happen?

Mr. ZANDI: Well, I think it's a great idea, and that's, in fact, exactly what we should do. There is a significant amount of so-called pork in the highway bill, and I think that's widely understood and believed. The energy bill also seems to be at this point not necessary, at least not the price tag that it takes. So I think that would be the right thing to do. What's the probability that we'll do it? I think very little. The leadership of the House and Senate have already pretty much come out and said that they're not going to do that. And so it's unlikely that that will happen, even though that probably is the right thing to do.

NAYLOR: Mike, I'm just wondering is there anything in Jacksonville that's in the works that you think you'd be willing to sacrifice to help pay for some of the costs of Hurricane Rita and avoid driving up the deficit?

MIKE: I'll be honest, I don't know of a whole lot going on in Jacksonville that--I mean, we get our share of funds for highway projects and things like that, but Jacksonville's got a fairly good, strong economy. It's been steadily growing for quite some time, and we haven't really had to rely on a lot from the government, as far as I know. Other people may know better than I. I'm not about to put myself up as an authority on that, but you know, we've got a pretty strong tax base, a pretty strong business community. It's a fairly conservative group of people overall. So I don't know of anything that we could sacrifice, but I'm sure it's one of those things that a lot of people here, being of a conservative ilk, they probably wouldn't have a problem if push came to shove on that. But you never know. Everybody wants their own pork, you know.

NAYLOR: All right. Well, all pork is local.

MIKE: What?

NAYLOR: I say all pork is local.

MIKE: Exactly. Just ask the guys in Alaska. And I've got one phrase: `Bridge to nowhere.'

NAYLOR: All right, Mike. Thanks very much for your call.

Mark Zandi, I'm wondering is this likely to have any kind of an impact on the president's economic or social agenda, the fact that Washington is going to have to come up with several tens of, not hundreds of, billions dollars more?

Mr. ZANDI: Yeah, I think the fallout from Katrina will have a significant impact. It already has on the president's economic agenda. For example, the day after the storm, the Senate had to shelve plans to debate elimination of the estate tax, and that postponement is indefinite. So it's already had an impact.

The president is also slated to unveil a broad-based set of tax reform proposals. Right now I think that's slated for the end of October. And the chance for tax reform, major tax reform, has been significantly diminished in the wake of Katrina and the president's political problems. I mean, to get tax reform done, you need a lot of political clout, and the president doesn't seem to have that at the moment. And, you know, things can change and they do change quickly in Washington, but at the moment, the prospects of major tax reform are significantly diminished.

And finally, Social Security reform, which the president proposed earlier in the year and which he pushed very hard for, now looks all about dead. I think that would be very difficult to get through. It already was losing support quite quickly before the storms, and now I think the president will be very hard pressed to get that through Congress.

NAYLOR: Mm-hmm. I'm just wondering also that--we've heard talk about some members of Congress have talked about making cuts in a wide variety of programs to help pay for some of these costs. What's the political outlook for making cuts elsewhere in the budget?

Mr. ZANDI: You know, that's tough. I mean, I think if that was politically feasible, it would probably have already been done, given the budgetary pressures that we're already under. I mean, the proposals are being made--I mean, cutting subsidies to Amtrak, cutting the subsidies to your own National Public Radio--public broadcasting has been proposed for cuts--cutting school lunches, cutting drug education in schools, cutting rent subsidies for the poor--these are things that have been put forth as ideas for trying to raise revenue, but...

NAYLOR: We're talking about money and how we'll pay for the damage left behind by Hurricanes Katrina and Rita.

I'm Brian Naylor. It's TALK OF THE NATION from NPR News.

(Soundbite of music)

NAYLOR: This is TALK OF THE NATION. I'm Brian Naylor in Washington, sitting in for Neal Conan.

Hurricanes Katrina and Rita reduced to rubble areas of Texas, Louisiana, Mississippi and Alabama. Today, we're talking about money and how we might pay to rebuild those areas of the Gulf Coast. My guest is Mark Zandi, chief economist for Economy.com, a firm which researches economic issues. You're invited to join the discussion. Give us a call at (800) 989-TALK. Our e-mail address is totn@npr.org.

The Republican Party is not of one mind on how to fund the rebuilding of those areas devastated by Katrina, and we're going to hear now from two Republicans on this issue. First, we turn to Iowa Senator Charles Grassley, who is chairman of the Senate Finance Committee and joins us by phone from the Capitol.

Senator Grassley, welcome.

Senator CHARLES GRASSLEY (Republican, Iowa): Oh, I'm glad to be with you, of course.

NAYLOR: Well, thanks for coming on. You and Senator Max Baucus of Montana introduced a bill to provide emergency tax cuts to areas affected by Katrina; the president signed that into law last week. And now you're working on a package of longer-term cuts for those affected areas. Tell us a little bit about how that would work.

Sen. GRASSLEY: Well, we just finished a hearing that involved the three governors that had been hit so hard--or at least their states had been hit hard--and the hearing was to find out from them what they think will work. And I think that their ideas are going to coincide with ours to some extent. We're thinking in terms of tax incentives that will promote job creation through particularly small business. Let me give you a couple examples. One would be what we call expensing, the writing off in one year the depreciation or, in the case of larger companies, accelerated depreciation with a 50-percent write-off in the first year. And then the use of enterprise zones would be another approach. And then lastly, what we call tax-exempt bonding has a basis for renewal of the commercial areas.

NAYLOR: Mm-hmm. Now I understand that also in the works you want to extend the president's tax cuts, which were approved on a more or less temporary basis. Can the federal government afford to cut that revenue stream--I think we're talking about $70 billion--now that we have hurricane disasters on our hands and the ongoing war with Iraq?

Sen. GRASSLEY: Yeah. That's all we're going to do this year if we do it, and it's still kind of up in the air if we'll do it. But let me explain that when the president wants to extend the tax cuts, he's talking about the rate cuts that we made in 2001, and what we're talking about this year is only a small part of the tax reductions and more made in 2003. Like, for instance, the things dealing with a marriage penalty, the continuation of college deduction, the--pushing back the AMT so it doesn't hit middle-class America, because there's 50--or there's five million middle-class taxpaying citizens who are going to pay the alternative minimum tax next year if we don't do it. And things of that nature have to be done this year or otherwise we're going to increase taxes because these items are all sunset.

NAYLOR: Mm-hmm. Mm-hmm. What about this other bill that members of Congress were trying to get approved in the closing weeks of the session? It's called reconciliation, and basically it would, among other things, cut Medicaid spending. Is that still viable?

Sen. GRASSLEY: Yeah. But don't forget for these areas that have been hurt, we're going to actually increase funding for Medicaid in the areas of Mississippi, Louisiana, Texas and all the states where there are evacuees for the evacuees in those states. And so we're trying to take care of the catastrophic instances because of the hurricanes one way, and then what we're trying to do in the reconciliation that you talk about--and it isn't just saving 10 billion in Medicaid, it's also saving three billion in agriculture, as an example--what we're trying to do is establish a policy that's more realistic in the days when we have the budget deficits that we have.

NAYLOR: Mm-hmm. I'd like to take a call now, if we've got a moment. Steve in St. Louis, Missouri, you're on TALK OF THE NATION. Thanks for calling.

STEVE (Caller): Hi, thanks for taking my call. It's great to be on the air with Senator Grassley, who I respect very much. But unfortunately, I have to disagree with him to a certain degree because I think all of the guests on your show, the senator included, have made this event seem so abstract, like, you know, we're just focusing on these economic concepts that aren't really affecting people. And to a certain extent tax cuts--you know, they may help businesses, but a person who doesn't have, you know, a nice shirt and a nice suit won't be able to apply for a job or a person who doesn't have, you know, the ability to get themselves to that place. So, I mean, this hurricane reveals that there are certain social costs that are tied into different economic policies, and I personally believe that as a society, we need to take this into account and take into account that--you know, whether this means increasing taxes or whether it means providing certain social programs that--you know, a storm could go and destroy a poor area in New Orleans or a rich area on the beach in New Jersey, and the government is one institution that is vitally important in providing certainty to people in times like this.

NAYLOR: All right, Steve. Thanks for your call.

Sen. GRASSLEY: I don't have any disagreement with the bottom line. The only thing is it seems that there's an inference that you can predict natural disasters and you ought to be able to put the money there to help people in advance. And we've been seeing for 40 years the federal government's been an insurer of last resort. We put up a little up-front money so that people can spend it immediately, but we don't have any way of knowing exactly when a natural disaster is going to happen or what it's going to cost, so we generally come in with the programs after the fact.

So we learned something from 9/11 in New York. We provided tax incentives for rebuilding in New York. We provided exactly the same program for Medicaid for New York and surrounding states because of people being dislocated from their job and needing health care. We just followed that same pattern for doing this in Louisiana, Mississippi and now, of course, it's extended to Texas.

NAYLOR: Steve, thanks for your call.

Mark Zandi, I just want to ask you for a moment, is there a--does Congress tend to help--focus its tax breaks, tax relief, on the small businesses at the expense of individual needs?

Mr. ZANDI: Well, I think it's important to recognize that the most important thing is jobs, that for the well-being of everyone, we need more jobs and we need to get jobs quickly. And the way to help produce those jobs is through these targeted tax incentives, which historically have worked pretty well.

So, you know, I sympathize with Steve's statement. He's saying, `Listen, you know, we've got guys with green eye shades on and economists and they're very antiseptic in their discussions,' and he's right, and I'm sorry about that. But we need to consider that the most important thing is to get as many jobs in these areas as quickly as possible because then the folks that don't have a place to live or don't have the clothing that they need will get it. And that's, I think, the most--the best and the most efficient way to help everyone in that region.

NAYLOR: Let me read an e-mail here from a listener, and this is addressed to the senator. `I know that the president is unbelievably dedicated to not rolling back any tax cuts. What is the feeling in the Republican Congress towards these general tax cuts, and will he override the president's tax cuts?' Senator.

Sen. GRASSLEY: Well, first of all, that decision doesn't have to be made for two or three more years. But right now--if we had to make the decision right now, this would be my thinking. We won't know for maybe a half a year or more whether there's a negative ripple effect through the entire US economy, because when Hurricane Katrina shuts down the economy and gross national product of Louisiana by one-third, is that going to have a ripple effect throughout the economy? If it does, you don't want to change laws that encourage investment, and you don't want to change laws that are going to reduce consumption because our economy is two-thirds based on consumption.

NAYLOR: Senator, let me ask you another question. This is not happening in a vacuum. Today, we had the news that Congressman DeLay in the House has been indicted by a grand jury in Texas. Is that going to throw any uncertainty into the process or make things--make it more difficult for the House and Senate to work together?

Sen. GRASSLEY: It shouldn't because, first of all, we consider people in this country innocent till proven guilty. He has done what he has to do under the rules of the Senate; he's stepped down. And then you look at, you know, the reputation of the prosecutor in southern Texas that has been after Tom DeLay for a long time anyway--in fact, there's a lot of--you know, 12 years ago, a brand-new senator, Hutchison, was indicted down there; I don't know whether by the same guy or not. So politics are just very rough in Texas, so you got to take that into consideration, too. But he's out of it now as leader, he's still a member of the House and he's--so I don't know. You know, I think that when you talk about Dreier or somebody else taking over, that they'll be able to do as good of a job as leader as he did.

NAYLOR: We're speaking with Senator Charles Grassley. He's the chairman of the Senate Finance Committee, a Republican from Iowa, and also Mark Zandi, a chief economist for Economy.com. I'm going to ask the two of you if you can just hang with us a little bit longer. We're hoping to hear from Congressman Patrick McHenry, but he has...

Sen. GRASSLEY: Well, I won't be able to hang with you because I've got constituent appointments.

NAYLOR: All right. Well, thank you for taking the time that you did spend with us. It's always good to talk to you.

Sen. GRASSLEY: I was glad to be with you. Goodbye.

NAYLOR: Bye-bye.

I'd like to move to a call then, Nancy in Anchorage, Alaska. Nancy, you're on TALK OF THE NATION.

NANCY (Caller): Hello. I can speak for a number of Alaskans who are embarrassed about the two `bridges to nowhere' and would love to give the funds back. There's not just the Gravina Island Bridge in Ketchikan, but the Knik Arm Crossing in Anchorage. And in both of them, the sole purpose appears to be speculative land development.

NAYLOR: Mm-hmm. So is that a widespread sentiment, do you think, Nancy?

NANCY: Well, it's a growing sentiment, I would say. We have a problem, though, and that is that it's--the other purpose besides land development is sort of the self-aggrandizement of our delegation. And what I think we need to do is to ask the leadership of both political parties to put the national interest ahead of local and personal interests, and repair our Southern states. And we would--we all sort of need the grassroots push to do that, but we also need the leadership at the top to revise the highway and energy bills and pull out some of these unnecessary projects...

NAYLOR: All right.

NANCY: ...and put them into our Southern states.

NAYLOR: Nancy, thanks very much for calling.

You're listening to TALK OF THE NATION from NPR News.

Now Murphy in Wyoming is on the line with us. Thanks for calling in.

MURPHY (Caller): Thank you for taking my call. And personally, I think we ought to take some of this money we've earmarked for--to help these other countries--being that it's billions and billions of dollars--and pull that money back and help put this country back in place where it should be.

NAYLOR: Do you think that--that money traditionally is but a drop in the bucket, I think, of the federal government; that's, at least, the argument that's made. Do you think that it's--is there enough money--let me turn this to Mark Zandi. Is there enough money in the federal foreign aid budget that could help--could be redirected?

Mr. ZANDI: No, there's not. That gets squeezed out very, very hard, and you wouldn't go very far in covering the costs for the various tax cuts and various spending initiatives that have been proposed.

NAYLOR: I'm wondering, Murphy, what--Wyoming, I know, has been the beneficiary of some federal spending over the years. Do you see money in the state that comes from Washington that could be redirected?

MURPHY: Well, I don't live in the state, so I can't answer anything for this state. I live in Oklahoma.

NAYLOR: Uh-huh.

MURPHY: And the spending in Oklahoma has not been very great over the years. It--the way I see things, we seem to be doing a lot of cuts to programs to help the poor and the lower middle class instead of any of the cuts on the upper class. We--our government could take and do a whole lot by just cutting from the president level to the city level. They can cut their salaries by one-quarter...

NAYLOR: All right.

MURPHY: ...that--and divert that money back into the country's budget. I mean, 'cause that would do a whole lot in itself.

NAYLOR: All right. Thank you very much, Murphy, for your call.

And thank you very much, Mark Zandi, for sticking with us here. I think we've got Congressman McHenry on the line now.

Congressman, are you there?

Representative PATRICK McHENRY (Republican, North Carolina): Good afternoon. How are you doing?

NAYLOR: I'm doing well, thanks. Patrick McHenry is a Republican congressman from North Carolina who belongs to a fiscally conservative group of Republicans who would like to take money from some other federal programs to pay for the costs of Katrina. Tell me, what are--give me top five items on your list that you'd like to see cut or redirected.

Rep. McHENRY: Well, just a few. I think we could get cost savings in order to pay for Katrina relief. I mean, one of particular interest, I would think, to you and your station is my belief that the Corporation for Public Broadcasting gets enough money from the private sector, you know, including the fact that only 15 percent of the Corporation for Public Broadcasting's budget comes from the budget--I mean, comes from the federal budget. I think we could save $400 million a year there. Also, suspending Davis-Bacon, which is really a sop to unions. It means that the federal government has to pay higher wages for contracting, and that could save, I think, you know, a couple billion over 10 years, including other ways for us to look--go back to the budget and cut some spending that could actually help out significantly.

NAYLOR: Let me add, Davis-Bacon--the president--which is a law that says that federal contractors have to pay the prevailing wage rates--the president has suspended that, if I'm not mistaken, already in the hurricane-affected areas.

Rep. McHENRY: Yeah. Davis-Bacon is an area where we could save $2 billion over 10 years, and something we could do nationwide. If it's good enough for immediate disaster of Hurricane Katrina, then I think it's good enough for us to look at as far as remaining fiscally conservative nationwide.

NAYLOR: Mm-hmm. Now--and insofar as Corporation for Public Broadcasting and many of the other cuts that people have been talking about, these were issues that--I know in the CPB's instance that Congress voted in the opposite direction. There was an effort earlier in the year to cut CPB funding, and that was reversed in a vote on the full House floor. I'm just wondering, do you think that there's the political sentiment there to reverse those cuts? And let me ask you if we can just hang on a moment and take a break for our stations.

We will continue this discussion with Congressman McHenry and talk a little later on about the new $10 bill that's been released today. It's TALK OF THE NATION. I'm Brian Naylor from NPR News.

(Soundbite of music)

NAYLOR: This is TALK OF THE NATION. I'm Brian Naylor in Washington, sitting in for Neal Conan.

And we're talking about how to pay for the costs associated with the cleanup and rebuilding of the Gulf Coast states hit by hurricanes Katrina and Rita. And joining us is Congressman Patrick McHenry, a Republican from North Carolina.

And before the break, Congressman McHenry, I was asking--Congress has rejected cuts of Corporation for Public Broadcasting, but many, many other things; passed a major highway will with lots of projects in it. Do you see--do you sense any sentiment to go back and revisit any of those issues now in the aftermath of Katrina?

Rep. McHENRY: Certainly. I think it's important for us to prioritize our spending. What's more important, us spending, you know, a couple billion dollars over 10 years for Davis-Bacon, which, you know, pays a higher wage rate than is necessary for us in federal contracting, or do we think it's more important to prioritize and say, `That money should go to helping the most devastated people in our country as a result of Katrina'?

For instance, if we eliminate Davis-Bacon, that would save $2 billion. And that money could be spent to rebuild bridges in Louisiana. If we say that Corporation for Public Broadcasting is not the most important priority in our country, we could take that $400 million and build 42 elementary schools in Mississippi, Alabama and Louisiana. And there are all--there are counties, three whole counties, in Mississippi, for instance, that do not have a public school or any education of any sort, that has a facility that is still standing. So we have to make sure that, in this time, as a result of these devastations of Katrina and Rita, that we prioritize our spending and make sure that we don't put our nation into greater debt, and we prioritize our spending to say, `Is it more important to continue this program, or is it more important for us to fund and help those that have been devastated by a natural disaster?'

NAYLOR: Congressman, I want to take a call here. Jim from Palm Coast, Florida, you're on TALK OF THE NATION. Thanks for calling.

JIM (Caller): Yeah, hi. Thanks. I'm a first-time caller. My name is Jim from Palm Coast. And I think one way we can raise money for the Katrina relief would be to raise the stamp from 30 cents to 50 cents. I mean, for us it's only pennies, but if you think about how many letters are mailed a day--say, anywhere from 600 million to a billion--I think that would be a big step towards raising revenue. And I'll take my comments off the air or whatever.

NAYLOR: All right. Thanks very much for calling.

JIM: All right. Bye.

NAYLOR: Congressman McHenry, what do you think of that notion...

Rep. McHENRY: It's an in...

NAYLOR: ...raise the price of stamps?

Rep. McHENRY: It's an interesting notion. In fact, we're trying to pass postal reform this year on the committee that I serve on, and that's the Government Reform Committee. The problem with raising, for instance, the cost of postage is that people will say, if you're going to go up, in that case, you know, probably 75 percent increase in the cost to mail letters, businesses will decide to not mail. They'll--instead of communicating with their customers, they'll use e-mail rather than the mail service. And what happens with every postal rate increase is that the level of usage of the Postal Service actually goes down and revenues go down.

This same reality is what we're facing with those that say, `Let's just simply raise taxes.' If we raise taxes in this country, for instance, the Democrat proposal to, quote, unquote, "roll back" the Bush tax cuts, which in essence is raising taxes, meaning we'd spend--we would pay more to the government next year than we did this year. If we raise taxes, what's going to happen is economic growth will be affected. The economy won't grow as much. People won't spend as much. More jobs won't be created. And as a result, as a result of that, we will get less in revenue to the government than had we kept Bush's tax cuts or continued to cut taxes.

NAYLOR: Let me ask you about another argument that some are--been starting to make, at least, and that's the continued cost of the war in Iraq. Can we afford to continue to--the federal--the dollar cost--support the dollar cost of that war to the extent that we have been in the wake of these other needs?

Rep. McHENRY: You know, certainly, it's a--the war in Iraq is a concern for everyone in this country and, you know, we have to ensure that we honor the commitment that we've made in Iraq. And that's why it's important that we have a strategy to win, to tamp down the insurgency and the terrorists in Iraq and get results and get a democratic government up and running and in place. And we're on track to do that in Iraq. We cannot cut and run at this point, because the cost to the American people and the cost to our economy will be too great at this point. We've made such a great investment that we have no other choice but to ensure that we win and create an ally of a free Iraq that is self-governing and can defend themselves.

In the end, us sticking this out and actually having a democratic government in Iraq, will help us in a number of different ways. And the uncertainty that terrorism plays on our economy, on our marketplace, will be lessened because there will be a free country that will not produce terrorists, and that's the agenda that we have. We have to make sure that we meet that call and ensure that we have a good, strong democratic Iraq.

NAYLOR: Congressman Patrick McHenry is a Republican congressman from North Carolina. He joined us by phone from his office in Washington, DC.

Congressman McHenry, thanks very much.

Rep. McHENRY: Thanks so much for having me, Brian. Take care.

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