Pricing the Bush Recovery Plan President Bush presents a plan to rebuild the Gulf Coast. It includes individual worker recovery accounts to help pay for job training, a homesteading program and a very hefty price tag.
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Pricing the Bush Recovery Plan

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Pricing the Bush Recovery Plan

Pricing the Bush Recovery Plan

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This is TALK OF THE NATION. I'm Neal Conan in Washington.

Under pressure from the White House and Hurricane Rita, New Orleans Mayor Ray Nagin asked all residents of his city to leave a second time. Though much of the city is now dry, there's concern that another storm might tear apart patched up and eroded levees. Cleanup and reconstruction in the city had scarcely begun before this second evacuation of New Orleans. The situation is mixed elsewhere on the Gulf Coast, with some areas still devastated, others on the road to recovery.

Last Thursday night in a speech from New Orleans, President Bush vowed to rebuild better than ever and described a series of programs to help families and businesses to recover but provided few details. Today we'll look deeper into this plan and at the president's proposals for urban homesteading, worker recovery accounts and at the creation of a Gulf Opportunity Zone.

Later in the program General Richard Myers joins us from the Pentagon. He steps down as chairman of the Joint Chiefs of Staff at the end of the month. If you have questions for the general, you can call later or e-mail us now. The address is

But, first, reconstruction and recovery on the Gulf Coast. In a few minutes we'll talk with John Taylor, economics professor at Stanford and former undersecretary of the Treasury during the president's first term. We'll also hear from Robert Reich, the secretary of Labor during the Clinton administration.

If you have questions about the president's plan for economic recovery, what is in it, how it will work, who benefits, give us a call. We're especially interested in hearing from those of you getting ready to rebuild homes or businesses in the affected area. Our number here in Washington is (800) 989-8255; that's (800) 989-TALK. The e-mail address is

And we begin with Claude Allen, assistant to the president for domestic policy and head of the Domestic Policy Council, who joins us now by phone from his office.

Thanks very much for taking the time to be with us today.

Mr. CLAUDE ALLEN (Domestic Policy Council): Good to be with you, Neal.

CONAN: The president wants everything to happen quickly. Everybody does. Does it make any sense, though, that anybody's going to invest money or rebuild a house in New Orleans until the bridges and highways are operating again and those levees are fixed?

Mr. ALLEN: Well, of course, that is going to be critical to any building that takes place, but we're talking beyond just New Orleans. We're talking about the Gulf Coast region. And some areas, such as Alabama and Mississippi, where the cleanup with the water has receded and they're able to get in there and to start the cleanup, clearly they're going to want to start rebuilding. With New Orleans we do have the immediate need of, first of all, getting the water out of the city and then turning our attention to the rebuilding effort. But that doesn't stop businesses from wanting to go in, assess the damage, assess what their opportunities are for going back in. And so that's what is going to go forward--is helping them to understand what is before them in terms of the recovery effort.

CONAN: Whether it's in Mississippi or in New Orleans or elsewhere in Louisiana or in Alabama, the question that has sort of--one of the questions that's dogged the recovery operation and the aid operation would seem to apply here as well. Who's in charge? Who gets to say, `We're going to build that here and that over there'?

Mr. ALLEN: Well, there's a certain role for the federal government to play, namely under the Stafford Act. The federal government is responsible for funding much of the public works projects. So all of the infrastructure rebuilding, public buildings and the like, those would be largely done with significant input and resources from the federal government. However, in other areas, the state has to lead in a lot of these areas in terms of working with them, in terms of redevelopment of those assets that the state's responsible for. And then ultimately the city and towns that have been affected, the parishes in Louisiana, they have a say also in how things get done. So it really is a--has to be a collaboration between all three branches of government, plus the public sector, plus the private sector, where individuals have lost property as well.

CONAN: It sounds like this is going to be an operation that requires careful planning. If, as the president said, he wants to do it right and wants to do it prudently, of course, and not waste money, this is going to take time.

Mr. ALLEN: It certainly is. It's not going to done overnight. We are just now in the recovery phase of the cleanup, and the cleanup itself will take much time. As you pointed in New Orleans, there's still much water there. And with Hurricane Rita bearing down the region, likely there'll be more water. And so we have to be very mindful of that; that it's not going to be quick.

What we're focusing on is on individual services, helping individuals find temporary shelter and housing, helping them to get reconnected to jobs. And that's where the president spoke on Thursday about his programs of looking at helping worker recovery accounts be created for individuals, who will have it difficult to get employed; helping with the Homesteading Act, helping individuals find, back in the region, places where they can own homes, those that were not there; and working with providing relief to the small business community through the GO Zone proposals, making sure that they, too, have a desire to go back and help rebuild that region.

CONAN: Some of those programs are going to have to be approved by Congress, no?

Mr. ALLEN: Well, certainly. But we have already been working with Congress, giving them greater details about it, and then it's going to be working out with Congress to get it done. But many of these issues, again, in terms of helping with worker recovery accounts, we have provided in the past certain assistance to individuals that are hard to employee. So it's not reinventing the wheel in any shape. What we're doing is targeting the relief to this region to help get it--quickly recover because not only is it important for the region, but it's significant to our national economy as well. And so it's important getting businesses back up and going and individuals back to work, where they can be gainfully employed and help participate in rebuilding the region.

CONAN: Congress is going to have its own ideas. For example, today Senator Olympia Snowe of Maine introduced the Small Business, Homeowners and Renters Disaster Relief Act of 2005. Are you guys working together with the Republican leadership in Congress to make sure that their proposals align with your plans?

Mr. ALLEN: We will be working with both Republicans and Democrats in Congress to get the best plans together that will provide relief immediately for those immediate needs but also provide assistance for planning and building out for the recovery effort for the long term. So we will work with the leadership in Congress, both the House and the Senate, both Republican and Democrat, because, again, it's important to all Americans that we rebuild a strong Gulf Coast region.

CONAN: According to the White House briefing on Friday, city or regional employees would determine who gets worker recovery accounts. What criteria will they be using?

Mr. ALLEN: Well, for the worker recovery accounts, many of the local labor departments have--already familiar with working with this type of program. Essentially, what it consists of is about 26 weeks of assistance for employees who are deemed to be difficult to hire or difficult to employ because either they lacked the essential skills necessary for the job they're searching for, the educational component or they just need a longer-term assistance. And so what we've done is set up up to $5,000 that they can use to provide employment-related and supportive services, including counseling, job training, even in some cases child care, transportation and relocation costs. And all that will be a part of it.

CONAN: This sounds like a 26-week extension of unemployment benefits plus.

Mr. ALLEN: It's sort of on top of that because, of course, they do have the 26 weeks of unemployment that they're entitled to. But after that some people--because maybe the line of work that they were in is no longer viable in a new Gulf Coast region and so, therefore, they're going to have to get retooled themselves with new skills, and so that may take longer than 26 weeks. And that's why we have the worker recovery accounts. And the goal, again, is not only to say, `Here's the training that you need, but if you get employed sooner than the additional 16 weeks,' they can get, as a bonus, the balance of that account that they can take for themselves because they got gainfully employed.

CONAN: Can you take a couple of calls with us?

Mr. ALLEN: Sure can.

CONAN: All right. Let's begin with Doug. And Doug's calling us from Ormond Beach in Florida.

DOUG (Caller): Yes, I was wondering--we have millions of people who are displaced and out of work, and I was wondering if it might be possible to form an organization like the WPA and put a lot of these people back to work, bring them back, set up camps and have them rebuild their own city and get paid for it.

CONAN: A Works Project Administration back from the old New Deal era of Franklin Delano Roosevelt. Claude Allen?

Mr. ALLEN: Well, actually our desire is to see--the best way to do this is not through the government setting up some public works program but, rather, using the strength and the power of the private sector. And that's what the GO Zones are designed for. And that is that small business, large business, they know what they need to get going back in this region, and so we are really incentivizing both the small business community but also individuals by providing them the job training accounts that can serve that purpose without having to have a large government footprint on this type of program that may not be necessary when the private sector can do it very well.

CONAN: Well, with one...

DOUG: Makes a great deal of sense.

CONAN: Doug, thanks for the call.

DOUG: Thank you.

CONAN: With one thing or another, there are going to be a lot of contractors hired by the government to do a lot of different things. Are local businesses going to get a fair cut of this?

Mr. ALLEN: Well, the president's made it very clear that he believes that we should certainly be supportive of having people in the region, from the region, be a part of the recovery effort. In fact, that's critical in order to build jobs in those areas. While we can't dictate that, we certainly believe that that is appropriate and that--we're working with the state and locals in terms of the contracts that are going out to ensure that they are complying with and meeting all the federal regulations that require equal opportunity and the like. And so those are going to be very important, but yes, we will work with them to make sure that locals do have an opportunity to get those jobs because this is their home.

CONAN: Here's an e-mail question from Todd in Des Moines, Iowa. `Who benefits from the exemption from prevailing wage rules in rebuilding?' I think he's talking about the suspension of the Davis-Bacon law.

Mr. ALLEN: Well, the people who benefit are actually the American public, the taxpayers, and the region at large. The purpose for waiving Davis-Bacon and other regulations that we're dealing with in this area was to get people back to work quickly but also to make sure that we're not putting bureaucratic barriers before people when we've got a region that has been devastated by Hurricane Katrina. And so for the period of about 90 says, we have waived a series of regulations to attract businesses that historically do not contract with the federal government because of simply that, we put too many obstacles before them.

While we will have strong adherence to our equal employment laws, strong adherence to equal opportunity, we want to make sure, though, that we can get as many takers, businesses, that would desire to go in here to help rebuild the Gulf Coast region--to do so without having to go through a lot of hurdles through the government putting up before them in terms of bureaucracy.

CONAN: There was another part of Todd's question. He said, `Doesn't suspension of Davis-Bacon just allow outside parties to come in and mandate a wage for rebuilding, forcing locals to take low pay or leave it to have no rebuilding at all?'

Mr. ALLEN: Not at all. Not at all. In fact, what we're trying to do here is that we're trying to get people back to work and not have to haggle with and overlook a lot of paperwork. So, for example, in some of the cases, it has been said that we are waiving some of the affirmative action laws, and that's actually not the case. What we've done is simply said that for the period of 90 days, you don't have to have a written affirmative action plan. And yet under such a waiver, those very companies--minority-owned businesses, small businesses that heretofore do not contract with the federal government--will now have an opportunity to do so and not have to fill out all the papers that we historically require in a normal period. And so, no, we will not be undermining the prevailing wage or undermining the economy. We'll let the market dictate and remove government from the bureaucracy of putting before those who want to do the work and those who want to employ people and put them to work.

CONAN: Claude Allen, thank you so much for your time. We know you're extremely busy. We appreciate your taking the time to talk with us.

Mr. ALLEN: Thank you, Neal.

CONAN: Claude Allen is assistant to the president for domestic policy, and he heads the Domestic Policy Council. He joined us from his office at the White House. We're talking about President Bush's plan to rebuild areas devastated by Hurricane Katrina. More of your calls and e-mails after the break. This is TALK OF THE NATION from NPR News.

(Soundbite of music)

CONAN: This is TALK OF THE NATION. I'm Neal Conan in Washington.

President Bush's ambitious proposal for the areas pulverized by Hurricane Katrina is long on grand ideas and thus far a little light on details. We're talking today about what it'll take to put those ideas into action and how the country will handle the price tag. If you're from the hurricane region, do you hope to take advantage of these proposals? What are your questions about exactly what's in the plan? Our number is (800) 989-8255; that's (800) 989-TALK. You can also send us e-mail at

A bit later this hour General Richard Myers, the outgoing head of the Joint Chiefs of Staff, will join us to talk about the ongoing American role in Iraq and the American military in general. If you have questions for the general, you can also send those buy e-mail now:

We're going to hear from a supporter and from a critic of the president's proposals. And we begin with Robert Reich, the former secretary of Labor during the Clinton administration. He's with us from the studios of WGBH in Boston.

And it's nice to have you back on the program, Robert Reich.

Professor ROBERT REICH (The Heller School for Social Policy and Management, Brandeis University): Hi, Neal. How are you?

CONAN: I'm good. The president's proposals seem to address housing, business revitalization, worker training and, of course, reconstruction of the infrastructure. Did you listen to the president's speech Thursday night? What do you think?

Prof. REICH: I did listen, and I think that certainly the worker recovery accounts are a great idea. And the goal of rebuilding it even better than ever, rebuilding New Orleans, I think, is a very, very worthy goal, Neal. Have no problem there. But there are some underlying questions. For example, do we rebuild the place, or do we rebuild people's lives? Many of the poor in New Orleans are now scattered all over the country. They need a lot of help. I'm not sure that the president and this plan are focusing on those people so much as focusing on rebuilding New Orleans. Those people who have been removed to Houston, for example, where there are many more jobs available for people right now, they may want to settle in Houston; they may never want to go back to New Orleans. What do we do about them?

CONAN: Well, the president did outline this program he's calling urban homesteading, where places owned by the federal government, HUD and other agencies, would be provided--basically sweat equity. Doesn't that sound like a good plan?

Prof. REICH: Well, over the long term, maybe. I mean, the Housing and Urban Development agency has identified about 4,000 plots in the area, some 4,000 areas kind of that the government could turn over to people. But, remember, we're talking about more than a quarter of a million families, a million people who have been displaced in New Orleans. The government's property won't nearly go far enough. What people need are basically rental vouchers, vouchers that they can take whether they're in New Orleans, whether they're in the surrounding area, whether they're in Houston--wherever they are, if they've been displaced, they can take these rental vouchers and get rental housing right away.

CONAN: Let's get some more callers on the line. And if you'd like to join us, it's (800) 989-8255. Or e-mail us,

We'll begin with Petra(ph). Petra calling us from San Diego in California.

PETRA (Caller): Hi.


PETRA: I've heard again and again from a lot of former residents of New Orleans who've been displaced that they have no intention of going back, a lot of the poorer residents in particular. You know, residents of the Ninth Ward, who were well below the poverty line, lost what little they had and are now in situations where they actually are finding that they have a better quality of life. You interviewed a couple on NPR who are now in Salt Lake City and are very happy there. And I'm just wondering, you know, while business owners have a vested interest in returning and rebuilding, a large population of New Orleans that has now been displaced does not have any vested interest in doing so and has expressed a lack of interest in returning. So I'm just wondering how you think that's going to affect the rebuilding...

CONAN: Robert Reich, you were just talking about--thank you very much for the call, Petra.

PETRA: Sure.

CONAN: We'll--but you were just talking about this. And these people are clearly finding opportunities elsewhere.

Prof. REICH: And if they're finding opportunities elsewhere, Neal, many of them, as Petra says, are not going to go back. But, remember, the business elite in New Orleans may not necessarily want a lot of poor people to come back to New Orleans. I mean, we know in the history of urban renewal that urban renewal often has meant urban removal of the poor. So on both sides you've got sort of maybe a lack of interest of a lot of people going back to New Orleans. And then the question is: What are we going to do to help them?

CONAN: Let's get another caller in. This is David. David's with us from Baton Rouge in Louisiana.

DAVID (Caller): Hey, thank you for taking my call.

CONAN: Sure.

DAVID: My question is: Is there anything in the president's plan that's going to be used for the city of Baton Rouge? I know our mayor has gone and asked for it, but I don't know if there's anything earmarked. And, frankly, we're just being overwhelmed. You know, what...

CONAN: I do know one thing specifically that was in the president's plan, David, and that's to provide education benefits to schools that have been, of course, inundated with a lot of kids from New Orleans and other places.

DAVID: OK. But, I mean, we've got traffic problems. I work 10 miles from my house, and it takes me an hour each way. It's unbelievable the amount of people that have come in, and, you know, I--you know, we need help, too. I guess that's what I'm saying.

CONAN: Yeah. Robert Reich, the city of Baton Rouge--I think it's basically doubling in size.

Prof. REICH: Well, the government obviously has to rebuild infrastructure so lenders and insurance companies will be available to support builders and investors all over the Gulf Coast. Now the president did talk--or at least the president's office has talked about the Gulf Opportunity Zone concept, and David may be interested in this. New Orleans and the entire Mississippi delta region will be eligible for some tax breaks that, you know, other parts of the country are not eligible for in order to attract new private-sector investment. The problem there is that New Orleans and the Mississippi delta region have already been among tax-favored enterprise zones for over a decade with very little impact.

So, once again, I think the president's trying to use the private sector, and I think that's perfectly fine. But maybe it's not enough and it's not quickly enough to get to what David is concerned about and what others are concerned about in terms of helping people on the ground right away.

CONAN: This enterprise zone, these have been--David, by the way, thank you very much for the call. I didn't mean to cut you off.

DAVID: Sure, Neal.

CONAN: But these enterprise zones--previously they've been relatively small targeted areas--suddenly are going to have an enterprise zone--well, people are saying the storm affected an area the size of Great Britain.

Prof. REICH: That's right, and that's a big enterprise zone, Neal. The problem there is the businesses, according to a lot of studies--now we've never had an enterprise zone that big, but businesses do not locate mainly on the basis of tax advantages. They locate where they can get skilled people, they have good infrastructure, good communications systems, good transportation systems. And that's why so much has to be done before we can expect businesses to go to the New Orleans and the Gulf area.

CONAN: There are some businesses who may leave New Orleans for good. It's going to be some time, they begin to realize, before they could be able to get back into the city. If they're going to establish a new headquarters in Baton Rouge or elsewhere, why move back into New Orleans?

Prof. REICH: Exactly. And remember also that one of the key industries in New Orleans specifically has been tourism. Tourists are probably the least likely to want to go to a place that has been as badly ravaged as New Orleans. The other industry is oil, but that is also--it's going to take time to get that infrastructure back. And that's not going to provide a lot of jobs to poor, relatively unskilled people. They need the tourist industry.

CONAN: And shipping is another big industry.

Prof. REICH: Shipping, too, is another big industry. But again, mostly skilled longshoremen, people handling cargo--most of the poor in or who were in the area were involved in retail, restaurant, hotel, hospital, child care, elder care. These are not the kind of jobs that are going to be back there anytime soon.

CONAN: Let's get another caller in: Diane. Diane's calling us from San Francisco.

DIANE (Caller): Hi. I've been in San Francisco two weeks. I came out of New Orleans, came through the flood, came off the roof, came through everything. I want to ask this: If they want poor people to come back to New Orleans, why did they close the schools for an entire year? Ninety percent of the students in New Orleans schools are black. And if you close the entire schools for an entire year, it means you don't want poor black people to come back to New Orleans. People have to have their children enrolled in schools, so they have to stay where they are to enroll their children in school.

Point two, there are now jobs in New Orleans cleaning up the city, and there will be jobs rebuilding the city. These companies are bringing people in from other states to take these jobs. And the people of New Orleans who could gladly take these jobs are being kept out, mainly because you can't move back in because your children got to go to school somewhere. And that makes us wonder if they want us back at all.

CONAN: I--there was an interview on "Morning Edition" today with an education official in New Orleans or in charge of New Orleans saying that they could open the schools, and they're thinking now as soon as January. But you're right, the remainder of this year...

DIANE: OK, but you've got people enrolling their kids in schools elsewhere, and we're supposed to just wait for them might to open the schools, maybe. Do you understand what I'm saying?

CONAN: Oh, I understand completely what you're saying, but...

DIANE: Because ...(unintelligible) the real people have to find a job where they are to put their children in school.

CONAN: But, Robert Reich, at the same time these schools, some of them, are still under water, some of them have been severely damaged. It's going to take a while to recollect to the teachers. January seems ambitious.

Prof. REICH: It does seem ambitious, Neal. This is why I think it's important to, as I said before, distinguish between the goal of helping people who had been in this area, New Orleans and the Gulf, and who are now scattered all across America, on the one hand, and rebuilding New Orleans on the other. Those are two different goals, and they may have very little to do with each other, particularly if a lot of the people who are scattered all over American decide not to come back.

CONAN: Diane, what do you think you're going to do?

DIANE: I would love to come back to New Orleans, but I have a grandson. My daughter is trying to keep her job. The job that she has has closed down to people elsewhere or part-time jobs in the future. She has to get a full-time job somewhere else. We would love to come back to New Orleans, but what is there for us to come back to New Orleans to?

Another question I'd like to ask: If they open these hotels, it's not just tourists. You have a lot of business and associations who have conventions and meetings in New Orleans, large meetings. So they...

CONAN: I think the convention center's going to be in difficulty for some time.

DIANE: OK. But they have other--hotels have big rooms. Who's going to staff these hotels?

CONAN: Good question, Diane.

DIANE: It's all you poor people. It's the poor people who staff the hotels.

Prof. REICH: Neal, if I...

DIANE: Who's going to staff the hotels?

CONAN: Go ahead, Robert Reich.

Prof. REICH: If I could, Diane is also raising a kind of very, very fundamental question about the future of the poor in the region. I mean, the president and the White House keep talking about restoring people to the lives they had before Katrina. But the reality is that about 27 percent of the people in New Orleans were under the poverty line, the schools were awful, jobs were not available for a lot of these people. They didn't have the skills. Many of the housing was substandard housing. Now if you restore the people to the lives they had before Katrina, you're restoring them to pretty awful lives. So the goal really does have to be if we want to rebuild New Orleans and do it in a way that is socially responsible, presumably to help the people have better lives who were there before. Now that's not necessarily an easy thing to do. And if we're going to do that, why don't we do it for poor people all over the country?

CONAN: Diane, thanks very much for the call and good luck to you.

DIANE: Thank you very much.

CONAN: And, Robert Reich, we appreciate your time today.

Prof. REICH: Thanks, Neal.

CONAN: Robert Reich was secretary of Labor during the Clinton administration; now university professor of social and economic policy at Brandeis University, and he joined us from the studios of member station WGBH in Boston.

We turn now to Stanford economics Professor John Taylor, who was undersecretary of the Treasury during the first term of the current Bush administration. He's with us by phone from his offices in Palo Alto, California.

And it's very good of you to be with us today.

Professor JOHN TAYLOR (Stanford University): Thank you.

CONAN: We've heard some skepticism about the president's plan. What do you think it achieves?

Prof. TAYLOR: It has the goal of rebuilding New Orleans and restoring the services and the style of life that was there before, and then some. Its focus, I think, is a lot on helping the private sector participate in the rebuilding, setting some good metrics to make sure things get done so that the critics--whatever criticism there is, it seems to me, more focused on these positive elements is merited.

CONAN: What are the metrics that you're talking about, these measurements of progress?

Prof. TAYLOR: Well, for example, there's going to be, in creating this Gulf, there's a Gulf Opportunity Zone, which is taking the areas of the three states that were hit hardest and allowing firms to write off additional funds if they invest in the area. And one of the metrics is to allow for twice as much expensing as before if the firms invest there, from 200,000 rather than 100,000.

There's also, I think, very important when they write the contracts for their infrastructure rebuilding to set the time lines and provide incentives for firms--construction firms to get the jobs done in time. This was a technique used in California after the Northridge earthquake and it was very successful.

CONAN: We're talking about the proposals to rebuild New Orleans and the Gulf Coast, and you're listening to TALK OF THE NATION from NPR News.

And let me ask you, John Taylor, about the price tag for this. The president said, `We'll do everything that's necessary and not a penny more,' but there is no price tag at this point, is there?

Prof. TAYLOR: Well, of course, the Congress has already put out $60 billion of funds. It's--and those are going to be used for infrastructure reconstruction, for direct payments to people. There's also the proposal to create these worker--special worker accounts for retraining, getting better education, and so the funds will be used for that, too. But right now the numbers that have been put forth are $60 billion. Some of it's already being spent this year, some of it will be spent next year, and then with the reconstruction projects, it'll be a number of years.

CONAN: But people are estimating something in the ballpark of 200 billion here.

Prof. TAYLOR: Well, those are just estimates and guesstimates at this point in time. The amount the Congress has already put out is 60, and the important thing is to emphasize that the projects are specific and the money's being used in very concrete, accountable ways.

CONAN: Here's an e-mail question that we have from Chris in San Diego: `Given that wetlands serve as a sort of buffer zone and could prevent a hurricane from being stronger than it otherwise might be, is part of the president's plan to rebuild those wetlands on the Gulf Coast which had been largely eradicated?'

Prof. TAYLOR: I have not heard that particular part of it. If it's a proposal that is something that's gonna work in terms of preventing this kind of thing in the future, it should be on the table. I haven't seen that particular proposal.

CONAN: Let's get another caller in--and the White House has said they're still working out the details of this. Anyway, Brad is calling here from Vancouver in Washington.

BRAD (Caller): Yes, hi. I have a curiosity about where this money is ultimately coming from. You know, $60 billion is a drop in the bucket compared to what's gonna be out there necessary, you know, and I guess I already know that it's gonna increase our deficit, and when we increase our deficit, it's not just borrowing from ourselves. My understanding is that we borrow from other countries. And I'm curious, you know, since Mr. Bush isn't going to lower the taxes or decrease the amount of money that he's spending in Iraq, you know, who's the biggest note holder here? Who are we gonna go to to get this money to spend on the reconstruction?

CONAN: I think he said--he meant to say that President Bush wouldn't raise taxes rather than that he wouldn't lower them. John Taylor?

Prof. TAYLOR: Yes. The president has, I think, very wisely said that it's not a good idea to be increasing taxes. Taxes that are in place now should remain. I think the caller is very correct to say that we ought to look for ways to control spending in other areas. The president's budget had a number of proposals to constrain spending, to reduce programs that he viewed as unnecessary. It seems to me at this point, especially the Congress should come back and look at those proposals and...

CONAN: Things like the transportation bill?

Prof. TAYLOR: There's--well, the proposals were for $15 billion, so that's a good start.

BRAD: No, my question basically was who's the biggest note holder? Who do we go to...

CONAN: Wouldn't that be China, John Taylor?

Prof. TAYLOR: Lots of people hold our debt--foreigners, people in the United States, and whenever there's increase in the debt, people who want to buy it will buy it. And one of the fortunate things now is that the budget deficit has been coming down ...(unintelligible).

CONAN: I'm afraid we're gonna have to leave it there. Brad, thank you very much for the call and, John Taylor, thank you very much for being with us today.

Prof. TAYLOR: Thank you.

CONAN: And when we come back from a short break, General Richard Myers joins us. It's the TALK OF THE NATION.

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