Congress, having already appropriated $10.5 billion for the first stage of relief for Hurricane Katrina, is hurrying another $51.8 billion into the pipeline. The total cost could reach a mind-numbing $100 billion – five times the $21 billion allocated for New York City after the terrorist attacks on Sept. 11, 2001.
This latest blow to the bedraggled federal budget comes as President Bush and key Republican leaders are trying to cut $35 billion from programs ranging from Medicaid and Medicare to student loans and farm supports – while extending $70 billion in tax cuts.
What’s wrong with this picture?
The American economy is strong but it’s not infinite. Our resources are adequate to meet any four of the following five objectives: provide a reasonable level of public services; maintain vital infrastructure from highways to levees like those that broke last week in New Orleans; fight the war in Iraq; keep the federal deficit within reasonable bounds; and make a major tax cut.
Unfortunately, Bush has tried to do all five, with pride of place going to the tax cuts that are undercutting other national needs. Thus, the federal deficit, which improved in July to a predicted $333 billion from $412 billion in 2004, is likely to balloon yet again.
Bush budget experts say the Katrina relief will be a one-time cost, not an ongoing expense. Unfortunately, the hurricane’s tab fits into an overall pattern of ad hoc budgeting that never attempts to rein in total federal spending. The best example is the Iraq war, which costs upwards $5 billion a month but is still handled outside the formal budget process in a series of “supplementals.”
The merits of the war aside, it was reasonable to finance the first year as a supplemental appropriation, since the cost and scope of the deployment could not be foreseen. But as the U.S. presence in Iraq enters its fourth year, it is long past time to include those costs in the normal budget and to ensure they are financed responsibly.
Senate leaders wisely delayed this week’s scheduled debate on repealing the federal estate tax. A time when thousands of Americans are shivering in shelters is hardly the propitious moment to succor the heirs of billionaires. When the Senate does return to the issue, we’d urge it to pass a reasonable reform such as proposed by Rep. Dennis Moore, D-Kan., that would raise the current estate tax exemption of $1.5 million to $3.5 million for individuals and $7 million for a couple. Moore’s plan would repeal the tax for 99.7 percent of all estates in the U.S. – while costing the Treasury far less than the $290 billion over 10 years that the outright repeal passed by the House last May would cost. Moore’s plan also exorcises the “Trojan horse” in the House bill that would force many Americans to pay for their estate tax “repeal” with sharply higher capital gains taxes.
Finally, with many states, including Colorado, battered by rising Medicaid costs, this is no time for Washington to shift even more of that burden to the states. And cutting student loans only further reduces America’s ability to compete in a world economy where brainpower has long since eclipsed muscle power.
The president and Congress should put any further tax cuts on hold until they get the federal fiscal house in order.
