Thursday, September 08, 2005

$62,000 per person in federal aid and counting in Katrina

Here's a small huge back-of-the-envelope calculation for those keeping score at home:

Congress has already approved $10.5 billion for Katrina recover. Now Bush is asking for an additional $51.8 billion. Let's see.... 5, 8 carry the one.....oh let's just round it down to an even $62 billion (that $300 million is just pocket change to Congress anyway).

OK; $62 billion to be appropriated in just over 1 week. Estimates are that 1 million people will be homeless as a result of the disaster.

$62 billion, 1 million people....that works out to $62,000 PER PERSON...not household...PER PERSON.

We have seen very little leadership in the Congress reviewing the White House's requests for aid. A few, like Representative Tom Tancredo, are a least questioning how the money is distributed, but even that is not enough.

Congress needs to slow down the appropriations process and make sure money is being allocated just for immediate needs. Long term reconstruction decisions should be put on hold until a complete review is done and the question of rebuilding New Orleans, and similar disaster prone areas, is settled.

Update: BizzyBlog (thanks Tom) provides this link (requires subscription) to the following Wall Street Journal editorial:

Beltway Hurricane

September 8, 2005; Page A18

Ten days after Katrina, the private economy is holding up nicely. Oil platforms and pipelines are being repaired, traffic is returning on the Mississippi, gasoline prices are stabilizing, and the stock market has rallied two days in a row. The biggest threat now to a rapid and complete recovery is the storm-after-the-storm in Washington, where the politicians are making Governor Blanco look composed.

Our panicky, or shall we say opportunistic, solons are already using Katrina to bust through whatever spending limits they had previously set for themselves. Following last week's $10.5 billion, Congress is set to appropriate $52 billion more this week, and not just for the Gulf Coast. Senate Minority Leader Harry Reid has already tossed out $150 billion as a spending goal, and Republicans are saying they won't be outbid. No one wants to be stingy, but it's time to worry when the same people who passed a $286 billion highway bill without enough money for Louisiana levees now want to throw money at everything in sight.

If you think we're being cynical, consider that it took all of two days back from recess for Democratic leaders yesterday to propose killing this year's budget resolution. That document is hardly a fiscal straitjacket. But it is the only mechanism Congress has for putting any restraint on Medicaid and other entitlements growing by 7% to 8% a year, or triple the inflation rate. It's a terrible sign for fiscal sanity that GOP leaders gave in yesterday and agreed to suspend "budget reconciliation" for at least two weeks.

The real agenda here is to use Katrina to kill the Bush tax cuts and restore Congressional spending-at-will. The rules of "reconciliation" allow tax cuts to pass the Senate with 50 votes, rather than with the 60 needed to break a filibuster. So Republicans had hoped to use those rules to extend the Bush tax cuts on dividends and capital gains for another two years, through 2010. Without reconciliation, tax cuts are dead.

The irony is that Congress is doing all of this just as the U.S. economy spurred by tax cuts is throwing off record increases in revenues. Federal coffers are rising this year to the tune of $262 billion more than in fiscal 2004, and most state budgets are also brimming. If America is going to have any hope of financing both a war on terror and hurricane relief, it needs to keep this expansion growing. Telling investors that their tax rates on dividends will soon rise back to 35% from 15%, and on capital gains to 20% from 15%, would both shock the stock market and hurt growth.

Financial markets have been resilient so far in part because they realize the economy had enormous underlying strength before Katrina hit. Only last Friday, the August jobs report showed strong job growth and the lowest unemployment rate in five years. Oil prices have fallen to $66 a barrel from a high of about $72. A disaster such as Katrina is an immediate blow to GDP because it destroys productive capital stock. But over time it can lead to an increase in the rate of GDP growth by creating new investment needs and opportunities.

The largest danger now is that Members of Congress will get in the way of this natural economic recovery by exploiting Katrina to spend like they're back on Bourbon Street. That will tell Americans that tax increases are inevitable down the road, and that they'd better start dampening the animal spirits the nation will need to rebuild New Orleans and the rest of the Gulf Coast.

Which leads us to ask: Where is President Bush? Helicopter tours of the disaster zone are important to reassure the suffering, and the federal disaster-bureaucracy needs to be shaken up. But in our system only a President can stop a runaway Congress. Mr. Bush needs to start explaining to the country that while Washington will spend what it takes to assist the victims, he won't allow Congress to exploit this disaster to build more Alaskan bridges to nowhere.

Update 2: Hey, Big Spender by John Fund:

With almost no debate and with precious few provisions for oversight, Congress has passed President Bush’s mammoth $62 billion request for emergency Katrina relief. House Speaker Denny Hastert says the final total will “probably [be] under the cost of the highway bill” that Congress passed last month with a pricetag of $286.4 billion.
Update 3: Washington Times editorial: Pork and hurricane relief:

Congress appropriated $51.8 billion in emergency-relief money for Hurricane Katrina's victims, and suspended the normal rules and procedures so the bill would not get entangled in special interests or endless debates. That made sense; lives were at stake and the money was needed at once. But Congress can listen now to those who want to cut discretionary spending so money can be sent for reconstruction in the Gulf states. Congress could erase half that total with the transportation bill earmarks.

Before Katrina, these earmarks were hardly necessary; today, they look like an abdication of duty. As we noted last month, the most outrageous items in this $286 billion bill were $229 million for a highway called "Don Young's Way" in Alaska, a favorite of the Republican chairman of the House Transportation Committee; $18.75 million for the "Highway to Nowhere," linking Ketchikan, Alaska, to the island of Gravina, population 50; and $20 million for a Magnetic Levitation Transportation System linking Las Vegas and Primm, Nev. Naturally the guilty legislators defended these projects as necessary spending on vital local needs. Of course.

These projects look particularly foolish now. Katrina has blown the roof off business as usual in Washington, and rightly so.



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