The Cost of Katrina: Reconsidering the Budget

Many of us believe that our government should do everything possible to help the victims of hurricane Katrina, but what is the cost? Some lawmakers have said the relief effort will carry a price tag of $200 billion or more, putting the U.S. that much deeper in debt.

Lawmakers are beginning to argue over how to adjust the budget in order to accommodate the cost of Katrina.

White House point of view

On September 19, 2005, the White House stated that the Katrina disaster will not have a lasting impact on the deficit. President Bush continues to be dedicated to his promise to cut the deficit in half by the end of his term. Bush believes that spending cuts in other areas will offset spending on the catastrophe.

Further, Bush has offered generous tax cuts to the Gulf Coast region in order to encourage investment in the devastated area and stimulate the economy there. In his speech on September 16, President Bush pointed out that the affected districts are unable to generate tax revenue, so offering tax breaks there does not drain the Treasury.

Not all Republicans agree

Some Republicans, such as George Voinovich of Ohio, are worried about Katrina’s effect on the national debt. Voinovich disagrees with Bush and feels that spending cuts won’t be enough. He says the government needs to "get real" about the impact of tax cuts on the deficit.

However, many prominent Republicans in Congress agree with the White House and say that Congress should move forward with its agenda, including extending broad tax cuts. House Majority Leader Tom DeLay believes that repealing tax cuts or otherwise raising taxes would pour "cold water on the economy."

But tax dollars are getting stretched thin with the war in Iraq, the Medicare prescription drug benefit - scheduled to begin in 2006 - and the hurricane relief effort.

In fact, tax dollars are not paying for all of those things. The White House National Economic Council Director Al Hubbard explained that the government has to borrow money to pay for the hurricane aid.

On September 20, DeLay pointed out that spending on Katrina has slowed, and the government is no longer paying $1 billion a day for the recovery.

Democrats say

Even if spending has decelerated, Democrats say, the budget must undergo a major revision. Many Democrats are against extending Bush’s tax cuts and feel that the tax cuts that benefit the wealthy should be repealed in order to ease the strain on the Treasury.

The Heritage Foundation, which is considered a conservative think tank, projects enormous deficits as a result of the hurricane. Specifically, the research group predicts a budget deficit of $520 billion in 2008, up from $400 billion this year.

What’s the difference between a budget deficit and the national debt?

Suppose you spend more money this month than you earn. This situation is called a budget deficit. In order to spend more than you make, you must borrow, and the amount you borrow (and now owe) is called your debt.

Starting in 1969, the federal government began to run annual budget deficits, creating a national debt. In 1998, President Clinton presented to Congress a balanced federal budget, which was maintained through late 2001.

Since 2002, there have been annual budget deficits, which some say are caused by the tax cuts, the increase in the military, and the effects of the recession. The budget deficit from each of those years adds to the total national debt, which is around $8 trillion, but changing every day.

Just like you have to pay interest on your credit cards, the government (we, the tax payers) must pay interest on the national debt. Much of the money is borrowed from the Japanese, Canadians, and the Chinese. We pay them interest on their loans, of course.

How should we pay for the cost of the hurricane? Are you willing to pay more taxes? Would cutting taxes spur economic growth? Are there other areas, like health care, defense, or human services that should be cut to offset spending on disaster relief?

What do you think?

WomenMatter is a place to discuss life issues with other women. We don’t want to wedge women apart, but rather bring them together to dialogue. To participate in our blog, click here.

WomenMatter encourages women to educate themselves on the issues and then approach their representatives with ideas.

Your voice is vital. Make sure your leaders know what’s important to you. To see how your representatives vote and to contact them, click here.

WomenMatter is dedicated to empowering women to participate in the political process. To do this we have invested in the most in-depth NONPARTISAN information, because we trust each woman to make up her own mind.

• We track nine issues every week and update this website several times a week.
• We launch after school GirlsMatter Clubs in middle and high schools to grow the next generation of politically aware women through a full curriculum and startup kit on girlsmatter.com.
• We do continuous research to make sure that we are meeting the needs of women across the country of all ages, races, incomes, preferences, and religions.
• We provide partnerships with nonpartisan organizations that provide services to women and advocate for them.

We offer all our services free of charge without memberships or subscriptions. To help us maintain this work - not just in election years but as a continuing part of women’s lives - please make a tax deductible donation, click here.

Article Posted on: 9/24/2005