Katrina costs will be borrowed, raise deficit
http://www.alertnet.org/thenews/newsdesk/N16153943.htm
By Steve Holland
16 Sep 2005 17:03:19 GMT
WASHINGTON, Sept 16 (Reuters) - President George W. Bush's advisers said on Friday billions of dollars needed to rebuild New Orleans and the Gulf Coast will be borrowed and will raise the deficit but Bush still wants to extend tax cuts.
The day after Bush proposed one of the world's largest reconstruction projects for the area, White House officials said they were still assessing how much it will cost.
Criticized for a slow federal response to the crisis and trying to restore Americans' confidence in him, Bush told a service at the National Cathedral the hurricane was "beyond any human power to control, but the restoration of broken communities and disrupted lives now rests in our hands."
He said the recovery offers a chance to end poverty generated by decades of racial segregation and will "measure our unity as a people."
"As we clear away the debris of a hurricane, let us also clear away the legacy of inequality," he said at the solemn service, part of a national day of prayer and remembrance for victims of Hurricane Katrina.
The goals Bush has laid out are significant: Rebuilding roads, bridges and schools devastated by Hurricane Katrina and getting the 1 million displaced people back in proper homes.
Some members of the U.S. Congress say it could cost $200 billion, and nobody at the White House was denying the figure, which would exceed the costs of the Iraq war.
"There's no question that the recovery will be paid for by the federal taxpayer and it will add to the deficit," said White House economic adviser Allan Hubbard, while stressing it is a one-time cost.
At the same time, he said, Bush wants to extend tax cuts that were a hallmark of his economic recovery plan but which Democrats would like to end because of the impact on the budget deficit.
"The last thing in the world we even need to be thinking about is raising taxes. A strong economy is what is going to pay for rebuilding the affected areas," Hubbard said.
DEFICIT FORECAST
The White House cut its forecast in July of the fiscal 2005 budget deficit forecast to $333 billion, down nearly $100 billion from its February projection and substantially below the record deficit of $412 billion in 2004.
The administration will press Congress to move quickly on investment, job training and housing proposals Bush is offering as a way to get the region back on its feet.
Hubbard said the administration will propose $2 billion to create a Gulf Opportunity Zone in Louisiana, Mississippi and Alabama.
The money would be used to spur investment and rebuilding by offering substantial tax write-offs for equipment and reconstruction costs.
Another $2 billion was proposed for reimbursing school districts that enroll significant numbers of displaced children.
Bush would provide compensation to displaced families for enrollment in private, including parochial, schools. The National Education Association complained that Bush was trying to use a voucher system for paying for education for displaced students that Democrats believe undermines public education.
"At this time, the most urgent need is to restore a sense of normalcy for the more than 300,000 students displaced by the storm. It is just simply not the time to open up a policy debate on vouchers," the group said in a statement.
Bush also proposed Worker Recovery Accounts that would help hurricane victims find work by providing up to $5,000 for job education, child care or transportation.
And $350 million would be paid to states to cover Medicaid and Medicare costs for storm victims.
Hubbard and Claude Allen, Bush's domestic policy chief, had no cost estimate of a third proposal, the Urban Homesteading Initiative, which would allow low-income evacuees to occupy a government-owned home at a favorable mortgage rate in exchange for their agreement to use "sweat equity" to fix up the place. (Additional reporting by Caren Bohan)
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