Arithmetic & the Clinton–Conservative View of How to Fund Katrina Relief
WASHINGTON (CNN) – Since the president prefers not to raise taxes to finance Hurricane Katrina recovery, three senators suggested Sunday that Congress cut spending, delay a Medicare prescription benefit and forego a tax cut for the rich. Senate Democrat Joe Biden from Delaware suggested sacrificing a cut in estate taxes, and Republicans Lindsey Graham and John Kyl put political “pork” in the budgetary cross hairs.
President Clinton appeared on ABC’s This Week:
“Tax cuts are always popular,” Clinton said. “But about half of these tax cuts since 2001 have gone to people in my income group, the top 1 percent. I’ve gotten four tax cuts. “Now, what Americans need to understand is that that means every single day of the year, our government goes into the market and borrows money from other countries to finance Iraq, Afghanistan, Katrina, and our tax cuts,” Clinton added. “We depend on Japan, China, the United Kingdom, Saudi Arabia, and Korea primarily to basically loan us money every day of the year to cover my tax cut and these conflicts and Katrina. I don’t think it makes any sense. I think it’s wrong.”
Senator Coburn is similarly upset with Bush’s spend and borrow fiscal policy:
The open-ended commitment by President Bush and congressional leaders to rebuild New Orleans and the Gulf Coast is stoking anger among conservatives over the Republican government’s record of higher spending and debt. Following the nation’s worst-ever natural disaster, no Republican in Congress is opposing federal aid that already totals $62 billion and is expected to exceed $200 billion. But the party’s conservative wing, led yesterday by Oklahoma’s Tom Coburn in the Senate and Rep. Mike Pence of Indiana in the House, is calling for offsetting “sacrifices” in federal spending. And they’re backed by a growing chorus of conservative activists, columnists and bloggers. “It’s not about taking care of the folks that need us,” Mr. Coburn said in an interview. “But I wouldn’t vote for another penny until we get real about the hard choices of cutting some spending.” In what would be a real break for conservatives, Mr. Coburn said he is also not inclined to vote to extend the Bush tax cuts absent some fiscal restraint.
This story from Jackie Calmes, however, notes that not everyone in the GOP is as willing to cut government spending:
Administration officials also express frustration that conservatives in Congress are criticizing the White House even as Congress has balked at making the Medicaid cuts that Mr. Bush had called for earlier this year. Also taking conservatives’ hits is House Majority Leader Tom DeLay, after the Texas Republican this week told reporters that for all the complaints that hurricane spending must be offset by spending cuts, “nobody has been able to come up with any yet.” He suggested that the government has little fat. “After 11 years of Republican majority, we’ve pared it down pretty good,” he said.
As knzn noted in one of his comments to this post, the Katrina relief effort is akin to the straw that broke the camel’s back. As the estimated Federal cost of the Katrina relief effort approaches the estimated Federal cost of our invasion of Iraq, I am reminded of William Kristol’s initial guess that the Iraq invasion would amount to a mere 0.1% of GDP. OK, Kristol said one year’s worth of GDP but a Ricardian Equivalence or Domar Burden of the Debt type might argue that the interest costs on one of these one-time debt increasing events might amount to something near 0.1% of GDP. However, Domar was referring to permanent increases in the operating surplus needed to cover one-time increases in Federal debt.
With the non-interest portion of the Federal buget running at a negative 3% of GDP, with total Federal debt now in excess of 65% of GDP, with GWOT including the Department of Homeland Security, and with the White House wanting to make its tax cuts permanent, the cuts proposed by conservatives such as Glenn Reynolds should make Jesse Taylor laugh. But to Glenn’s credit, his list seems to be the best game in town. And the sad part is that President Bush has yet to walk the walk even if he has been talking the talk for four and a half years. And even if he does walk the walk finally, let’s not forget that the cost of the Rx bill start next year.