Lawrence Kudlow defends President Bush’s decision to use Federal funds to address the aftermath of Katrina. While I also applaud the President’s decision, a couple of Kudlow’s arguments strike me as absurd:
Bush knows, even if others have forgotten, that the terrorists are carefully watching the U.S. government’s response to the natural disasters in New Orleans, Houston, and elsewhere. Hurricanes are one thing, but a terrorist attack with biochemical weapons or a nuclear weapon would be far more devastating. Even another 9/11-type bombing episode from the air, ground, or sea could present more of a challenge than what we now face in the Gulf Coast. Bush knows this. He knows that the U.S. must rebuild the Gulf no matter what it takes because this effort might be a test run for something far worse.
I doubt Al Qaeda was deterred by the fact that we took care of the families for the victims from 9/11. They made their horrific point (alas) and they were more likely paying attention to the pitifully slow response from FEMA after Katrina. Kudlow’s second argument seems to be that we don’t have to worry about the consequences of the deficit:
Yes, the budget deficit will rise for a year or two, from roughly 2.5 percent of GDP to perhaps something over 4 percent. Big deal.
The increase in the deficit from Katrina will be temporary. But Kudlow seems to be confused. The starting point for the General Fund deficit was closer to 5% of GDP than 2.5%. And that is a very big deal. Kudlow babbles on about Federal debt relative to total U.S. wealth. Alas, he forgets that Federal debt is rising relative to GDP, while the fact that national savings is near zero means a slower accumulation of total wealth. But Kudlow does suggest a few modest steps towards fiscal restraint in the form of proposals to cut spending that he knows will not pass Congress.