RE: Has the next recession already started now that Katrina arrived?
Katrina Bailout Means Big Deficits, Higher Taxes: John M. Berry
Snippets from the article:
After administration officials told the president the reconstruction effort may cost at least $200 billion, Bush said, ``You bet it will cost money, but I'm confident we can handle it.''
Of course, the U.S. is prosperous enough to handle it. The big question is how will we pay for it?
``It's going to cost whatever it costs,'' Bush also said, adding, ``We're going to be wise about the money we spend.''
The first step in being wise in this case would have been for the president not to suggest an open-ended commitment of federal money. His words underscored how little he actually seems to care about fiscal discipline or the long-term consequences of running large budget deficits when national saving is much too low to adequately finance them.
Bush's behavior is just the latest reason to regard the budget process and the budget itself as out of control.
Federal Reserve Chairman Alan Greenspan certainly thinks that, according to French Finance Minister Thierry Breton. At a Sept. 25 press conference in Washington after a meeting between U.S. and French officials, Thierry said Greenspan told them he ``very bitterly regretted'' that budget deficits are no longer a political priority. Greenspan said the U.S. has ``lost control, and that's his expression, of its budget,'' according to Breton....
Many Republicans ``seem genuinely oblivious to the fact that the burden of government is largely determined by the level of spending, not taxes,'' he said. ``Nor do they understand that in the long run, all spending must be paid for one way or another. Increasing spending today, therefore, absolutely guarantees that taxes will have to be raised in the future.''
....With little forethought, Bush has by proclamation created a new entitlement, one for which he apparently is unwilling to pay.
With Bush's implicit invitation to open-ended spending, Louisiana's congressional delegation has proposed a $250 billion Hurricane Katrina Disaster Relief and Economic Recovery Act, which includes $40 billion for Army Corps of Engineers projects in the state. The legislation would waive the usual requirement for partial matching funding from state or local governments and create a commission that would decide which projects would be built.
No New Taxes
For comparison, over the past five years, the Corps of Engineers' budget for the entire country has averaged $4.6 billion annually.
Meanwhile, Bush has ruled out raising taxes to cover any of the reconstruction costs. Instead, as usual when some new spending comes along, the president said other government programs can be cut.
What programs? Who is supposed to do the cutting?
Certainly not congressional Republicans, who have shown no spending restraint, all their small-government rhetoric notwithstanding.
And certainly not the president, whose rhetoric runs in a similar vein and who has not vetoed a single bill in his almost five years in office. The last president never to exercise the veto was John Quincy Adams.
House Republican leader Tom DeLay of Texas discouraged the notion of cutting spending to offset reconstruction costs. ``There is no fat left to cut in the federal budget,'' DeLay said.
Well, if there's nothing to cut on the spending side of the budget, the alternatives are expanding deficits or raising taxes.
Or, as Cutter put it, trimming the fat isn't nearly enough. Taxes eventually are going to go up, and the longer big deficits are allowed to persist, the larger the eventual increase will have to be.
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