Blog: The Fine Print / Revenue & Spending

GOP Uses Katrina As Excuse To De-Fund Government

Sep 22, 2005 by Adam Hughes*

The Republican Study Committee (RSC), a conservative group of House Republicans, has released a 24-page proposal they are (not so) cleverly calling "Opperation Offset," which details $500 billion in budget cuts they are proposing to reduce the overall cost of Katrina relief and reconstruction. The proposal has created friction among Republicans in Congress because the RSC wants to institute cuts that rehash policies they have promoted for years, including significant cuts to NASA, Amtrak subsidies, the Corporation for Public Broadcasting, the Peace Corps, foreign aid, the Earned Income Tax Credit, the national park system, community health centers, agricultural subsidies, and many, many more. Other Republicans believe proposals making up the majority of the cuts, such as delaying the Medicare prescription drug benefit by one year or repealing earmarks in the recently passed transportation bill are not realistic and might divide conservatives and moderates. Republican Party politics aside, this proposal is indicative of the "starve the beast" mentality that promotes huge tax cuts and then severe budget cuts to balance the budget. The result, unfortunately, is a dramatically decreased ability of the government to invest in communities and infrastructure. As was seen after the hurricane, these cuts do have consequences. The RSC's policies promote a short-term goal of shrinking government instead of a long-term investment agenda that will make the country more secure.

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More On Cost of Rebuilding; Congress Passes Tax Bill

Sep 21, 2005 by Adam Hughes*

Many Republican leaders in the House and Senate are worried about the costs of rebuilding after Katrina, even though President Bush has promised, and rightly so, to devote all the funds needed to help the devastated region. Republicans who are worried about excessive deficit-financed spending are pushing for the costs will be offset (most are suggesting by cutting the budget elsewhere). To appease them, OMB Director Josh Bolten said Tuesday that the administration would consider offsets, but did not offer any details about what would be cut and by how much. As Stan Collender correctly points out (subscription required), any offsets proposed by the administration would to little, if anything, to reduce the amount Katrina relief spending will add to the deficit, and the national debt. Because President Bush refuses to even consider not extending or rolling back some of his first term tax cuts, it will be future generations who will be paying for reconstructing the Gulf Coast. The federal government is required by law to pay at least 75 percent of the cost of rebuilding public infrastructure after a disaster (1988 Stafford Act). To comply, Congress -- besides approving about $64 billion in emergency spending -- has agreed on a tax-relief bill to expand deductions this year for victims. The final bill was scored by the Joint Committee on Taxation as costing $6.1 billion over 10 years. Congress hopes these targeted tax cuts will spur employment of low-income workers on the Gulf Coast. In addition, President Bush signed three bills today to help in the aftermath of the disaster. The bills waive Pell Grant and other federal student loan requirements for displaced college students and expand Temporary Assistance to Needy Families eligibility for victims. CNN.com: House Passes Tax Breaks for Hurricane Katrina Victims

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Watcher: September 20, 2005

Sep 20, 2005 by Guest Blogger

Federal Budget
  • Katrina Could Cause a Needed Reevaluation of Priorities in Congress
  • Senate, House Pass First Katrina Tax Cut Package

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House GOP Reps Urge Bush to Cut Budget Further

Sep 19, 2005 by Adam Hughes*

Last week, twenty-one Republican members of the House sent a letter to President Bush, in which they urged him to cut non-defense discretionary spending to offset additional spending dealing with the hurricane aftermath. The letter said, "Congress and the President have a historic opportunity to show the American people that we are not afraid to make hard choices on cutting current federal spending when a national disaster requires investment of tens, possibly hundreds, of billions of dollars." Cutting spending elsewhere in the budget, most likely for supports and programs benefiting low-income Americans is certainly not a hard choice for Congress as they continue to push the completion of reconciliation bills cutting entitlement spending simply to offset the cost of new tax cuts or the rich. Perhaps Congress and President Bush should be sincere in their claims to be able to make hard choices and call upon those Americans who can best afford to pay to shoulder just a tiny bit more of the burden through choosing not to pass new tax cuts for the wealthy this year. Cutting non-defense discretionary programs to pay for emergency hurricane relief funding is akin to robbing Peter to pay Paul and continues to concentrate the burden on low- and middle-income Americans. Also, Reps. Hensarling and Flake, members of the conservative Republican Study Committee, sent a letter to Speaker Dennis Hastert and Majority Leader Tom DeLay, in which they suggested that the 2006 implementation of the Medicare prescription drug benefit be delayed in order to contain costs, which are expected to sky-rocket with all of the post-Katrina spending. In reality, though, these costs should be dealt with by promoting an agenda based on shared sacrifice -- not on cutting money further from the budget so that people don't have access to the services they rely upon. It's time the President to call for a renewal of shared sacrifice in rebuilding the Gulf Coast through our tax code.

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Voinovich Calls for End to Tax-Cutting Fervor

Sep 19, 2005 by Adam Hughes*

Senator George Voinovich (R-OH) joined his voice with other Republicans who are seeking to re-evaluate plans to pass additional new tax cuts after Hurricane Katrina. Voinovich told reporters at a press conference this afternoon he believed the government needed more money to pay all of its priorities and obligations and because of that hoped "we won't hear any more about making tax cuts permanent." While Voinovich did not call for specific tax increases, his decision to speak out against the accepted and irrational GOP policy of "starving the beast" through tax cuts at any time shows great vision and leadership. Let's hope other in Congress, Democrats and Republicans, follow his lead.

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Aspen Institute: Charities Will Lose With Bush Budget

Sep 19, 2005 by Guest Blogger

Congressional GOP leaders and the administration have, since Katrina hit, made a point of singling out charitable organizations and nonprofits for the important role they play in helping people in need. President Bush, in his address to the nation Sept.15, said, "I ask the American people to continue donating to the Salvation Army, the Red Cross, other good charities and religious congregations in the region." Bush, and other Congressional leaders, however, are undermining the abilities of the charitable sector to effectively provide help by continuing to push forward with budget cuts that harm nonprofits, as well as push for repeal of the estate tax, which would have adverse effects on nonprofits and the charitable sector as well. Federal budget experts at the Aspen Institute have found in a recent report that FY '06 federal budget proposals reflect a trend of shifting responsibility for a number of social programs from the federal government towards the charitable sector. In The Nonprofit Sector and the Federal Budget: Fiscal Year 2006 and Beyond, they found that the budget proposed by Congress would cut funding for programs of interest to nonprofit groups by $40 billion between FY '05 and FY '10. The President's budget proposal is even more harmful; it would cut these same programs by $71.5 billion over the time period.

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Repeal Advocates Will Stop At Nothing...

Sep 19, 2005 by Adam Hughes*

Advocates of estate tax repeal have been scrambling in the weeks following Hurricane Katrina since a vote on repeal was postponed in the Senate and the repeal agenda has been knocked off the front burner in Congress. But now it appears those forces have reached a level of desperation not yet seen in this debate. Time.com reported over the weekend that Senator Jeff Sessions (R-AL) and other pro-repeal advocates are scouring the Gulf Coast for victims of the Hurricane they can take advantage of to further their political goals of repealing the estate tax. The article quotes Sessions as saying, "If we knew anybody that owned a business that lost life in the storm, that would be something we could push back with." Senator Sessions - a Senator from one of the states hardest hit by Katrina - and others involved in pushing such misguided priorities of favoring a few millionaires at the expense of the public good after a natural disaster of these proportions need to re-evaluate their positions. It's even more despicable to be seeking to take advantage of someone who lost their life in such a tragedy to further political agendas. Senator Sessions should be concentrating on helping all those whose lives were ruined in Alabama after the hurricane - not just a handful of multi-millionaires.

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The Costs of Rebuilding

Sep 19, 2005 by Adam Hughes*

In his remarks to the nation Sept. 15, President Bush said the federal government would be responsible for "the great majority" of the costs of repairing public infrastructure in the Gulf Coast. Government spending in the aftermath of the disaster could reach proportions not seen since the country was hit by the Great Depression, and many are predicting spending could top $200 billion. Economic analysts are predicting the deficit for FY 2006 could easily out-do the record deficit of $412 billion reached last year. Deficit spending is not always necessarily harmful; in fact if done correctly it can serve to revitilize regions of the country all while spreading the cost over a number of years. However, the problem with extreme deficit-financed spending right now is that the government will be borrowing all while continuing to uphold -- and push for more -- tax cuts for the rich. As this New York Times editorial points out, "The problem is that the United States was deep in hock before Katrina." The fact that tax cuts are on the agenda as well as massive spending is "breaking the bank for our descendants, while impairing our ability to borrow responsibly today." If the government plans on taking a fiscally responsible approach while spending "unprecedented amounts" in the aftermath of Katrina, they will need to cease pursuing tax cuts for the wealthy by allowing the dividends and capital gains cuts to expire in 2008 (instead of extending them), and they will also need to suspend some tax breaks scheduled to go into effect in 2006 (for more on this, see this CBPP report). The priorities of the administration and Congress need to change, or else current and future tax payers can expect to be hit with a large bill -- a bill either in the form of higher taxes and/or severe cuts in government programs.

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Rep. Obey Calls Administration Reports on Spending "Useless"

Sep 16, 2005 by Adam Hughes*

In the most recent emergency supplemental bill for relief funding for the victims of Hurricane Katrina, the House and Senate included a provision that required the administration to provide weekly reports on how the money was being spent by FEMA and the Army Corps of Engineers. The Office of Management and Budget sent Congress the first of those reports late last night. Today, the ranking minority member of the House Appropriations Committee David Obey (D-WI) called the report "useless" and reiterated the need for detailed information, saying, "Congress is spending an unprecedented amount of money on disaster relief, requiring unprecedented diligence to avoid waste, fraud and abuse. We need specific information to ensure accountability."

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What About Taxes?

Sep 16, 2005 by Adam Hughes*

Last night President Bush unveiled his initial ideas about plans for reconstruction of the Gulf Coast in the aftermath of Hurricane Katrina. The president did not mention how much he expected this to cost, how he thought the country should pay for it, or what sacrifices he expected citizens to make to help out with the efforts. Congress has already approved over $60 billion for emergency relief efforts, with another emergency supplemental expected sometime in October. The large amount of existing spending plus vague, but potentially costly plans for reconstructions has some members of Congress once again worried about deficits. Before the president addressed the nation last night, fiscally conservative members of the House and Senate held a press conference with government watchdog groups asking the President to reign in federal spending for Gulf Coast states decimated by Katrina. Sens. Tom Coburn (R-OK), John McCain (R-AZ), Jim DeMint (R-SC), and Rep. Mike Pence (R-IN) led the calls for fiscal restraint. Sen. McCain stated, "We know this is a huge bill and we don't want to lay it on future generations and Speaker of the House Dennis Hastert (R-IL) commented after the president's speech, "for every dollar we spend on this, it is going to take a little bit longer to balance the budget." But cutting relief and reconstruction efforts, or other parts of the budget is not the right answer. It is budget cuts and underinvestment that played a part in making the impact of Katrina so much worse along much of the Gulf Coast. If those conservatives are truly concerned about balancing the federal budget and not passing on debts to future generations (and not simply shrinking the size of government), they need to look at more than simply reducing federal spending - they need to reconsider the incredible number of tax cuts passed over the past five years that have driven government revenues to its lowest level in 50 years. Countless projections and estimates (see here, here, here, and here) show the combination of massive tax cuts and current policies leading to decades of unsustainable, deep, and persistent deficits. In order to truly address consistent budget deficits, and to pay for not only the relief and reconstruction efforts in the Gulf Coast, but also long-term preventative investments in the infrastrucure and people of America, the President and Congress must reverse some of the tax cuts passed over the past five years.

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