Tuesday, September 27, 2005

Sounding like Yogi Berra, President Bush gave the best description of his administration’s overall fiscal philosophy earier this month. When asked Sept. 16 how much his grand program to rebuild the Gulf Coast after Hurricane Katrina will cost, he said, “It’s going to cost whatever it’s going to cost.”

And, boy, will it ever. The current estimate of taxpayer money needed to pay for Mr. Bush’s grand scheme range from $150 billion to $200 billion. And that’s on top of a $612 billion increase in the federal budget since he took office in 2001. Adding the $62 billion already appropriated for Katrina relief puts him in the same big-spending league as Lyndon Johnson.

The massive cost is just one of the distressing things about Mr. Bush’s plan. What’s also disconcerting is how it broadens the scope of the federal government’s response to natural disasters. By doing so, he is setting an expensive precedent.

Before Mr. Bush’s address to the nation from New Orleans’ Jackson Square, the federal government’s usual response to natural disasters was generally limited to four basic functions as laid out in the 1988 Stafford Act: helping clear debris, assisting states with search and rescue assistance, assistance for displaced residents (mainly via temporary housing assistance and traditional unemployment benefits), and rebuilding infrastructure such as roads and bridges.

Mr. Bush’s new response includes all those elements — and a whole lot more. The president plans to give each displaced worker $5,000 for job training. He has proposed $2 billion in tax “incentives” to bring businesses back to the area.

Federal taxpayers will also pick up the tab for the education expenses of all students forced to relocate, whether they attended private or public school.

Certainly the biggest part is the rebuilding of the Gulf Coast. But that doesn’t just mean the infrastructure the federal government controls. It’s likely assorted other things too: from homes and businesses to shopping malls and parking lots.

Here’s the kicker: The president says the federal government will pay a “great majority” of the bills. For all intents and purposes, Mr. Bush has given a blank check to elected officials in the states affected by the hurricane.

This is a departure from the intent of previous modern disaster relief efforts. The Stafford Act specifically calls for at least 25 percent of the bills to be paid for by states and localities. The idea that the state should bear at least a fraction of the cost is explicit in the legislation. Throughout the legislation, states are presumed to commit a “significant proportion” of funding. Indeed, under certain circumstances the act allows the federal share to be as low as 25 percent.

The federal government can waive the cost-sharing requirement — which it already did for the first $62 billion. But this creates incentives for governors and mayors to lard their wish list with nonessential projects. If state officials making the request aren’t footing the bill for at least a substantial part of it, why not ask the feds to fund every project they desire?

Unfortunately, the president isn’t trying to slow what is likely to become a taxpayer-financed shopping spree. He’s egging it on. Sept. 20, the president urged Mississippi officials to “think bold” when plotting their demands on federal taxpayers.

The White House used the Stafford Act as a defense of its grand design by saying it was obligated by law to provide all this assistance. While that’s true of the obligations laid out in the Stafford Act, it is not true of a broader long-term economic recovery assistance of the sort the White House proposed.

As the Congressional Research Service points out in its analysis of the Act, “[it] does not explicitly authorize the president to provide long-term recovery assistance to communities.”

Mr. Bush’s rebuilding plan actually expands the expected federal response to future disasters. What’s to keep state officials from expecting the same treatment when their states are hit with the next hurricane, earthquake, tornado or wildfire?

The president’s blank-check mentality has emboldened members of Congress to expand their wish lists. Farm-state senators plan to add crop subsidies to the next Katrina bill. Senators from Northeast states hope to expand low-income heating aid for constituents facing higher heating oil prices.

President Bush is right. This relief effort will cost what it’s going to cost. And that’s exactly what taxpayers should fear.

Stephen Slivinski is director of budget studies at the Cato Institute (www.cato.org).

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