Money for Rebuilding Katrina Damage to be Borrowed
Just when we get some tiny bit of good news that the budget deficit this year is going to be quite a bit lower than initially estimated, Bush decides that isn’t a good thing and that we’ll borrow even more money. I don’t know, but I’m begining to suspect that somebody told Bush that in terms of percentage of GDP current deficits haven’t reached record levels he took it as a challenge.
WASHINGTON, Sept 16 (Reuters) – President George W. Bush’s advisers said on Friday billions of dollars needed to rebuild New Orleans and the Gulf Coast will be borrowed and will raise the deficit but Bush still wants to extend tax cuts.
Don’t get me wrong, I like tax cuts. However, financing them with budget deficits means that in the future we will have higher taxes plus interest. The oft repeated bromide that the tax cuts will raise tax revenues just isn’t going to happen. What needs to happen is that spending needs to be cut. The pork fest that was the Energy Strategy would be a great place to start. Not that I expect the prok addicted politicians to actually do something like this.
Some members of the U.S. Congress say it could cost $200 billion, and nobody at the White House was denying the figure, which would exceed the costs of the Iraq war.
“There’s no question that the recovery will be paid for by the federal taxpayer and it will add to the deficit,” said White House economic adviser Allan Hubbard, while stressing it is a one-time cost.
Well more accurately it is a one time expense that will rack up interest until the debt is paid off. So in a sense it will keep costing us whatever percentage (compounded at whatever intervals) until it is paid off. Cool, eh? Bush’s reputation has taken a hit due to Katrina so he’s solution is to spend not just our money, but money we haven’t even earned yet.
Hubbard said the administration will propose $2 billion to create a Gulf Opportunity Zone in Louisiana, Mississippi and Alabama.
The money would be used to spur investment and rebuilding by offering substantial tax write-offs for equipment and reconstruction costs.
Great, so we end up with a bunch of investments that otherwise wouldn’t have been made. Talk about a great way to encourage even more people to move to, build in, and live in an area that will probably end up flooded the next time another Katrina type Hurricane comes along in that region. Further, how many of these projects will depend on these special “write offs” and will fold if they are removed. Lowering the taxes on one group of people requires raising taxes on another group.