Bush Says Spending Cuts Will Be Needed
Tax Increase Not Part Of His Gulf Relief Plan

By Michael A. Fletcher and Jonathan Weisman
Washington Post Staff Writers
Saturday, September 17, 2005

One day after pledging to undertake one of history's largest reconstruction efforts, President Bush served notice yesterday that rebuilding the hurricane-ravaged Gulf Coast will require spending cuts elsewhere in the federal budget.

Amid growing concern among congressional Republicans about the huge cost of the planned reconstruction effort, Bush said the federal government can foot the bill without resorting to a tax increase. "You bet it's going to cost money. But I'm confident we can handle it," Bush said. "It's going to mean that we're going to have to cut unnecessary spending."

Bush has refused to put a price tag on the reconstruction plan, which he outlined in a prime-time speech Thursday night, although members of Congress and others have predicted that it could cost as much as $200 billion. The plan was assembled by Department of Homeland Security Secretary Michael Chertoff, White House Deputy Chief of Staff Karl Rove and Claude Allen, Bush's top domestic policy adviser.

Speaking at a prayer service earlier in the day as part of a national day of remembrance for the hurricane's victims, Bush vowed to rebuild the Gulf Coast with the goal of wiping out the legacy of racial discrimination and social inequality that has compounded poverty there.

"As we clear away the debris of a hurricane, let us also clear away the legacy of inequality," he said.

His blueprint envisions the federal government paying much of the cost for the reconstruction of roads, bridges, schools and other infrastructure wiped out by Katrina. It also calls for an unprecedented effort to attack poverty in the region, through a combination of tax breaks for small and minority businesses, individual grants for job training and day care and other needs, and an initiative to give federal land or abandoned homes to poor people for home construction and renovation.

The deadly storm and the federal government's slow response has damaged Bush's standing as a leader among voters, polls show, and his approval rating has hit all-time lows. The president has faced particular anger from African Americans, a majority of whom believe the government's response to the storm would have been faster were most of the victims not poor and black.

Although the plan promises to be huge in scale, many details about how it will be managed and carried out are still being determined. Bush's rebuilding promise has created new political pressures amid concerns that in the absence of tax increases, the huge expenditure will lead to larger budgets, at least in the short term. Members of his own party are publicly stating strong concerns about the money being allocated.

A half-dozen House and Senate Republicans have drafted legislation to keep a close eye on Katrina expenditures, and several have called for significant spending cuts to pay for the relief.

"There's no shortage of places where the federal government can tighten its belt to pay the cost of the hurricane recovery effort," said Rep. Jeff Flake (R-Ariz.). "Let's face it, after years of uninterrupted growth, the federal government is bloated."

Other Republicans have contradicted that assertion, including House Majority Leader Tom DeLay (R-Tex.), who has said there is no appreciable fat in the federal budget.

Bush pledged to find some spending cuts. But he offered no specifics, and his chief economic aide, Allan B. Hubbard, dismissed the rebuilding effort's impact on the longer-term effort to reduce the budget deficit. "This in no way will adversely impact his commitment to cut the deficit in half by 2009," he said.

An administration official said the White House and Congress will look for specific spending cuts, starting with about $20 billion in savings identified in the president's 2006 budget. Still more could come from changes to entitlement programs to slow their growth. Those proposals have already been examined by Congress and rejected.

Also, some of those cuts would hit precisely the programs the lawmakers want to expand. Among the programs slated by Bush for cuts were Medicaid, which he now wants to extend to evacuees, and the Army Corps of Engineers, which is faced with the huge burden of repairing levees and dredging waterways wrecked in the storm.

White House aides confirmed that Rove, in his capacity as deputy chief of staff, is helping to lead the Katrina recovery effort. With Rove's name a rallying point for Bush foes, especially after revelations of his role in the unmasking of a CIA operative, Democrats sought to denigrate his involvement.

"Mr. Rove may be an expert on leaks, but that doesn't qualify him to oversee flood relief," said Rep. Rahm Emanuel (Ill.), chairman of the Democratic Congressional Campaign Committee.

The administration's first report to Congress on Katrina spending -- delivered late Thursday night -- provided some window into the scale of the recovery effort but raised sharp questions on Capitol Hill. Congress has allocated more than $60 billion for hurricane relief, driven in large part by urgent White House requests for large, open-ended allocations.

But some congressional appropriations aides said the money is not being spent as quickly as they had expected. So far, about $9.8 billion has been allocated to Federal Emergency Management Agency relief contracts and federal projects. An additional $4 billion is tied up in contracts that have not been formalized.

That leaves more than $46 billion in unobligated funds, the documents indicate. Congressional aides said that figure is likely to persuade lawmakers to rein in their open-wallet approach to Katrina spending, at least until the administration provides a more detailed accounting of where the money is going.

"We need specific information to ensure accountability," said Rep. David R. Obey (Wis.), ranking Democrat on the House Appropriations Committee.

A White House official said he was anticipating concern that expenditures appear to be slower than expected, but added that some costs have not been recorded because federal agencies have yet to bill FEMA for their services.

What is clear from the report is that the vast majority of federal expenditures will not go toward innovative economic development programs, such as the ones laid out by Bush on Thursday night, but to more old-fashioned government programs: dredging of shipping lanes, building highways and bridges, cash assistance for the dislocated and home-building.

Some of those initiatives proposed by Bush have been discussed among conservative policy researchers for years as a way to help people escape poverty by offering them flexibility in seeking services and a chance at home ownership.

"If there is a silver lining in this tragedy it is that it is creating an atmosphere to try new approaches to ending long-term poverty," said Douglas J. Besharov, a researcher at the American Enterprise Institute, who talked to White House officials about elements of their plan. "There are a lot of us who think that one of the problems is that anti-poverty programs have been more responsive to the people who run them than the people they are supposed to serve."

Before Bush addressed the day of prayer service at Washington National Cathedral, Bishop T.D. Jakes, head of 30,000-member Potter's House church in Dallas, delivered a sermon calling on Americans to no longer ignore the plight of the poor. "We can no longer be a nation that overlooks the poor and the suffering, that continues past the ghetto on our way to the Mardi Gras," he said.

In Maryland, more than 100 people gathered inside the State House in Annapolis for a morning program that included prayers from three faiths and a song by Marina Harrison, Miss Maryland USA. "God expects us to help those in need," Maryland Gov. Robert L. Ehrlich Jr. (R) told the crowd.

Cardinal Theodore E. McCarrick, head of the Washington Archdiocese, and Bishop Paul S. Loverde of Arlington each celebrated mid-day Mass in their respective dioceses for the hurricane victims. And the weekly Friday services at All Dulles Area Muslim Society in Sterling included prayers for victims and the collection of food and donations for the relief efforts.

A displaced family from the Gulf Coast was among the nearly 100 people who attended Loverde's Mass at the Cathedral of St. Thomas More in Arlington.

Staff writers John Wagner and Caryle Murphy contributed to this report.

© 2005 The Washington Post Company