The Cutting Cost of Spending

By Terry M. Neal Staff Writer
Thursday, October 20, 2005; 9:24 AM

Natural disasters and the war in Iraq are now forcing Congress -- after years of heavy spending -- into a serious debate about cutting costs. And it's playing out in a way that could end up influencing next year's midterm elections.

Congress this week has been debating a plan to cut $50 billion in spending on social programs, including food stamps, student loans, Medicare and Medicaid. The figure had been $35 billion, but lawmakers raised the amount amid calls by fiscal conservatives to offset some of the $62 billion approved so far in the relief efforts after Hurricanes Katrina and Rita. That, in turn, has drawn accusations of subterfuge from Democrats.

The House and Senate could vote on separate bills as early as today, even as Republicans continue to fight among themselves about the extent of the proposed cuts. One thing is for sure -- with speculation that hurricane relief could eventually top $200 billion, pressure to find ways to pay for it are increasing.

"Congress must do everything necessary to attend to the immediate needs of those who have tragically lost their homes and their livelihoods," said Rep. Jeb Hensarling (R-Tex.) said last month. "But Congress must also use its head. At this critical time, we need to exercise sound fiscal judgment and ensure that we do not end up bankrupting our children and grandchildren.''

The federal government essentially has four options for paying for the cost of reconstruction and cleanup from the hurricanes: Borrow and add to the already staggering debt, cut spending, raise taxes (or at least forgo making the Bush tax cuts permanent), or some combination of the above.

As the congressional battle continues, fiscal conservatives who have been turned off by the growth in the federal budget are gaining new momentum. In the five years of the Bush administration, government spending has increased by one-third, from $1.86 trillion to $2.47 trillion, with much of that spending coming from massive growth in non-defense and non-homeland security spending. According to the conservative Heritage Foundation, spending has increased twice as fast, on an annualized basis, under President Bush than it did under President Clinton.

The federal deficit for the fiscal year ending Sept. 30 was $319 billion, lower than originally anticipated but still a significant turnaround from the budget surpluses Bush inherited.

In a speech last month, Bush said he'd "work with members of Congress to identify offsets to free up money for the reconstruction efforts."

Mike Pence (R-Ind.), a leader of a group of fiscal conservatives in the House called the Republican Study Group (RSG), has suggested that the federal government "pay for the cost of Katrina by reducing the size and scope of government."

Democrats argued Wednesday that the real reason Republicans were trying to cut the budget was to offset some of their proposed $70 billion in new tax cuts -- including a permanent repeal of the estate tax.

House Minority Leader Nancy Pelosi (D-Calif.) wrote to House Speaker Dennis Hastert (R-Ill.) on Wednesday that "the proposal to increase mandatory spending cuts to $50 billion comes under the guise of offsetting the cost of the hurricane response. Long before this summer's devastating hurricanes, however, the budget resolution's reconciliation instructions cut mandatory spending by $35 billion. Similarly, the increase in reconciled spending cuts - likely at the expense of vital programs such as Medicaid, food stamps, and student loans - now being contemplated will still be used to offset new tax cuts, not to offset the cost of hurricane relief. Meanwhile, even with these additional cuts in spending, the budget would still increase the deficit by more than $100 billion over five years."

Pence said he was encouraged by Hastert's attempts to enact cuts. He said he has warned that conservatives might try to block future hurricane relief funds unless there is progress toward paying for the aid with spending cuts.

Whatever the outcome, both parties seem to be setting the stage for upcoming elections, with some Republicans trying to move their party back to the principles of the 1994 Republican Revolution, which called for balancing the budget. And Democrats are eager to have that fight, arguing both that GOP spending irresponsibility and tax cuts for the rich have led to the massive deficits the party wants to close on the backs of the poor.

The House leadership put off a vote on the budget bill last night, apparently unable to come up with enough support for it. Democrats, meanwhile, believe the pendulum has swung and that they generally have an edge over Republicans on fiscal policy. Whether that's true, at least one new polls suggests that RSG priorities are going to have a tough sell.

In a nonpartisan Diageo/Hotline poll taken Oct. 12 to 16 and released this week, only 4 percent of people named cutting "spending for domestic programs, like health care and education" as the best way to pay for problems caused by Hurricane Katrina. But 31 percent said "delay or cancel tax cuts," and 27 percent said "cut spending for the war in Iraq."

So, as Republicans get pulled in several directions over the fiscal future, the party could also end up finding itself pulled toward trouble in next year's midterm elections.

Comments can be sent to Terry Neal at

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