Here we go again.
With images of New Orleans still fresh in their minds and forecasters warning of another monster hurricane, 3 million residents fled the Texas gulf coast, jamming highways and overwhelming airports. Even before Hurricane Rita hit land, its rains and storm surge overwhelmed the weakened levees in New Orleans, sending floodwaters once again into low-lying areas already devastated by Hurricane Katrina.
The one-two punch has now shut down a quarter of the nation's oil-refining capacity for at least a week -- or longer, depending on Rita's damage. At a minimum, it will ensure that supplies of gasoline and home heating oil will remain tight, and prices high, for months to come. The prospect of higher inflation prompted the Federal Reserve to continue raising its benchmark interest rate, even in the face of what most forecasters believe will be slower economic growth for the balance of the year.
In a hint of the financial restructuring now facing the Gulf Coast, Entergy, the region's largest electric utility, put its New Orleans subsidiary into bankruptcy protection. And in Washington, lobbyists for banks were already on Capitol Hill looking for relief for what is sure to be billions in write-offs of loans secured by property or inventory washed away by the storm. Holders of municipal bonds issued by Gulf Coast cities want the federal government to insure repayment of principal and interest, while the nation's largest fishery is looking for help while it recovers from environmental damage on par with the Exxon Valdez oil spill. The gaming industry made clear that it plans, for the first time, to tap into investment tax breaks to rebuild its Gulf Coast casinos.
But those and other special pleadings are likely to run into opposition from Republicans in Congress who are already balking at the price tag for rebuilding public infrastructure and taking care of a million people who have lost their homes and their jobs. While President Bush reiterated his promise to do whatever it takes to get the area back on its feet, fiscal conservatives are demanding that the extra outlays be offset by spending cuts. In a sign of the potential rift, Treasury Secretary John W. Snow announced that plans to make permanent previous cuts in estate and income taxes would have to be put on the back burner, only to be immediately rebuked by House Majority Leader Tom DeLay.
Katrina has also brought to the surface ideological differences over a wide range of social policies. Bush dusted off controversial proposals for education vouchers for displaced students that can be used at either public or private schools and lump-sum retraining accounts for the unemployed. Democrats, meanwhile, are pushing for housing vouchers -- a program the Bush administration has criticized in the past but may now be forced to embrace.