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How are we going to pay for all of this?

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With the cost of hurricane Katrina mounting fast, and now faced with more damage from hurricane Rita, Washington is all atwitter with proposals to offset some of those expenses by cutting spending or boosting revenues.

A prime target, at least for liberals and many Democrats, are the tax cuts put in place since 2001 by a Republican-led Congress and approved by President Bush. These have to date cost the United States Treasury $859 billion in lost revenues. About 30 percent of that sum wound up in the pockets of the nation's top 1 percent of taxpayers. They make an average of $1.2 million a year.

Former President Clinton, for one, has called for repealing tax cuts for upper-income people to help pay for the bills from Katrina and the Iraq war.

Without congressional action of some sort, the yearly deficit and overall federal debt will climb. That $859 billion tax loss since 2001 rises to $928 billion when you include the cost of interest on that extra debt.

On July 13, the White House predicted the deficit would shrink for the next four years. Few in Washington believe that is likely now, even though federal revenues have been rising handsomely. For fiscal year 2005, tax receipts are up 15.3 percent through August, while outlays have risen 6.8 percent. But now Katrina is costing an estimated $1 billion to $2 billion a day.

The total bill from that storm could reach as much as $200 billion in fiscal 2006, some say.

Many Washington budget observers doubt Congress will do anything substantial to offset that cost. For example, Adam Hughes, a policy analyst at OMB Watch, a nonprofit government watchdog group, suspects the deficit could exceed $500 billion in fiscal 2006, well above the $412 billion in 2004.

Though the White House still talks about halving the deficit in five years, Mr. Hughes doubts it will happen. Even if if did, it will be "nothing to be proud of," since the deficits will still add hundreds of billions to the national debt each year, he says.

"My children will be paying for the cost [of Katrina]," says Keith Ashdown, vice-president for policy at Taxpayers for Common Sense, another watchdog group.

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"There isn't enough 'unnecessary' spending or waste, fraud, and abuse in the budget to pay for the federal costs of Katrina," writes Stan Collender, a budget expert with the National Journal Group in Washington.

Nonetheless, many are suggesting cuts or other savings. Here are a few proposals:

• Conservative House Republicans last Wednesday recommended a plan to save more than $500 billion over 10 years. The plan included delaying the start of the new Medicare prescription-drug coverage for one year to save $31 billion. It also called for knocking off some of the 6,000 add-on projects in the recently passed transportation bill (saving $25 billion), eliminating $5.5 billion for the Corporation for Public Broadcasting over 10 years, and $44 billion for NASA's moon-Mars initiative.

• Conservative Heritage Foundation economist Brian Riedl suggests eliminating $60 billion annually in corporate tax breaks and subsidies. He'd also cap the growth of government at the inflation rate plus population growth, thereby saving $3 trillion to $4 trillion over the next decade.

• Taxpayers for Common Sense offers a list of spending cuts and revenue enhancers totalling $202 billion. One example: $42.6 billion from Defense Department weapons systems not needed for the war on terrorism.

Perhaps a little mischievously, Mr. Ashdown notes that the highway bill included $114 million in "pork projects" for House majority leader Tom DeLay of Texas. Mr. DeLay has indicated he won't give up that money.

His counterpart on the Democratic side, Nancy Pelosi of Calif., has said she would pass up $30 million in pork projects, Ashdown adds.

• The Center on Budget and Policy Priorities (CBPP), another Washington think tank, suggests that two tax cuts enacted in 2001, but only coming into effect this Jan. 1, should be abandoned. This would save $35 billion over five years. These measures, phasing out limits on personal exemptions and itemized deductions, only benefit the well-to-do. Those with incomes of more than $1 million a year will save nearly $20,000 a year on average in taxes.

What will happen may not be clear until late October or early November, when congressional leaders are expected to deal with legislation reconciling House and Senate budget bills. They could decide the fate of plans to fully repeal the estate tax, or reduce it to an insignificant amount. They might also decide whether to extend the 15 percent tax rate on dividends and capital gains beyond 2008.

CBPP's executive director, Robert Greenstein, is concerned that the Republican leadership could use the hurricane season's threat to the economy as an excuse for a national economic stimulus package.

But some in Congress believe that "deficits don't matter," either economically or politically. If the deficit grows to $500 billion to $600 billion, the attitude is "Who cares?" says Martin Sullivan, an economist with Tax Notes, a Washington publication that follows the tax scene.

Tax cuts that benefit the wealthy, though, have become harder to maintain after Katrina's revelation of deep poverty in the South.

"Why has it been acceptable to provide tax breaks primarily for the richest in our society when basic human needs have gone unmet for so many?" asks an OMB Watch statement.

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