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.