On Hill, it's bailouts vs. budget restraint
Congress is loosening the purse strings to lift economy, but Greenspan urges caution.
As Congress assesses the effects of the attacks on the World Trade Center and Pentagon, pressure to do something quickly to boost the economy is intense.
Last week, the airlines won $15 billion in aid. The insurance was on Capitol Hill yesterday, with tourism and hotels next in line. And some lawmakers want to improve Amtrak service, to provide a better alternative to air travel.
But, for all the spending and bailout talk, official Washington is also lending an ear to its two most respected economic advisers: Federal Reserve Chairman Alan Greenspan and former Treasury Secretary Robert Rubin. The pair has toured Capitol Hill in the tense days since the Sept. 11 attacks, spreading a message of patience: Wait and see what the economic effects are before acting.
Paying heed, leading members of Congress appear to be moving toward an approach that, in coming weeks, will balance government economic aid with a measure of restraint. Fiscal discipline is seen as a key by bond markets, which otherwise might worry about inflation and push up long-term interest rates.
Still, despite Mr. Greenspan's warnings, the atmosphere here is a far cry from the sentiment before the attacks.
On the morning the twin towers fell, the House had been poised to make deep cuts across the federal budget. Both parties had promised not spend the Social Security surplus and were competing to keep that pledge. Even powerful committee chairmen had watched cherished line items sliced out.
That's over now.
The new watchword in Congress is national security, not Social Security. Then reviving the economy. Then, and only then, getting back to the old rules of budget restraint.
"We need to get back to protecting the Social Security surplus, but that's way on the back burner. Everything is subordinated to the war on terrorism and turning the economy around," says Rep. John Spratt (D) of South Carolina, the ranking Democrat on the House Budget Committee and ordinarily an antideficit budget hawk.
No lawmaker is prepared to put a number on what the rebuilding and bailout effort may cost.
On Sept. 18, Congress authorized $40 billion in emergency appropriations, including rebuilding funds and $3 billion to improve airline security.
It was just a down payment.
First up for a bailout was the airline industry. Airline executives began by asking for $24 billion to keep their jetliners flying. They told lawmakers it was a conservative estimate. Costs of recovering from the attacks and airport shutdown could be as high as $35 billion. The White House urged $5 billion. In the end, Congress settled on $15 billion - $5 billion in cash, $10 billion in loan guarantees.
Looking at a changed risk environment, the insurance industry, too, wants help - possibly government underwriting of the risks that terrorism poses.
The nation's rail system is another likely recipient of aid. Amtrak saw its ridership jump 17 percent in the week after the attacks, but is now slated to lose federal subsidies in 2003.
Amtrak officials are asking Congress for $3.2 billion improve service and security. Some lawmakers want to spend as much as $71 million upgrading service.
Just behind the transportation and insurance industries are hard-hit tourism businesses. Rep. Alcee Hastings (D) of Florida calls for $4 billion to help compensate for losses in that sector.
On Tuesday, House Republicans repackaged their controversial energy bill, which includes drilling in the Arctic National Wildlife Refuge, as a new national-security priority. US-produced energy "will be at the heart of the economic renewal," says Sen. Frank Murkowski (R) of Alaska.
House Democrats are rallying around a $3 billion plan to support workers who have lost jobs as a result of terrorist attacks. That includes 100,000 airline employees and as many as 250,000 in related industries.