Cutting Spending is not Enough

Even before the disaster wrought by Hurricane Katrina, our nation's fiscal house was in disarray. Tax cuts, increased domestic spending, and expensive wars had combined to balloon the deficit to record levels. And as we all know, the costs of existing programs, particularly Medicare and Medicaid, are expected to rise dramatically in the coming decades. So when President Bush announced that $200 billion in additional federal money would be earmarked for the Katrina relief effort, even the administration's most loyal water-carriers began to express concern. To their credit, many conservative voices in the media and blogosphere (and even some Republican politicians) have begun pressing the Bush administration to get serious about cutting spending and restoring some measure of fiscal sanity. When House Majority Leader Tom Delay suggested last week that there was "simply no fat left to cut in the federal budget," he was sharply rebuked by a number of conservative pundits and bloggers--many of whom almost never criticize Republican leadership. There is a growing sentiment among conservatives and Republicans that the spending earmarked for Katrina relief should be offset by cuts in other areas.

Unfortunately, as Stan Collender explains in his National Journal column, this is pure conservative delusion. While there are undoubtedly areas where spending could be cut, there simply isn't a vast reservoir of money out there being spent on unnecessary things. Collender writes:

The significant additional federal spending
because of Hurricane Katrina absolutely will
not be offset with cuts to other programs.
There are two reasons. First, there isn't enough
'unnecessary' spending or waste, fraud, and
abuse in the budget to pay for the federal costs
of Katrina, which are now expected to total at
least $200 billion in fiscal 2006 alone. That
may be hard to believe in a budget that will
approach $2.6 trillion next year. But when you
subtract those things the White House will not
want to cut -- Social Security, interest on the
debt, most other federal mandatory spending,
the Pentagon, the costs of activities in Iraq and
Afghanistan, homeland security and foreign aid
-- there is only about $500 billion left to be
scrutinized. Completely offsetting Katrina-
related costs would mean that all other
programs would have to be cut by about 40
percent, a ridiculous notion under virtually
any circumstances.

Commenting on Collender's piece, Mark Schmitt applauds recent efforts by conservative bloggers to identify unnecessary 'pork' in the federal budget, observing that this exercise will "provide participants with an education in the actual insignificance of domestic discretionary spending, of which 'pork' is a small part, in the bigger context of war, reconstruction, and tax cuts."

Schmitt notes that while spending is up, the current deficit is attributable, in large part, to diminished tax revenue. The Republican obsession with cutting taxes has created a deficit so enormous that spending cuts alone cannot reasonably be expected to bring it back into balance. Though conservatives and Republicans refuse to admit it (and many still push for even further tax cuts), at some point we will have to raise taxes. There is simply no way around it. The sooner we do this, the less debt and interest will have to be repaid by future taxpayers.

Finally, Schmitt puts the Katrina relief costs in the proper perspective:

That leaves the question, do we need to offset
the spending for Gulf Coast reconstruction? In
theory, of course not. That's exactly the kind of
project that one runs deficits for -- a crisis, a
major capital investment, an undertaking that
will yield economic benefits into the future. But
it is exactly the reason that one doesn't want to
run massive deficits routinely in good economic
times. It makes it all the more painful when you
do have an emergency or a recession. It is the
deficit that pre-existed Katrina -- projected at
$4.5 trillion over the period 2006-2015 -- that
we need to be concerned about and that will
take a toll on our economy.