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Monday, September 19, 2005
The Costs of Rebuilding
In his remarks to the nation Sept. 15, President Bush said the federal government would be responsible for "the great majority" of the costs of repairing public infrastructure in the Gulf Coast. Government spending in the aftermath of the disaster could reach proportions not seen since the country was hit by the Great Depression, and many are predicting spending could top $200 billion.
Economic analysts are predicting the deficit for FY 2006 could easily out-do the record deficit of $412 billion reached last year. Deficit spending is not always necessarily harmful; in fact if done correctly it can serve to revitilize regions of the country all while spreading the cost over a number of years. However, the problem with extreme deficit-financed spending right now is that the government will be borrowing all while continuing to uphold -- and push for more -- tax cuts for the rich. As this New York Times editorial points out, "The problem is that the United States was deep in hock before Katrina." The fact that tax cuts are on the agenda as well as massive spending is "breaking the bank for our descendants, while impairing our ability to borrow responsibly today."
If the government plans on taking a fiscally responsible approach while spending "unprecedented amounts" in the aftermath of Katrina, they will need to cease pursuing tax cuts for the wealthy by allowing the dividends and capital gains cuts to expire in 2008 (instead of extending them), and they will also need to suspend some tax breaks scheduled to go into effect in 2006 (for more on this, see this CBPP report). The priorities of the administration and Congress need to change, or else current and future tax payers can expect to be hit with a large bill -- a bill either in the form of higher taxes and/or severe cuts in government programs.
Posted by Becky Lewis
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