Commentary

Bush’s Blank Check

By Stephen Slivinski
This article appeared in the Washington Times on September 28, 2005.
Sounding like Yogi Berra, President Bush gave the best description of his administration’s overall fiscal philosophy last week. When asked on September 16 how much his grand program to rebuild the Gulf Coast in the wake of Hurricane Katrina will cost, he answered, “It’s going to cost whatever it’s going to cost.”

And, boy, will it ever. The current estimate of the amount of taxpayer money needed to pay for Bush’s grand scheme range from $150 billion to $200 billion. And that’s on top of a $612 billion increase in the overall federal budget since he took office in 2001. Adding the $62 billion already appropriated for Katrina relief puts him in the same big-spending league as Lyndon Johnson.

The massive cost is just one of the distressing things about Bush’s plan. What’s also disconcerting is how it broadens the scope of the federal government’s response to natural disasters. By doing so he’s setting an expensive precedent.

Before Bush’s address to the nation from New Orleans’ Jackson Square, the federal government’s usual response to natural disasters was generally limited to four basic functions as laid out in the 1988 Stafford Act: helping clear debris, providing search-and-rescue assistance to states, providing assistance for displaced residents (mainly in the form of temporary housing assistance and traditional unemployment benefits), and rebuilding infrastructure such as roads and bridges.

Bush’s new response includes all of those elements—and a whole lot more. The president is planning to give each displaced worker $5,000 of taxpayer money for job training. He’s proposed $2 billion in tax “incentives” to bring businesses back to the area. Federal taxpayers will also pick up the tab for the education expenses of all students forced to relocate, whether they attended private or public school. Certainly the biggest part of the whole plan is the rebuilding of the Gulf Coast. But that doesn’t just mean the infrastructure the federal government has control over. It’s likely an assortment of other things too: from homes and businesses to shopping malls and parking lots.

Here’s the kicker: the president states that the federal government will pay a “great majority” of the bills. For all intents and purposes, Bush has given a blank check to elected officials in the states affected by the hurricane.

This is a departure from the intent of previous modern disaster relief efforts. The Stafford Act specifically calls for at least 25 percent of the bills to be paid for by states and localities. The idea that the state should bear at least a fraction of the cost is explicit in the legislation. Throughout the legislation, states are presumed to commit a “significant proportion” of the funding. Indeed, under certain circumstances the act allows the federal share to be as low as 25 percent.

The federal government can waive the cost-sharing requirement—which it has already done for the first $62 billion in spending. But doing so creates incentives for governors and mayors to lard their wish list with nonessential projects. If state government officials making the request aren’t footing the bill for any of it or a substantial portion of it, why not ask for federal taxpayers to fund every project their hearts desire?

Unfortunately, the president isn’t trying to slow down what is likely to become a taxpayer-financed shopping spree. He’s egging it on. On September 20, for instance, the president urged Mississippi officials to “think bold” when plotting what demands they are going to make of federal taxpayers.

The White House has used the Stafford Act as a defense of their grand design by saying they were obligated by law to provide all of this assistance. While that’s true of the obligations laid out in the Stafford Act, it is not true of a broader long-term economic recovery assistance of the sort the White House has proposed. As the Congressional Research Service points out in their analysis of the act, “[it] does not explicitly authorize the President to provide long-term recovery assistance to communities.”

Bush’s rebuilding plan actually expands the expected federal response to future disasters. What’s to keep state officials from expecting the same sort of treatment when their states are hit with the next hurricane, earthquake, tornado, or wildfire?

The president’s blank check mentality has also emboldened members of Congress to expand their wish lists, too. Farm-state senators are planning to add crop subsidies to the next Katrina bill, and senators from northeastern states are hoping to expand the low-income heating assistance program for constituents who are affected by higher heating oil prices.

Bush is right. This relief effort is going to cost what it’s going to cost. And that’s exactly what taxpayers should be afraid of.

Stephen Slivinski is director of budget studies at the Cato Institute.