By Stan Collender, NationalJournal.com
© National Journal Group Inc.
Tuesday, Sept. 20, 2005

President Bush either is wrong, mistaken, or misleading: 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.

	If, as expected, the president continues not to veto appropriations bills, the administration's commitment to funding Katrina with spending cuts should be considered highly suspect.

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 circumstance.

This is especially the case because the vast majority of these cuts would be in annual domestic appropriations, including the nuts and bolts costs of the federal operations that proved to be so popular during the government shutdowns in 1995 and 1996.

This has been the part of the budget where the Bush administration has focused most of its attention since 2001 and undoubtedly is where, in a perfect world, it would like to make more changes. But cuts like this would have a disastrous impact on the day-to-day activities of virtually every domestic federal department and agency; some would have to cease operations completely. The fact that these federal functions continue to exist indicates they are very popular in general and have substantial political support on Capitol Hill. Cuts of this magnitude, or even anything close to this magnitude, will simply not be possible.

The first sign that this was the case actually occurred before the president said that he wanted to finance the Katrina-related spending by cutting other programs. One of the president's staunchest congressional supporters and one of the leading enthusiasts for reduced federal domestic spending -- House Majority Leader Tom DeLay, R-Texas -- told reporters days before the president spoke that there was little or no fat left to cut in the budget.

The timing of DeLay's statement was extremely unusual -- both because Congress was about to consider reconciliation legislation that included additional cuts, and because there was already significant interest in where the funds for Katrina were going to come from. But there was no mistaking DeLay's message to the White House: Don't even think about it.

One thing to watch in the weeks ahead will be the White House's willingness to veto fiscal 2006 domestic appropriations. If, as expected, the president continues not to veto these bills, the administration's commitment to funding Katrina with spending cuts should be considered highly suspect.

The second reason other spending won't be cut to offset the costs of Katrina is that attempting to do so would significantly slow the process of providing federal aid.

Simply adding new dollars means that no constituency will be asked to give up anything it already has or is expecting, which will make the vote easy and noncontroversial for most representatives and senators. They will not have to explain the cuts to their voters and instead will be able to talk about how quickly they responded to the needs of those living in or displaced from Louisiana, Mississippi and Alabama. The subtext will be that their constituents can expect the same type of treatment from Washington if another disaster strikes.

Requiring the new spending to be offset with cuts in existing programs, on the other hand, will pit one part of the country against another, state against state, and one industry vs. another. That's the kind of political battle that literally requires representatives and senators to fight on behalf of their districts and states, and would almost certainly knock an emergency aid bill off its fast track.

That's not something the White House or congressional Republicans can allow at this point. The Bush administration has already been heavily and repeatedly criticized for its response to Katrina and cannot afford to have the president's aid package delayed by a Congress controlled by the president's party. Congressional Republicans, who so far have been able to avoid most of the Katrina-related criticism, do not want to allow themselves to be drawn into the controversy by being seen as the reason for the delayed aid.

The president and congressional Republicans have already made it clear that tax increases will not be used to pay for Katrina. That leaves only one way to pay for what may well be the most significant instant increase in federal domestic spending in U.S. history: borrow it.

If spending cuts and tax hikes are not possible or likely, Washington will have no other choice than to pay for Katrina by increasing the federal debt. In fact, that already seems to be the prevailing attitude. At the same time President Bush was saying that spending would be cut to pay for Katrina, a $500 billion deficit in 2006 was being discussed almost as if it was already a forgone conclusion.

Question Of The Week
Last Week's Question. All of those (and there were many) who in response to last week's question said that the House of Representatives was required to originate all supplemental appropriations were misreading the U.S Constitution. Article I, section 7 does require that "all bills for raising revenue" must originate in the House, but an appropriation is not a revenue-raising bill. It is true the House has insisted that it must originate spending as well as revenue bills, something that many experts believe dates back to pre-Civil War days, when the Ways and Means Committee had jurisdiction over both revenues and appropriations. But the correct answer is that, in spite of the House's continuing refusal to consider an appropriation with a Senate bill number (S. 2750, for example), either house has the authority to originate a supplemental appropriation.

The "I Won A 2005 Budget Battle" pennant goes to Kelly Flanagan, who works for the FBI. Kelly was selected at random from all those who submitted the correct response.

This Week's Question. This is another one of those weeks you can venture a guess even if you're a casual budget observer rather than an aficionado. There were indications last week that a significant portion of the $62 billion already appropriated for Katrina-related activities is not being spent as quickly as expected. The question: Is federal spending recorded in the fiscal year in which the appropriation is enacted or the year when the spending occurs?

Click here to send in your response, which must be received by 8 p.m. EDT Saturday, Sept. 24, 2005. You must include a mailing address so we can send you the "I Won A 2005 Budget Battle" pennant if you win. If more than one person submits a similar winning response, the winner will be selected at random from that group.

Note to government employees: Because of security procedures at many offices and facilities, your home address will be the best way to make sure the pennant actually gets to you.

Stan Collender is a NationalJournal.com contributing editor and general manager of the Washington, D.C., office of Financial Dynamics Business Communications. A frequent speaker on the budget and economy to audiences across the country, he is also author of "The Guide to the Federal Budget." His e-mail address is secollender@nationaljournal.com.

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