To Pay for Katrina, Pay As We Go

One of the luxuries of no longer being in public office is that you can make suggestions for public policy solutions without having to worry about how your vote will affect your chances for re-election.

Paying for the cost of hurricane Katrina presents just such an opportunity.

Let’s start with the basic facts: President Bush is supporting an effort that probably will cost as much as $200 billion. This includes a variety of initiatives to help the people displaced by the hurricane on a short-term basis, the cost of cleaning up the damage to New Orleans and other coastal areas and the long-term costs of rebuilding New Orleans as a viable American city.

If Congress votes for the President’s program but does nothing to pay for it, the result will be an annual deficit reaching $500 billion in 2006 or 2007. Congress may well do nothing and simply pass along the costs to our children and grandchildren. I personally think that is a terrible result.

Congress has several fundamental options for paying this staggering cost -- cut other federal programs, raise taxes or do a combination of both.

Let’s start with cutting other federal programs. House Majority Leader Tom DeLay recently said that he doesn’t believe there is a great deal of fat to cut in the federal budget. Forcing big cuts through Congress would force vulnerable Republican Congressmen to cast hard votes that might jeopardize their re-election chances in 2006, so it shouldn’t come as any great surprise that DeLay lacks enthusiasm for budget cutting.

Also, the current Republican Congress is a big-spending outfit (witness the massive highway bill and the new prescription drug entitlement program under Medicare). Don’t look for much in the way of offsetting budget cuts from the current Congress.

Then we have the issue of raising taxes. Republicans are adamantly opposed to tax increases and some, in fact, would like to cut taxes even more (in addition to the targeted tax relief sought by President Bush for rebuilding the Gulf Coast). Large additional tax cuts would drive up the deficit even more in the short term and perhaps for a longer period of time also.

Deficit hawks in both parties are unlikely to support major tax cutting initiatives at this time.

So where is the middle ground?

Former President Bill Clinton has proposed rolling back recent tax cuts for the top 2 percent of taxpayers. That has some appeal on the basis of equity but any permanent increase in tax law will be opposed by the Republican Leadership and by President Bush.

How about a different approach?

President Lyndon Johnson in 1968 asked Congress to enact a one-year 10 percent income tax surcharge to help pay for the cost of the Vietnam War. Congress agreed and I remember going to the bottom line on my tax return for that year and adding an additional 10 percent. It seemed like the patriotic thing to do.

Congress could enact a one-time 10 percent tax surcharge (effective for tax year 2005) on all personal and corporate income taxes to help defray the cost of President Bush’s Katrina program. Current Congressional Budget Office projections for 2006 are that the Federal Government will collect $1,013 billion in individual tax revenues and $258 billion in corporate tax revenues for a total of $1,271 billion in total revenue. Ten percent of this would be $127 billion. Thus a 10 percent surcharge would pay for a little more than half of President Bush’s program.

Such a surcharge would be a flat tax…everyone would pay the same rate, no matter how much they earned. Also, it would represent shared sacrifice and would not be a permanent tax increase, but only a temporary one brought about by a truly unusual event.

Congress could then attempt to make budget cuts to come up with the other half of the cost of Katrina.

I know this would be controversial, but it’s time Congress stopped adding to the debt that my three granddaughters (ages 8, 6 and 2) will have to help finance during their working lifetimes. It’s time for a little courage and a lot of pay as we go.

Martin Frost served in Congress from 1979 to 2005, representing a diverse district in the Dallas-Ft. Worth area. He served two terms as chairman of the House Democratic Caucus, the third-ranking leadership position for House Democrats, and two terms as chairman of the Democratic Congressional Campaign Committee. Frost serves as a regular contributor to FOX News Channel, and is currently a fellow at the Institute of Politics at the Kennedy School of Government at Harvard University. He holds a Bachelor of Journalism degree from the University of Missouri and a law degree from the Georgetown Law Center.

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