Hurricane relief affects budget

Hurricanes Katrina and Rita have blown ill winds upon the federal budget. Hurricane Katrina has set the federal government on a spending spree. The total is more than $62 billion, approved by Congress for Katrina relief. President Bush has suggested that we will be spending as much as $200 million to rebuild the devastated Gulf Coast. This is equal to about 45 percent of DoD's budget.

The damage wrought by Hurricanes Katrina and Rita has caused certain members of Congress to refocus on the budget. Fiscally conservative watchdogs are looking at the federal budget for "Katrina offsets" and have already met with officials at the White House. This group is seeking spending cut options to reduce the deficit.

These hurricane relief expenditures stand to further strain this year's projected budget deficit of $314 billion. Last year's deficit was a record $412 billion. Leon Panetta, White House chief of staff and budget director under President Clinton, says that the 2006 deficit could reach $500 billion.

Some in Congress have suggested that lawmakers should revisit the pork-laden highway bill, rescinding $24 billion in earmarked highway funds. Others have suggested that $30.8 billion can be saved by delaying the new Medicare pharmacy program.

Another suggestion is that every cabinet department within the federal government be asked to trim 2 percent of its budget for relief efforts. Sen. Tom Coburn (R-Okla.) has suggested an across-the-board 5 percent cut on discretionary spending other than defense and homeland security.

Still others suggested eliminating the tax cuts. The Senate estate-tax vote proved to be another casualty of the storm, being knocked off the calendar. The reconciliation bill is pending in Congress. It includes an extension of the capital-gains and dividend rate cuts which, as part of the 2003 tax bill, helped revive the economy. The effects of the storms may sideline permanent tax cuts.

Officials are looking at ways to trim the budget. One area they are looking to is Defense. The House Republican Study Committee, headed by Rep. Mike Pence (R-Ind.), includes three provisions aimed at military quality-of-life programs:

* Cash incentives for servicemembers and families to accept a less comprehensive health-care plan.

* Consolidation of the three separate military exchange systems.

* Elimination of stateside system of elementary and secondary schools for military family members.

At risk are several issues for which ROA has been fighting that would be included in next year's National Defense Authorization Act (NDAA). Most visible is the Graham/Clinton TRICARE amendment to the Senate NDAA bill, which was cost at $3.8 billion over the next five years. Some in Congress would view that as low-hanging fruit, ripe for the plucking.

A bittersweet irony is that the nation is fighting a war, and one of the top items of discussion in Congress is how to reduce the deficit. During this time of conflict, the DoD budget is currently 3.5 percent of gross domestic product (GDP) for FY05.

The DoD budget is under the historic norms as a percentage of GDP. In every year from 1941 to 1994, except for 1948, the United States spent more than 4 percent of GDP on national security. (1) With the $82 billion supplemental passed to fund ongoing operations in Afghanistan and Iraq, the combined budgets will reach 4 percent.

The Bush administration has not endorsed any plan to pay for hurricane relief. Congressional leadership is also lukewarm to these offset proposals. Yet, the final months of the first session of the 109th Congress will be affected by the remnants of Katrina.

Katrina has definitely upset the agenda of Congress. Issues related to the Hurricane Katrina recovery, as well as the confirmation of Supreme Court Justice nominee John Roberts, have already made it more difficult for Senate leaders to complete their work on the FY06 NDAA and the Defense Appropriations Act before the start of the fiscal year October 1.

These delays are likely to compound, and the government will be run on a series of continuing resolutions. How Katrina will affect yet-to-be passed defense bills is still to be revealed.

CAPT Marshall Hanson, USNR (Ret.)

(1) "Where We Stand: Our Principles on Transforming the U.S. Armed Forces," Heritage Foundation, 3/23/2005

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