Katrina to cost 400,000 jobs: report

By Caren Bohan

WASHINGTON (Reuters) – Hurricane Katrina’s economic toll
could include the loss of up to 400,000 jobs and slower U.S.
growth, a congressional report said on Wednesday as the White
House prepared a roughly $50 billion request for the troubled
Gulf Coast.

Bush was expected to submit his second budget request for
Katrina relief in mid-afternoon and Congress will likely
approve it this week. It comes after a $10.5 billion measure he
signed on Friday and is expected to be followed by an
additional, longer-term package that some say could top $100
billion.

Giving a preliminary tally of the damage from the storm to
the U.S. economy, Douglas Holtz-Eakin, director of the
Congressional Budget Office, said the “evidence to date
suggests that overall economic effects will be significant but
not overwhelming.”

The CBO report said Katrina could slow economic growth in
the second half of the year by one-half to 1 percentage point.

Holtz-Eakin also said rebuilding from probably the
deadliest national disaster to hit the United States ultimately
could help the unemployment situation by providing more jobs.

But he acknowledged the estimates were “fraught with
uncertainty.”

Katrina’s destruction could reduce employment through the
end of this year by about 400,000, the report said. Employment
for September will decline significantly — from an estimated
150,000 to 500,000 — as a direct consequence of the hurricane,
the budget office said.

“Employment will increase in subsequent months, as workers
return home and businesses reopen and as reconstruction
activity gathers steam,” CBO said.

Congressional sources who are familiar with the
deliberations over the aid package Bush was preparing said it
was likely to be around $50 billion.

Like the aid measure passed last week, the latest one will
be focused on meeting immediate needs for thousands of people
displaced or hurt by the hurricane. White House spokesman Scott
McClellan said the administration will spare no effort in
helping the survivors.

The White House is facing fierce criticism from many
Democrats and some Republicans about its initial handling of
the catastrophe, which may have killed thousands of people.

HIGH PRICE TAG

The spending will add to an already large U.S. budget
deficit. Numbers being talked about for total spending on
Katrina relief hover around $150 billion to $200 billion.

By comparison, about $300 billion has been approved so far
for the Iraq war.

Senate Appropriations Committee Chairman Thad Cochran,
Republican of Mississippi, said the initial $10.5 billion was
being spent at a much quicker pace than expected, requiring
urgency in passing a new bill.

“The administration anticipated that these funds would be
spent at the rate of about $500 million a day,” Cochran said,
speaking at meeting of Republican leadership and committee
chairmen. “They are now being spent at twice that rate.”

Senate Majority Leader Bill Frist, Republican of Tennessee,
said the Senate would act this week on the latest request.

Meanwhile, Senate Finance Committee Chairman Sen. Charles
Grassley said lawmakers will consider extending U.S. jobless
benefits, normally a 26-week program.

Grassley, an Iowa Republican, said the finance panel would
also examine “the extent to which tax policy needs to be
changed to affect individual victims and particularly to help
the rebuilding of lost businesses.”

Another issue to be looked at is whether Congress should
“waive and modify programs for Medicare, Medicaid,” Grassley
said. “We’re looking at setting up a welfare contingency fund.”
He gave no details.

(Additional reporting by Adam Entous, Susan Cornwell, Vicki
Allen and Rick Cowan)