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Katrina to cost 400,000 jobs: report

Posted on: Wednesday, 7 September 2005, 11:41 CDT

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.

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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)

Source: REUTERS

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