September 16, 2005

Bush rules out tax hikes to pay for Katrina

By Steve Holland

WASHINGTON (Reuters) - President George W. Bush, facing
alarm from conservatives over the soaring cost of post-Katrina
rebuilding, said on Friday the U.S. budget could handle the
expense and he would not raise taxes to pay for it.

"It's going to cost whatever it costs," Bush said at a
joint news conference with Russian President Vladimir Putin as
estimates circulated in Washington the cost could hit $200
billion, exceeding the cost of the Iraq war.

Responding to concerns among fiscally conservative
Republicans, Bush said his administration would work with
Congress to make sure the money was wisely spent and that he
would look elsewhere in the budget to make offsetting cuts.

"But I'm confident we can handle it, and I'm confident we
can handle our other priorities. It's going to mean that we're
going to have to cut unnecessary spending," Bush said.

His domestic policy adviser, Claude Allen, suggested
earlier in the day that no programs would be cut, triggering
alarm among conservatives and prompting the White House to
scramble to correct any impression Allen had left.

Bush rejected Democratic pleas he reconsider his proposal
to extend tax cuts. Bush's position is that to reverse the tax
cuts would amount to a tax increase at a time when Americans
are struggling with high gasoline prices.

"We got to maintain economic growth, and therefore we
should not raise taxes," Bush said, noting Americans were
already paying "a tax in essence" because of higher gas prices.
"And we don't need to be taking more money out of their

Putin backed up Bush on the need to spend money now to help
the hurricane-hit area recover.

"In the Soviet Union, for many the case, we lived under the
motto, 'We need to think about the future generations,' but we
never thought about the existing, current, present generations.
And at the end of the day, we have destroyed the country not
thinking about the people living today," Putin said.

The White House and Congress already have rushed $62.3
billion in emergency funds to the region.

The day after Bush proposed one of the world's largest
reconstruction projects for the area, White House officials
said they were still assessing how much it will cost but that
whatever it is will be borrowed money.

"There's no question that the recovery will be paid for by
the federal taxpayer and it will add to the deficit," said
White House economic adviser Allan Hubbard, while stressing it
is a one-time cost.

The goals Bush has laid out are significant: Rebuilding
roads, bridges and schools devastated by Hurricane Katrina and
getting the 1 million displaced people back in proper homes.


The White House cut its forecast in July of the fiscal 2005
budget deficit forecast to $333 billion, down nearly $100
billion from its February projection and substantially below
the record deficit of $412 billion in 2004.

Criticized for a slow federal response to the crisis and
trying to restore Americans' confidence in him, Bush told a
service at the National Cathedral the hurricane was "beyond any
human power to control, but the restoration of broken
communities and disrupted lives now rests in our hands."

The administration will press Congress to move quickly on
investment, job training and housing proposals Bush is offering
as a way to get the region back on its feet.

(Additional reporting by Caren Bohan)