Paying for Rita and Katrina

After two enormous hurricanes in a month, America has a lot of work to do. Things will never be quite the same on the Gulf Coast, and rebuilding will require some creative thinking lest history repeat itself.

Because of the magnitude of the damage of Hurricane Katrina particularly - and because we're still fighting a serious and costly war against terrorism - it's probably unavoidable that reconstruction costs will add to the federal deficit. But Congress should look for every possible opportunity to cut spending elsewhere first.

Some say that focusing on fiscal responsibility in the aftermath of a natural disaster demonstrates a lack of compassion. I disagree. Certainly we don't want to unduly restrict efforts to meet the urgent needs of evacuees and others who have suffered.

But the reality is that a natural disaster changes things for a country the same way a personal tragedy like a house fire changes things for a family. You don't lie down and give up, but neither do you race into major debt without thinking things through. And you certainly don't rebuild the house exactly the same way, inviting another catastrophe down the road.

For starters, we should be looking hard at two major pieces of legislation that were recently signed into law, the energy bill and the highway bill, for spending offsets. Both were laden with legislative pork of dubious merit, some of which had little to do with energy or highways (which is why John McCain and I voted against them).

It's been heartening over the past week to see members of Congress offering to give up the bike paths and other such projects that they "brought home" to their constituents - the Texas congressional delegation alone came up with $754 million worth - and even more so that ordinary voters have started writing letters to the editor urging their local officials to give back federal money for projects they don't really need.

Of course, the entire burden of rebuilding from Katrina and Rita cannot and must not fall exclusively on the federal government. Private insurance payouts will be critical. Municipal bonds can spread payments out over time for facilities, like bridges and public buildings, that will be used by future generations.

Smart redevelopment of devastated areas will involve more than just choosing safer locations and having better contingency plans. Ultimately there is only so much government can, or should, do to revitalize a local economy. Private industry must be the primary engine for growth, particularly small businesses, which already create most of the new jobs in America.

We must encourage economic growth with tax incentives and other rewards for investment, like legislation I introduced this month to stimulate the construction of new refineries and significant upgrades to existing ones.

What we don't want to do is choke off growth with higher taxes.

President Bush's tax cuts of 2001 and 2003 actually increased government revenues - according to the Congressional Budget Office, $262 billion more this year than last. Raising taxes would, therefore, not only hurt investment, job growth and family budgets, it might actually result in less, not more, revenue to the federal government.

By the same token, we certainly don't want to exacerbate high gasoline prices by raising taxes on oil production, as Senator Byron Dorgan (D-ND) has proposed in legislation that would impose a "windfall profits tax" on oil companies. Then-President Carter signed a similar bill into law in 1980 and the result was a sharp reduction in domestic exploration and a corresponding increase in our dependence on foreign oil, which hit states like Louisiana particularly hard (unemployment there averaged 11 percent during the time the tax was in effect).

To sum up: the federal government must help in the rebuilding, not substitute itself for local or state government programs or the private sector; and it must do so prudently, mindful of the cost to taxpayers. While other spending should be reduced to offset the cost of this emergency, it would be a mistake to raise taxes, especially as that might impact the very people we are trying to help.

Senator Kyl serves on the Senate Finance and Judiciary committees and chairs the Senate Republican Policy Committee.

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