Monday, September 5, 2005 - Page updated at 12:00 AM

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Katrina, oil don't mix with GOP tax-cut plan

The Washington Post

WASHINGTON — Republican leaders intended to return to work tomorrow with a dream agenda for small-government conservatives: permanent repeal of the estate tax, an extension of deep cuts to capital gains and dividend taxes, the first entitlement-spending cuts in nearly a decade, and the advent of private investment accounts for Social Security.

But Congress and the White House are on the spot to respond to Hurricane Katrina's historic Gulf Coast destruction and to skyrocketing gasoline prices, and the leadership is feeling pressure to set aside or jettison parts of that well-laid agenda.

The federal budget already is stretched by spending on the war in Iraq and a nearly $11 billion emergency hurricane relief package that was rushed through Congress late last week. GOP leaders will have to justify additional tax relief for upper-income people at a time of civil and economic crisis.

"How do you do tax cuts when your budget is straining to save lives?" asked Rep. Mark Foley, R-Fla. The House Ways and Means Committee, on which Foley serves, had been set to pass a package of tax and spending cuts by the end of September, followed by broad, controversial Social Security legislation. Katrina "is going to have a tremendous impact," he predicted.

House Majority Whip Roy Blunt, R-Mo., said he has every intention of pushing forward with the tax and spending cuts and Social Security legislation. But asked at a news conference whether tax cuts are wise when the government is pouring billions of dollars into emergency aid, Blunt replied: "I think we need to look at what we need to do to be sure that the economy isn't affected more than it needs to. ... We'll be thinking about that."

Senate Minority Leader Harry Reid, D-Nev., implored Republicans late last week to drop plans to take up permanent repeal of the estate tax soon after Congress returns to work.

"With thousands presumed dead after Hurricane Katrina and families uprooted all along the Gulf Coast, giving tax breaks to millionaires should be the last thing on the Senate's agenda," he said.

Marshall Wittmann, a former Republican political strategist now with the centrist Democratic Leadership Council, said the GOP agenda looks like "political suicide."

"The entire fiscal landscape has been transformed in the last week," Wittmann said. "The entire Republican agenda of tax cuts, Social Security reform and big spending on pet Republican projects is over. Events do eventually have an impact on Capitol Hill."

With the government's response to the hurricane disaster fast becoming a sensitive political issue, Republicans are responding cautiously to Democratic criticism. Amy Call, a spokeswoman for Senate Majority Leader Bill Frist, R-Tenn., said the plan is still to move to legislation repealing the estate tax this week. "However, we remain willing and able to return to Katrina business at any time," she said.

This week, the House plans to move on a variety of hurricane-related issues, including allowing the federal court in New Orleans to reconvene elsewhere and allowing Louisiana food-stamp recipients to claim assistance in Texas, Blunt said.

Rep. Clay Shaw, R-Fla., a Ways and Means member, said some tax-cut plans will have to change. Bush's push to add private investment accounts to Social Security is all but lost.

"I think all of us are in a little bit of shock at the human misery and anarchy that seems to be prevailing," he said. "The problems in the Gulf states are going to dwarf any other business of the Congress — as it should."

Rep. Bobby Jindal, R-La., whose home in Metairie is submerged, said: "I haven't had time to think about legislative items, but we will be consumed with this. This has got to be my focus."

That will mean money. Jindal said the needs are almost incomprehensible: housing whole communities until homes can be reclaimed or rebuilt, salvaging levees and dams, educating thousands of displaced children, rebuilding an entire electricity grid, and getting the Gulf's energy industry back up and running.

Lawmakers and aides say relief spending could easily double the $10.5 billion that Congress hastily approved as part of a relief package. And it will not be for the immediate hurricane victims only.

Rep. Ray LaHood, R-Ill., said he will push for assistance to Midwestern farmers, hurt by drought and now by grain prices that have plunged on word that grain harvests cannot be shipped down the Mississippi River for export because of hurricane damage. Republican Sens. Olympia Snowe and Susan Collins of Maine requested $900 million in emergency heating assistance to defray surging heating-oil costs.

Another priority is likely to be surging gasoline prices, which could soon approach $4 a gallon in some parts of the country. Rep. Joe Barton, R-Texas, chairman of the House Energy and Commerce Committee, said he will convene a hearing tomorrow on Katrina's impact on the energy market. Part of the inquiry will be allegations of price gouging — usually a staple of the Democratic Party, but one the Republicans must take up "in lickety-split time," said Rep. Donald Manzullo, R-Ill. "Our constituents demand it."

Barton agreed: "I'm a free-market guy. I come from an oil state. I am not anti-oil, by any stretch. But I don't want to see people get ripped off just because they're scared and retailers think they can just jack up the price."

Barton will also push legislation to address the glaring inadequacies of the energy infrastructure, especially pipelines and refineries that were shut down in the wake of Katrina. Finally, he said, "if there is a silver lining in this," it will be renewed political impetus to expand oil exploration beyond the Gulf region, especially in Alaska's Arctic National Wildlife Refuge.

None of that will necessarily mean the abandonment of tax cutting and cuts to Medicaid, student loans, farm-price supports and other popular programs. Conservative activists hotly denied that there had been any slackening of will.

"I don't think Republicans will be fooled into taking this necessary spending and using it to oppose pro-growth tax cuts," said Grover Norquist of Americans for Tax Reform, who castigated Reid for "using this tragedy and those deaths for his own political desires."

Washington Post staff writer Charles Babington contributed to this report.

Copyright © 2005 The Seattle Times Company


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