Washington, DC, September 27, 2005 --  

After two large hurricanes slammed into the Gulf Coast this month, the American government is preparing to continue its irresponsible behavior: it's planning to spend its problems away. President Bush's proposal to spend massive amounts of money to rebuild the battered Gulf Coast promises to add heaps on to the national debt. While no detailed cost estimates have been made, congressmen and White House officials are using a $200 billion figure in reference to the proposals.¹ Given existing uncontrolled expenditures in Iraq, America's balance book now shows money hemorrhaging from the treasury like blood from a punctured jugular.

Since the night that the president made his deep-pocketed proposals, government watchdogs have warned that spending such incredible sums in a short time will undoubtedly lead to waste and corruption. While this may be true, it misses the larger point: such government spending is inherently wasteful because it takes dollars out of the pockets of individuals whose personal decision making processes are key to ensure that it is spent in a valuable manner. Using government-supplied taxpayer money to rebuild a doomed home on a floodplain, for example, is the epitome of wastefulness. And this is exactly the kind of spending that the plan supports.

While the president deserves the full fury of fiscal conservatives for his pledge, there is plenty of blame to spread around. In the days after New Orleans was flooded, Democratic politicians seized upon the suffering of millions along the Gulf Coast to score cheap political points at the president's expense. Blaming a natural disaster on a president is unbelievably unfair, but because a slow federal response effectively colored perceptions, giddy Democratic finger pointing succeeded in putting the president on the defensive. The result: an ostensibly generous pledge by the president to spend hundreds of billions of dollars of other people's money.

$200 billion is hardly chump change. That amounts to nearly $700 for every man, woman and child in the country. And if you think you won't be paying for it, you're wrong. Because Bush's proposed tax cuts are likely to be abandoned as a result of runaway spending, hundreds of dollars will be sucked out of the average American's pockets each year than would otherwise have been the case.

And because the value of the U.S. Dollar has been eroded partially by deficit spending, imports will become more expensive than they otherwise would have been. That means stores like Wal-Mart won't be able to cut prices as much on its imported goods from China and Mexico, and will likely have to raise prices on some of them. Bottom line: there's no free lunch. In the end, you'll be the one paying for this spending, one way or another.

America is a rich country, and will somehow manage these costs, even if they are simply put on the nation's credit cards by an irresponsible leader. But the longer-term problem comes from changes in attitudes on spending. Long after New Orleans is rebuilt and Hurricane Katrina relegated to old folks' stories of "the Disaster of '05," the effects of this attitude will still be felt. In only a decade, the Republican Party has transformed itself from a supporter of fiscal responsibility and limited government to a party of profligate spending and federal enlargement. And while much of the blame can be placed on the Bush White House, the tepid opposition from congressional Republicans -- who dominate both the Senate and the House of Representatives -- makes the party as a whole responsible for the shift.

Tragically, the Democratic party shows no signs of picking up the mantle of fiscal responsibility. Democratic opposition to Republican spending typically involves outraged demands that runaway spending should be wasted on other things.

This bi-partisan irresponsibility shows no signs of changing soon. While $200 billion for Katrina relief is a one-time cost, the cost of operations in Iraq and Afghanistan are not. To date, they've also cost about $200 billion -- $75 billion this year alone.² Since all of this money is simply piled on to the national debt, the end result will be a slow decline for America's fiscal health that is difficult to reverse. The U.S. Dollar is sinking worldwide -- down 33 percent against the Euro since 2002³, at a 13 year low against the Canadian Dollar⁴ and recently devalued with respect to the Chinese Yuan.

Unless Americans wise up and pressure politicians to stop the runaway deficit spending, they'll ultimately feel the effects of a disaster far greater than any tropical storm.

Related Web Columns:

He's No Gipper, April 27, 2004

Back With a Vengeance, August 19, 2003

Notes:

1. Washington Post, Bush Pledges Historic Effort To Help Gulf Coast Recover, September 16, 2005

2. Ibid, Defense Spending Is Overstated, GAO Report Says, September 22, 2005

3. The Economist, Online Currency Calculator, September 27, 2005

4. Reuters, Canadian Dollar Rebounds With Oil Price, Bonds Sag, September 26, 2005