The Journal Editorial Report | September 9, 2005 | PBS
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Lead Story
September 9, 2005

Anne Ritchie of Houston uses a laptop computer to write a message for Harvey Jackson of New Orleans
Anne Ritchie of Houston uses a laptop computer to write a message for Harvey Jackson of New Orleans while sitting on the man's cot in the Astrodome in Houston on September 8, 2005. Jackson is trying to find family members while taking care of his nearly 100-year-old grandmother in the shelter. (AP/David Zalubowski)

Another challenge facing the president is his effort to regroup in order to push a domestic economic agenda in the wake of the hurricane disaster.

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So far, the economy appears to remain generally unaffected by Katrina, and the stock market has rebounded from its first days' jitters. But the long-term economic ramifications of Katrina are not clear. This winter, home heating oil prices are expected to jump by as much as 71 percent. Drought-stricken farmers in the Midwest are threatened with losses in the billions because Gulf Coast ports are damaged and unable to move farm exports. Stranded barges clog the Mississippi River.

The federal costs of up to $150 billion for relief and rebuilding mean additional stress on the federal budget. The Congressional Budget Office estimates that Katrina will cost 400,000 jobs, slowing the economy and reducing tax revenue.

All of this creates uncertainty for much of the president's economic game plan. Probably most endangered are efforts to reduce the budget deficit and to make permanent his expiring tax cuts. Senate Majority Leader Bill Frist already has put on hold a vote to repeal the estate tax for the wealthiest one percent of Americans.

What will President Bush be able to accomplish when his tax commission delivers a tax reform plan later this month, which may include a proposal to replace the federal income tax with some kind of consumption or flat tax? Equally unpredictable is what effect the president's lower ratings will have on his ability to push through the rest of his economic goals: social security reform, or cuts in Medicaid, farm subsidies, student loans, food stamps, housing and cash assistance to poor families.

The poor are the iconic images of this disaster -- its most visible victims -- and it's likely to be harder to make cuts on programs designed to help them.

GIGOT: Steve, the signs are so far that the economy is holding up pretty well, despite this blow. What does the president need to do now to make sure that it keeps on that path?

MOORE: Not only is the economy holding up, but right before Katrina hit, all of the economic reports were very positive. We had an unemployment report that came out last week -- 4.9 percent unemployment, which is the lowest that we've had in five or six years. The GDP growth forecasts have been very solid. So Bush's economic program is working.

GIGOT: A lot of the underlying strength there.

MOORE: Exactly. And just to get to one point on jobs -- everybody's concerned about what are we going to do about these 400,000 people who don't have jobs. The economy has been producing 150,000 to 200,000 new jobs a month. That means within just a couple of months, we could find jobs for all these folks, as long as the economy keeps growing. That means Bush has to stick with the tax cuts, he has to keep a lid on spending, those kinds of things. And of course, the Democrats want to do just the opposite.

GIGOT: If you're the president of the United States, how do you react to this disaster? How do you frame it to say to the American people, "Look, this is an opportunity to do things differently?" And what do you do? What should he do?

MOORE: Well, for example, I like the idea of basically saying, "We want to rebuild New Orleans where it is appropriate to rebuild. Let's have the private sector come in first. Let's create a large enterprise zone area, with low taxes, get rid of some of the regulatory barriers that make rebuilding tough. We editorialized this week about the fact that a lot of the trade sanctions against things like steel and lumber are going to increase the price of building new homes. These are all very positive steps that will make the rebuilding happen much faster.

GIGOT: Kim, is there anything that we could do on the refinery energy side of things in order to help get gasoline supplies back faster?

STRASSEL: Absolutely. This should be an opportunity to finally do something substantive on energy policy. We currently have half as many refineries in this country as we did in 1981.

GIGOT: It's astonishing.

STRASSEL: This, despite the fact that demand has grown by 20 percent or so. On top of it, no one wants to invest in this industry at the moment. Right now, the refining industry is looking at between the years of 2006 and 2012, having to cope with 14 new environmental programs. Investors look at this and they go, "Whoa, like, I don't want to be involved with this." This is something Congress should be looking at.

HENNINGER: And just a footnote: the price of gasoline now is high enough that you could bring those refineries on stream in an economic sense. There's new incentive to do it, now.

New Orleans
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GIGOT: In terms of leadership, there is a precedent here. After the Northridge earthquake in 1994, former Governor of California Pete Wilson had the ability to invoke emergency powers under California law, the ability to waive a lot of rules, a lot of regulations. It had been estimated that repairing the area would take about two years. It ended up taking about two months to get the big I-10 highway back on line. The president could speak to the American people and say, "We need to do this thing."

The problem, I think, is that he's back on his heels. He's not really asserting himself, and going out and defining the problem and saying what we should do about it. In Washington, if you're not ahead defining it, you get swept right away.

STRASSEL: This is an opportunity. Democrats are out there. They would like to turn this into the new New Deal: let's spend what we can. Bush and the Republicans should be standing back and saying, "This should be an opportunity for an experiment. Let us see how many bad regulations we can sweep away, and what good we can do from that." Go out on the offensive.

GIGOT: Dan, are we looking at a changed national agenda here? Is this an inflection point in terms of the ability of the Republican Congress and government to actually work its agenda?

HENNINGER: I think it could be an inflection point. Let me say something that is going to sound a little bit starry-eyed. One reason we have these problems is the incredible degree of partisanship that exists in Washington right now. It does not look as though the Democrats are going to change. I think probably the president should reach out, and try to offer a fig leaf to the Democrats under these circumstances, and say "Let's bury some of these hatchets so we can do something about problems like New Orleans."

Let's move on to a third major challenge. With another opening on the Supreme Court resulting from the death of Chief Justice Rehnquist, is the president in a position to take on a major fight over another conservative appointment? We have a hint of what is to come in a couple of reactions when the president said he would now want John Roberts confirmed as chief justice, rather than as Sandra Day O'Connor's replacement.

Supreme Court Nominations
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Senator Ted Kennedy said: "Before the Senate acts on John Roberts's new nomination, we should know even more about his record, and we should know whom the president intends to propose to nominate as a replacement for Sandra Day O'Connor." Senator Patrick Leahy said: "I would hope that he would consult with us before he nominates somebody for that next position...It would at least give him an understanding of who might have the easiest time to go through, and who might be a good one to show balance in the court."

Dan, there were a lot of people who looked at the president's quick elevation of John Roberts to be chief as opposed to associate justice, and read it as a sign of his political weakness, saying the president just didn't want to take on another fight at this time. Do you read it that way?

HENNINGER: Well, I would say at some level politics is about winning. It looks to me like George Bush just pocketed a victory with the Roberts nomination, even looking rather presidential, I'd say, nominating someone who is intelligent and capable to be the chief justice. Now, the replacement for O'Connor is unavoidably going to be a fight. The president has to choose whether he wants to fight with his own party by nominating somebody who doesn't share his conservative credentials, or fighting with the Democrats. And he is going to have that fight, short of nominating Chuck Schumer to the Supreme Court. We have to choose.

GIGOT: Kim, if he names, say, an Alberto Gonzales -- the attorney general, his friend, former White House counsel, friend from Texas, a guy he really likes -- he would have a fight with his political base, wouldn't he?

STRASSEL: No. The voters are expecting Bush to step up to the plate and give them the person he promised that he was going to give them during his election campaign. He came out and said, "My models are Scalia, are Thomas. I want to re-make this court, and here's an opportunity to do it now." Now the pressures are going to be on him for him to sort of look at the next 30 days, and how do you decide that. But 15 years from now, when people are deciding on his legacy, they are going to looking at that court.

GIGOT: But a lot of people inside the White House, Steve, are saying, "Look, Mr. President, you have got an awful lot of challenges here. You've got Iraq, you've got post-Katrina, you've got your other agenda. Don't pick another fight." What is wrong with that argument?

MOORE: Well, the big problem politically is that when you've got a conservative base that is somewhat angry at the White House and Republicans for this big spending spree that has been going on, even before Katrina hit, you have got a lot of agitated conservatives. And they really do, as Kim said, expect for Bush to keep his word, to nominate a conservative. I think he would be in much bigger political trouble if he tried to pacify the left with a more liberal candidate than if he satisfied his base with a more conservative one.

STRASSEL: This could also be an opportunity for him, an advantage. He is good on these issues -- on culture, on society. Iff he came out and said, "Let's have a debate on judicial activism, let's have a debate on gay marriage, let's have a debate on any of these things," this is the stuff that has really rallied him support in the past. It could help him again.

GIGOT: These are some of his strongest issues, especially in those red states that voted for him in 2000 and 2004.