Hurricane Relief May Cost Less Than Original Estimates

WASHINGTON – As lawmakers ramp up their efforts to cut spending to pay for hurricane relief and rebuilding, they are finding that the total cost promises to be less than originally feared.

The final tab is likely to be less than $150 billion, instead of an estimated $200 billion or more that was tossed about immediately after Hurricane Katrina (search) hit the Gulf Coast in August, Congressional Budget Office Director Douglas Holtz-Eakin said Thursday.

"There's nothing that we've seen so far that adds up to even approach $200 billion," Holtz-Eakin told The Associated Press, amplifying on testimony to the House Budget Committee. "Everything we've seen is in the vicinity of $150 billion or below."

But the cost of the war in Iraq is rising. It's about $1 billion more a month than last year, according to another congressional report.

The accumulating costs of both hurricane relief and the war have prompted House GOP leaders to unveil a new bid to squeeze the federal budget to pay the bill. Their plan would cut another $15 billion from federal benefit programs such as Medicaid, food stamps and farm subsidies already slated for $35 billion in spending cuts.

At the same time, new benefits for hurricane victims, including additional Medicaid costs, would have to be paid for with cuts to other benefit programs.

The House plan also would make across-the-board cuts to agency budgets, though many rank and file lawmakers vowed to exempt the Pentagon and the Department of Homeland Security.

"We must and can do better to mind the bank account of the American people — the federal budget," said House Speaker J. Dennis Hastert (search), R-Ill.

Senate leaders such as Budget Committee Chairman Judd Gregg (search), R-N.H., also are working to bring that chamber along, though even implementing prior budget plans is proving difficult.

The challenge was vividly illustrated Thursday by a Republican battle over farm subsidies. The Senate Agriculture Committee, slated to trim farm and food programs by $3 billion over five years, called off a vote as midwestern Republicans such as Pat Roberts (search), R-Kan., balked at boosting payments to dairy farmers at the expense of other commodity producers.

Senators from traditional dairy states, such as Rick Santorum (search), R-Pa., and Pat Leahy (search), D-Vt., were the losers in the first round, but the battle is hardly over. Still, comparable fights promise to break out all over Capitol Hill when Congress turns in earnest to the budget after a weeklong recess that begins Friday.

Many lawmakers have never faced difficult votes to cut federal entitlement programs, and the upcoming effort promises to be a rite of passage for a new generation of GOP lawmakers. The last effort to curb such programs, whose costs rise yearly, came in 1997.

Gregg had great difficulty getting GOP moderates to accept this spring's $35 billion in benefit cuts, but he says lawmakers' attitudes seem to have genuinely changed since Katrina. Still, with virtually no support expected from Democrats, any budget-cutting plan promises to be a delicate balancing act.

And the White House has yet to give the effort a sustained push, preferring to point lawmakers to earlier budget proposals already rejected by Congress.

Meanwhile, the deficit for the budget year that ended Sept. 30 came in $14 billion below what was projected just seven weeks earlier, Holtz-Eakin said in a separate report to Congress.

In mid-August, the CBO predicted a 2005 deficit of $333 billion, an almost $100 billion improvement over springtime predictions. The 2004 deficit was a record $412 billion.

The improved budget picture came despite increased costs for hurricane aid and rising monthly costs for the Iraq war.

The Congressional Research Service said in a separate report Thursday that the Bush administration is spending about $5.9 billion a month on the war, a 19 percent increase — or more than $1 billion a month — from a year ago.

As for hurricane damage, the CBO's Holtz-Eakin told the House Budget Committee that his office now estimates damage to homes, government buildings, oil refineries and businesses will cost between $70 billion and $130 billion. But at least $40 billion is covered by private insurance, he said.

Those figures don't include the cost of immediate relief and rescue efforts, which have been paid for from $62 billion Congress has approved for the hurricane response.

Separately Thursday night, the House voted 347-70 to pass a $31.9 billion measure funding the Department of Homeland Security for the 2006 budget year, which began Oct. 1.

The House also voted to prohibit Medicare and Medicaid coverage for erectile dysfunction drugs such as Viagra, at a projected savings of $600 million over five years, in order to pay for health care and extended unemployment benefits for Gulf Coast hurricane victims.

The legislation, approved by voice vote, provides $500 million in federal unemployment funds to disaster states, including $400 million to Louisiana. It extends Medicaid and other health programs that help low-income families nationwide.