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Storm seen sidelining permanent tax cuts

The recovery from Hurricane Katrina may temporarily sideline some parts of President Bush’s domestic agenda, including efforts to make the administration’s tax cuts permanent, U.S. Treasury Secretary John Snow said Tuesday.
/ Source: Reuters

The recovery from Hurricane Katrina may temporarily sideline some parts of President Bush’s domestic agenda, including efforts to make the administration’s tax cuts permanent, U.S. Treasury Secretary John Snow said Tuesday.

“It’s taken over the national agenda and I think it will for a while,” Snow said of Katrina. “I think it will push to the back burner some issues that otherwise would have been on the agenda now -- the estate tax, tax (cut) permanency, GSEs and other things.” Snow told the National Association of Federal Credit Unions.

Snow’s statement, which he offered before launching into prepared comments for the credit union audience, marked the first time a member of the Bush administration has said Katrina could cause delays in the broader economic agenda.

The White House, however, said that while recovery from Katrina was a top priority, the administration remained committed to its economic agenda.

House of Representatives Majority Leader Tom DeLay declined to comment on Snow’s remark, but said House Republicans were not reconsidering their push to extend Bush’s tax cuts.

“We are not reexamining that. That is raising taxes and I just stated that’s not an option,” he said during a weekly media conference. “Raising taxes would be the worst thing to do in this situation. We’ve got a growing economy and to pour cold water on that growing economy by raising taxes is not an option.”

Snow called Katrina “the most far-reaching and widespread devastation America has ever faced,” and said the short-term economic pain will be “devastating” for the Gulf Coast region.

But Katrina will place only “temporary” pressure on economic growth and job creation for the country as a whole, Snow said.

“From the point of view of the national economy, while we’ll suffer a temporary setback in (gross domestic product) growth rates and in job creation, and while we’ll probably see the unemployment rate tick up and the growth rate tick down, I think it’s temporary because there will be a major rebuilding effort here,” he said.

Snow said he expected a downturn in the economy lasting a quarter or so. But the massive reconstruction effort should lead to faster economic growth in 2006 than would have been otherwise, he said.

The Treasury chief said damage from the storm is likely to cause a temporary and short-run deflection in the Bush administration’s efforts to reduce the budget deficit.

Asked about concerns that the years-long rally in the U.S. housing market had created a bubble set to burst, Snow said a nationwide housing crash seemed unlikely.

“There’s some easing off going on and that’s to be expected,” he said.

“The ’bubble’ is a gross misnomer, a mischaracterization. The idea that we’re going to see a collapse in the housing market seems to me improbable,” Snow said.