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Katrina Recovery: Who Will Pay?

President Bush on Friday ruled out raising taxes to pay the massive costs of Gulf Coast reconstruction, saying other government spending must be cut to pay for a recovery effort expected to swell the national debt by $200 billion or more.

Hours earlier, Bush vowed to help rebuild the region with an eye toward wiping out the persistent poverty and racial injustice that exist there.

"As we clear away the debris of a hurricane, let us also clear away the legacy of inequality," he said at a prayer service at Washington National Cathedral in memory of Hurricane Katrina's victims. Polls suggest a majority of Americans believe the president should have responded quicker to Katrina, and high percentages of blacks tell pollsters they believe race played a role in the slow response by all levels of government.

Race may be playing a role in who is getting rebuilding work as well, reports CBS News Correspondent Sharyl Attkisson.

Although FEMA has handed out $9 billion, many local businesses in New Orleans, including black morticians, say they didn't get body recovery work. When they complained, FEMA asked for a list of minority businesses. The NAACP's local President provided one but says he hasn't heard back, Attkisson reports.

"The majority of people who perished were African American," said Danatus King, New Orleans NAACP president. "Now it would just seem right that minority businesses would be involved in the process."

Back at the White House, the chairman of Bush's National Economic Council, Al Hubbard, made clear that Hurricane Katrina recovery costs are "coming from the American taxpayer." Another top aide, domestic policy adviser Claude Allen, said the administration had not identified any budget cuts to offset the disaster expense, and Bush did not name any either.

Congress already has approved $62 billion for the disaster, but that is expected to run out next month and require another budget-busting installment. The federal deficit was projected at $333 billion for the current year before the storm slammed into the Gulf Coast more than two weeks ago.

CBS News Correspondent John Roberts reports that the rebuilding efforts could add $200 billion to the deficit – a figure Republican budget hawks complain is out of control.

"It is inexcusable for the White House and Congress to not even make the effort to find at least some offsets to this new spending," said Sen. Tom Coburn, R-Okla.

Bush, who declined to try to put a price tag on the costs, expressed no worry.

"You bet it's going to cost money. But I'm confident we can handle it and I'm confident we can handle our other priorities," he said during a news conference with Russian President Vladimir Putin. "It's going to cost whatever it costs."

Bush said it's important that government quickly restore the region to give people hope, and repeated his statement from Thursday night's speech from the heart of the New Orleans' French Quarter that the federal government would cover most of the cost of rebuilding schools, bridges and other infrastructure. Asked who would pay for the work and how it would impact the nation's rising debt, Bush said "the key question is to make sure that the costs are wisely spent."

"It means we're going to have to make sure we cut unnecessary spending," he said. "It's going to mean that we maintain economic growth and we should not raise taxes."

Without being asked, Putin stepped up to respond to Republican worries that Bush was writing a blank check for hurricane recovery that would increase the debt on generations to come.

The old Soviet Union had lived by the rule that money should not be taken from the pockets of future generations, Putin said. "But we never thought about the existing, current, present generations. And at the end of the day, we have destroyed the country not thinking about the people living today."

"Therefore, of course, yes, we need to spend money," the Russian leader said. "There is no two ways about it."

Opening Friday's joint news conference with Putin, Bush thanked his guest for sending supplies to the Katrina relief effort, saying the gesture would help "lift the spirits" of hurricane victims. The Russian said that Katrina provided "serious lessons" for Russia and other countries. Putin did not specifically mention the criticism of relief efforts in the Gulf Coast.

The hurricane killed hundreds of people across five states, forced major evacuations and caused untold property damage.

Bush also said he wants Congress to consider changing the law to allow the military to step in immediately if a catastrophic disaster occurs again. "It's important for us to learn from the storm what could have been done better," he said. Under fire, the White House has accused state and city officials of not authorizing federal involvement quickly enough, although critics say the administration didn't need approval to act.

Earlier Friday, many churches and other houses of worship across the country were heeding Mr. Bush's call for a day of prayer and remembrance for the victims of Hurricane Katrina.

Speaking from the pulpit of the ornate and cavernous National Cathedral, Mr. Bush spoke of the panic and pain and uncertainty inflicted by Katrina, reports CBS News Correspondent Mark Knoller. But through prayer, he said, people look for ways to understand the arbitrary harm of the storm.

In the cathedral, several dozen evacuees and first responders, all from New Orleans, filled one side wing. The president and his wife, Laura, sat solemnly in a front pew along with Vice President Dick Cheney and his wife, Lynne.

Before Mr. Bush's remarks, Bishop T.D. Jakes, head of 30,000-member Potter's House church in Dallas,

in which he called upon Americans to "dare to discuss the unmentionable issues that confront us" and to not rest until the poor are raised to an acceptable living standard.

"Katrina, perhaps, she has done something to this nation that needed to be done," Jakes said. "We can no longer be a nation that overlooks the poor and the suffering, that continues past the ghetto on our way to the Mardi Gras."

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