Katrina, Rita: Who Will Pay?

Although the toll on people of Hurricane Katrina and, to a lesser extent, Hurricane Rita, is the most immediate concern in the minds of Americans, the long-term economic impact isn't far behind.

CBS News Correspondent Anthony Mason reports the oil industry will be feeling the repercussions for months, and the ripple effect will reach into everyone's pocketbooks.

And CBS News Correspondent Joie Chen notes that politicians in Washington are already posturing over the best way to foot the bill for the massive rebuilding costs.

As Rita roared ashore, Mason says, the Gulf Coast oil industry was fearing a knockout punch.

Instead, says John Kingston, the chief oil analyst for Alaron Trading, "so the more damage you pile on, the further back goes the recovery process, and the longer that goes, the longer high prices stay around."

Katrina and Rita helped introduce us to $3 a gallon gas, Mason says. And, as storm winds die down, those prices may fall a bit, too. But this problem won't blow over when the hurricane season ends.

The oil fields and refineries may have dodged a bullet, he concludes, but we will have to bite the bullet and keep paying up at the pump.

And, reports Chen, the nation as a whole will keep forking over funds, as well.Reeling from the one- two punch of Katrina and now Rita, and coming to grips with the enormous cleanup job ahead, a political storm is brewing in Washington over a question faced by every American family: "How in the world are we going to pay for all this?"

Options being raised include eliminating tax cuts for the rich, cutting spending, and borrowing.

"We have made a decision to send a $2,000 check to every family that has been evacuated," President Bush has said.

He adds he can't explain just how, until all the numbers are in.

"It's hard to work with Congress," the president says, "until we fully understand the size and scope of what is going to be expected for us to pay."

Mr. Bush draws the line at tax hikes, but last week he asked Congress for some budget-cutting ideas. Republicans quickly got their knives out, Chen observes, with NASA's Mars and moon initiatives, Amtrak and PBS among potential targets already being mentioned.

The president may go along with some of those cuts, Chen points out, but when some Republicans put one of his pet programs in the crosshairs, things got dicey.

The new Medicare prescription drug benefit will start in January, unless Republican Sen. John McCain of Arizona gets his way: "It was supposed to cost $400 billion. It's now up to $700 billion. We ought to cancel it and go back to square one."

Democrats, however, led by House Minority Leader Nancy Pelosi of California, say the answer isn't in gutting social problems, but in "cutting tax cuts; removing tax cuts for the wealthiest people in America."

The deficit, Chen notes, is expected to hit $503 billion next year and rise throughout the decade. The U.S. has spent more than $300 billion for wars in Iraq and Afghanistan. And Katrina alone is expected to cost another $200 billion.

Remember that question from Economics 101: 'How do we choose between guns and butter?' Chen asks.

One critic points out that folks on Capitol Hill don't like to choose among guns, butter, and tax hikes. They want it all! And when they don't have the money?

"It's without question, we're borrowing every penny for Iraq, and we're borrowing every penny for Afghanistan. And we borrowed every penny for 9-11," says Newsweek's Wall Street editor, Alan Sloane.

He predicts Washington will, once again, take the easy way out: borrowing the money and ballooning the debt: "Everyone wants to spend. And the Republicans want to borrow they money and stick someone else with the bill. And the Democrats want to tax the alleged rich, and stick them with the bill. It's not a question of whether we spend. It's a question of who pays."

But McCain insists this time, facing the enormous bills for the hurricanes, it has to be different: "We didn't anticipate around 200 billion taxpayers dollars a month ago. So everything's changed. Everything's got to be on the table."