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Compensation may cost billions

A lone rescue worker walks under a large piece of construction equipment picking through the still smoldering wreckage of the World Trade Center on Monday. Rescue and recovery work is now being done with large cranes and earth movers. PHOTO: REUTERS

The federal government's promise to compensate victims of the Sept. 11 hijack attacks on buildings in New York and Washington could cost taxpayers billions of dollars with no clear limits, fiscal watchdog groups said on Monday.

Although part of a US$15 billion airline assistance package signed over the weekend by President George W. Bush, the fund's size was never specified in the legislation that included measures aimed at limiting airline liability for the attacks on New York's World Trade Center and the Pentagon near Washington.

But with nearly seven thousand people dead or missing, and more injured, the payout estimates run into the billions.

"I've heard guesses that start at US$9 billion and go up," said Bob Bixby, executive director of the Concord Coalition, a non-partisan group that keeps an eye on US government spending.

The bailout package set aside US$5 billion in direct payments and up to US$10 billion in loan guarantees for the airlines that have been hard hit by the two days of groundings and declining passenger confidence that followed the Sept. 11 attacks.

It also limited airlines' liability to the amount of their insurance while helping victims and their dependents by creating a "Victim Compensation Fund."

"It looks pretty open-ended and it's going to be pretty difficult to estimate how much it could potentially cost," Bixby said. "If people are compensated for potential future earnings, and some of those victims would have had phenomenal future earnings, it will be costly."

Questions about the overall price tag were among the glitches that held up the airline bailout legislation for a few hours last Friday.

"Some [lawmakers] wanted to put a cap on this [fund], calling it an open-ended entitlement. But no one produced a number. There isn't one," said one congressional aide.

The law allows victims and their relatives to go to court if they wish to get damages, although they are restricted to the US District Court for the Southern District of New York, and limited to whatever the airlines' insurance will cover.

Alternatively they can apply for money from the Victim Compensation Fund. A special master -- a new position to be filled by the Attorney General -- will decide their claims.

Victims have up to two years to file, and the Special Master must decide their claims within 120 days.

"I wouldn't even bother calling it a fund. It's a victim's compensation entitlement," said Richard Kogan, senior fellow with the Center on Budget and Policy Priorities.

His estimate of the ultimate cost was lower -- between US$1 billion and US$2 billion -- but he stressed this was just a "guesstimate."

"It could be more or less depending on how generous the Special Master is and how many people choose to apply," Kogan said. "But whatever it takes, is there."

The Congressional Budget Office will eventually give an overall cost for the new law, but has not done so yet.

"There hasn't been any formal estimate on the bill," said one CBO staffer, adding: "We don't do cost estimates overnight, and we don't have a crystal ball."

"Congress may well have to revisit this legislation," Bixby observed. "It will be tough to keep the lid on."
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