Larry Kudlow
During this hurricane season of George W. Bush’s political discontent, the president has been slammed almost uniformly by pundits on the left and the right. Some criticisms about the administration’s late reaction to Katrina, and FEMA’s inadequacies in a crisis, are justified. But critics, especially in the conservative ranks, are missing two crucial messages being sent by the president -- messages that could endure long after the names Katrina and Rita are just names again.

Bush knows, even if others have forgotten, that the terrorists are carefully watching the U.S. government’s response to the natural disasters in New Orleans, Houston, and elsewhere. Hurricanes are one thing, but a terrorist attack with biochemical weapons or a nuclear weapon would be far more devastating. Even another 9/11-type bombing episode from the air, ground, or sea could present more of a challenge than what we now face in the Gulf Coast. Bush knows this. He knows that the U.S. must rebuild the Gulf no matter what it takes because this effort might be a test run for something far worse.

Is $200 billion too high a price to pay to send a message to our terrorist enemies? I doubt it. This is something our $13 trillion economy can easily shoulder. (Although a federal emergency control board should be appointed to monitor the taxpayer monies headed for the political swamp of New Orleans.) Yes, the budget deficit will rise for a year or two, from roughly 2.5 percent of GDP to perhaps something over 4 percent. Big deal. The very bond markets that actually do the financing have shrugged the spending off, with Treasury issues continuing to trade around 4.25 percent. There was no “spiking up” of long-run interest rates that might suggest a financial crisis. The stock markets, meanwhile, just registered their best third quarter in seven years.

In this new spending environment, total U.S. debt held in public hands will rise a little more quickly to the $4 trillion mark. But that’s a small fraction of our nation’s wealth. The Federal Reserve recently indicated that total family net wealth -- which includes the value of our nation’s businesses, bonds, stocks, and real estate -- just hit an all-time high of $50 trillion. This illustrates the firepower of the free nation and economy that the radical Islamic fundamentalists desire to overthrow.

Larry Kudlow

Lawrence Kudlow is host of CNBC’s “The Kudlow Report,” which airs nightly from 7 p.m. to 8 p.m.