They should talk to Abby, bartender at the Baby Dolls Strip Club in Houston. A week after Hurricane Katrina had relocated thousands of New Orleans residents to Houston, Fema, the much-maligned federal agency responsible for dealing with the crisis, decided it would be a good idea to hand out debit cards with a value of $2,000 to the displaced to buy necessities.

There were virtually no restrictions on the use of the cards and so the definition of “necessities” acquired some latitude. Louis Vuitton did a roaring trade in handbags in the Houston area and a good deal was dropped, as it were, at some of the city’s finest adult entertainment establishments.

Interviewed by a reporter for the local TV station, Abby over at Baby Dolls said she had seen many clients using their debit cards. She had nothing but praise for this exercise in government largesse. “A lot of customers have been coming in from Louisiana and they’ve been real happy about the $1.75 beers and they’re really nice.” It was only fair, she added that they should get a little publicly funded help. “You lost your whole house, then, why not?” she said. “You might want some beer in a strip club. There are a lot of guys out there that like to do that.”

Indeed. It may not be the kind of relief that most Republicans were thinking of when they voted through $50 billion in spending on the devastated region, but I can’t think of a more compassionate conservatism than one that pays for a Budweiser and a lap dance with somebody else’s money.

One of the more puzzling myths about the US in the wake of the Katrina disaster is the notion that heartless, penny-pinching Republicans have bled the Government so dry that the very idea of public spending, even on disasters, has become impossible. In fact, the Fema sponsor-a-stripper exercise was entirely of a piece with an outburst of fiscal incontinence proudly presided over by government-hating Republicans in the last decade.

When President Bush promised last week that the US would spend hundreds of billions of dollars to rebuild the Gulf Coast it was the latest step in the remarkable conversion of the Republican Party from the party of fiscal prudence into the progenitors of the next New Deal and Great Society combined. The rhetoric, it is true, has been all about the virtues of small government. But since 2000 the Republican controlled Congress and White House have been on a spending binge that would make any self-respecting banana republic blush.

Stripping out the public spending that is mandated, such as on pensions, in the last four years, federal spending has increased by more than it did in the previous 17 years. It is not all extra military spending. Take out defence and you find that so-called discretionary spending has increased by one third in the last five years.

And those tightwad conservatives have only just started. Last year Republicans approved and President Bush happily signed a Bill to expand Medicare, the health insurance system for the elderly. It was the largest increase in the role of the federal government since Lyndon Johnson’s presidency. This year Mr Bush again praised and signed transport and energy Bills that funnel hundreds of billions of dollars into vast public works projects from Anchorage to Atlanta.

In this twisted new conservative orthodoxy, though, this propitiation of Leviathan is fine as long as you don’t raise taxes to pay for it. Signing the Transport Bill this summer, Mr Bush actually hit upon a new definition of fiscal prudence: “[This Bill] is fiscally responsible,” he said, “because it doesn’t raise [gasoline] taxes.”

You don’t have to have a degree in applied mathematics to figure out the consequences of this lopsided approach to budgeting: deficits as far as the eye can see, debt piled onto future generations of Americans, a growing dependence on the willingness of the People’s Republic of China to lend money to the US Treasury.

How on earth did Republicans get here? It began some time ago with the high-minded idea that tax cuts were the route to cutting spending: “starving the beast”. If you cut taxes, Congress, fearful of deficits, would be forced to cut public expenditure too. A nice idea in theory that never worked in practice. The next justification was an ideological one. You can increase spending, but as long as you cut taxes the economy will grow faster, generating enough public revenues to pay for the increased spending.

There was a word for that in the Middle Ages. It was called alchemy. Of course when tax rates are punitive, as they were in the 1970s, there comes a point where revenues do increase if you cut them, but we are well beyond that point now.

Don’t misunderstand me. There is much to be said for cutting taxes. But not for committing the Government to permanent tax cuts matched by permanent spending increases.

As Hurricane Rita tears open the Gulf Coast this weekend, we can expect another heart-warming promise of hundreds of billions to dollars to put it together again, with no suggestion of how it’s going to be paid for.

Oh, no, wait a minute. There will always be those debit cards to fall back on. I can even think of a slogan to promote them: Mortgaging America to the hilt? $300 billion. US dependency on China? $600 billion. A beer and a lap dance at Baby Dolls? Priceless.

gerard.baker@thetimes.co.uk

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