As an embattled President George W. Bush announced the details of his massive hurricane relief effort, Brazilian President Luis Inacio Lula da Silva endured his most difficult days yet amid a continuing corruption scandal.

I discussed the situation facing Lula with Brazilians in Sao Paolo last week, and was struck by the parallels and differences between circumstances in the two countries.

Lula's problems began in June, when allegations surfaced that the ruling Worker's Party orchestrated a campaign to buy votes from allied politicians. Facing Brazil's worst scandal since Brazilian president Fernando Collor de Mello resigned in 1992, also amid allegations of bribery, Lula has seen his party and administration decimated by resignations.

While not directly implicated, Lula's popularity has been hammered. His personal approval rating sank to an all-time low of 50 percent this month, according to Instituto Sensus, while his government's approval ratings slumped to 36 percent.

Most observers in Brazil still appear to believe that Lula himself will survive the scandal. Over and over, one hears the argument that Lula has been good for the economy. Press accounts even express concern that the involvement of his finance minister in the affair is a risk to markets, because markets perceive Lula's economic policies to be so good.

Right on Taxes

What are these policies? High taxes, relatively tight government spending, and a surplus estimated to be 5.1 percent of gross domestic product as of July. While these policies are hardly out of the conservative playbook, in the case of Brazil, they probably have been essential. That's because Latin American nations have such a terrible record of government finance and debt default that deficits could be disastrous for Brazil.

These factors may have forced Lula to be a fiscal conservative, but now he is reaping an interesting reward. Even in the midst of the scandal, he has built up personal equity, especially with the international press, as a virtuous policymaker, equity that may well save his political life.

Contrast this with the experience of President Bush. He came to office arguing, correctly in my view, that tax cuts and reforms could improve the economy. He passed them over the deficit wails of political opponents.

He was probably right. The economic harm from higher deficits hardly seemed significant. Interest rates didn't soar the way his opponents claimed they would. At the same time, tax cuts certainly helped stimulate the economy.

And Now Katrina

But Bush failed to impose any spending restraint. Increased revenue from higher economic activity was dwarfed by the increased spending. Deficits soared far beyond forecasts.

Those on the left (and in the press) viewed the deficits as proof of the President's incompetence, while his allies have begun to revolt over the high spending.

Then along comes Katrina, requiring enormous government expenditures. If there were a surplus, the U.S. could repair New Orleans without making difficult fiscal policy changes. But now money is so short even deficit doves are concerned.

Responding to House Majority Leader Tom DeLay's recent charge to “bring me the offsets,'' Brian Riedl of the Heritage Foundation compiled a list of wasteful federal programs that, if terminated, would save at least $100 billion. That would be more than enough to cover the most recent emergency supplemental appropriations bills for hurricane relief.

Considering the widened budget deficit from spending on relief efforts, Senate Republican Tom Coburn of Oklahoma observed, “We have two disasters.''

Two Messes

Democrats, meanwhile, are calling for tax increases. Indeed, said Colorado Representative Diana DeGette, “The only way we can start to solve this is rolling back the tax cuts.'' Everyone, it seems, is angry with the administration.

So like Lula, Bush is facing a political crisis. Criticism mounts about the federal government's response to Hurricane Katrina. His approval numbers are at a record low. The resignation of Michael Brown as director of the Federal Emergency Management Agency, has done nothing to assuage criticism.

Unlike Lula, however, and despite a growing U.S. economy, fiscal policy has generated little political capital for President Bush--precisely because he has been so willing to run high deficits. Lula has one mess on his hands. Bush has two.

Kevin A. Hassett is a resident scholar and director of economic policy studies at AEI.