Rebuilding New Orleans

We have a chance to do something different in rebuilding New Orleans. If government falls back into the same old rut of handing out money it is doomed to return to what it was before Katrina hit, the most corrupt city in America.

At the beginning of August, 10 people in the city were indicted for participating in a scheme to skim from an $81 million city contract. In the 1990s the New Orleans Police Department had the dubious distinction of being the nation's most corrupt police force and the least effective: the city had the highest murder rate in America. More than 50 officers were eventually convicted of crimes including murder, rape and robbery; two are currently on Death Row. A week before Katrina hit New Orleans, the Detroit Free Press published a story that as an experiment over 700 rounds of blanks were fired in a New Orleans neighborhood. No one reported the gunfire, it was so commonplace. In addition, the paper said the people fear the police in New Orleans. Murder rates had skyrocketed in the city. Two weeks before Katrina there had been 192 murders, compared with 169 at the same time in 2004. Adjusted for the city's size, those numbers dwarf the murder rates of Washington, Detroit, Baltimore, Atlanta, Chicago, Los Angeles and New York. Police have been quoted as saying that they don’t need to search out the perpetrators, because usually a few days after a shooting, the attacker is shot in revenge. Even Michelle Malkin had a go at describing the pitiful state of the school system in the city observing the city government was an "abscess." When you pay your taxes in the city, where they go, nobody knows whose pocket they end up in.

In the coming months, billions more dollars will flow into New Orleans. This money will be earmarked to create a “New Deal” for the city. Without question we will hear all the right buzzwords such as “public investment, creation of stable jobs, new schools, cultural programs and housing restoration.” Where it really goes, I predict nobody will know. But one thing is for sure. Based upon the track record of the city and the success of federal programs to “help people,” I can predict where it won’t end up. That is the problem with this approach of giving people money, which will be in essence a continuation of the same failed types of federal programs that insured the poor in the region stayed mired in poverty.

The other day I read an article by Jack Kemp, entitled “Time to Imagine the Unimaginable,” which unfortunately I cannot find a link to on the Internet tonight as I write this. In that article he proposed the only system that would stand a chance at not returning New Orleans to the status quo of “before Katrina.” It may be far too radical for politicians, especially statist ones that seem to be so plentiful on both sides of the “aisle” in Congress. You see it depends on two things, invoking capitalism and eliminating the onerous federal regulations that dampen innovation, competition, and ultimately the only chance New Orleans and the Gulf Coast may have at coming back better than they were before.

Kemp suggested the entire storm region could be turned into an enterprise zone, suspending burdensome federal regulations, such as the Davis-Bacon Act (Note: President Bush did this by executive order on 11 Sep already earning the ire of unions. I expect he will recant as he gets pilloried by the press and progressive thinkers when they too notice.) and the Jones Act. He also suggests the anti-business regulations imposed by the Federal Trade Commission, the Federal Communication Commission and the Environmental Protection Agency be suspended, at least during the recovery period.

Taxes, he suggests, such as gasoline taxes, telephone taxes and others could be suspended for the duration of the emergency. Individuals living in the storm-affected region and companies doing business there could be relieved of the outrageously complex and economically destructive federal tax code. Rules relating to retirement accounts and income taxes could be relaxed to give people access to capital.

To energize small businesses, he suggests they be forgiven paying payroll taxes. Businesses would be relieved of the most economically damaging features of the current corporate tax code. For instance, under the proposed “relief rules,” they could write off all investment spending (e.g., spending on plant, equipment, structures, machinery and technology) immediately rather than having to depreciate it over a period of years.

Instead of giving money to people with destroyed homes, Kemp suggests they be given property vouchers with which to make a down payment on a new homes anywhere in the US. Even those in public housing would have a first chance at home ownership and for the first time an opportunity to experience the rights and pride of property ownership. Radical stuff eh?

Additionally Kemp suggests let private investors purchase rights of ways and other property to rebuild infrastructure. These would include roads and bridges, plus sewage treatment plants and other utilities that could be privately owned and operated on a fee/toll basis.

Lastly, he suggested that the "federal government could pay to rebuild the levies under the condition that they were rebuilt by private contractors and with the understanding that the federal government no longer would provide federal flood insurance for any newly constructed structures, requiring all new building to be economically rational and privately insurable."

This rebuilding approach may be too radical for government though. Its dependence on people acting in their rational self interest and independently of government mandate may be a “bridge too far” for politicians who benefit from keeping their constituents enslaved in poverty and desperation.