Pelosi, Bush, Clinton Stir Up Their Own Katrina

Aug. 15 (Bloomberg) — This week Nancy Pelosi is leading a Democratic delegation to New Orleans. It's a blunt move to recall the Bush administration's failure to curtail the recovery costs of Hurricane Katrina.

The Speaker of the House and her colleagues are also highlighting the remaining damage in New Orleans, the goal presumably being a feisty debate over how many rehab dollars the Gulf Coast needs. Hillary Clinton is on the Katrina case, calling for a White House appointee to address Gulf Coast concerns.

Republicans don't mind politicizing the storm either. In September 2005, President George W. Bush atoned by promising federal involvement in New Orleans. "This government will learn the lessons of Katrina," he said in a speech at Jackson Square. "We're going to review every action and make necessary changes, so that we are better prepared for any challenge of nature."

Now in time for the second Katrina-versary comes a study confounding many of these assumptions. Authors Peter Boettke, Daniel M. Rothschild and Emily Chamlee-Wright of the Mercatus Center at George Mason University provide evidence for what most of us suspected: New Orleans was uniquely vulnerable to the chaos of a disaster. Their study of aid since 2005 shows the solutions for the Gulf Coast are local ones, not city, state, or federal.

If federal money is in the picture, the study suggests, the most important thing is that citizens know where that money comes from, how much is available, and when it will arrive. The amount matters less than the certainty. The tedious left-right debate about whether disaster aid ought to be more generous (the Democrats) or less generous (the Republicans) is less relevant. The aid-and-tax-break combo, a favorite of both parties, is likewise of dubious value.

Sick City

At the time the World Meteorological Association was just thinking of assigning the name "Katrina" to a tropical depression building in the Atlantic, New Orleans's murder rate was the third-highest in the country, behind only Gary and East Chicago, Indiana. Louisiana ranked in the bottom five among states in various surveys when it came to education, business environment, health outcomes, and longevity.

Orleans Parish was, in Rothschild's words, "sick in a civic sense." This week New Orleans Mayor Ray Nagin reminded us of just how sick when he said that his city's notorious crime was a "two-edged sword": Murders might not be good, but at least they get the New Orleans brand into the news.

What about the rebuilding record? The scholars found wonderful stories, all local. Broadmoor in New Orleans was part of the city hardest hit. A month after the hurricane, it was still 10 feet underwater. The Broadmoor Improvement Association managed to rebuild three-quarters of its structures by joining with non-profits, Harvard's Kennedy School of Government, Royal Dutch Shell Plc, and other companies.

Rallying Point

In New Orleans East, the Vietnamese-American community rebuilt its Catholic church, providing a rallying point for a healthy return of citizens from Texas and elsewhere. One priest from the church drove around the South showing Katrina refugees pictures of fellow parishioners to lure them all back.

In neighboring Mississippi, small and large businesses were crucial in the reconstruction drive. Though the Wal-Mart Stores Inc. outlet in Waveland was destroyed, the company opened a temporary shop under a tent in the parking lot. The citizens began to feel they could find their own way to recovery. Mercatus calls this supply-side strategy "build it and they will come."

"There was nothing that was even halfway resembling normal," a woman told study interviewers. "When businesses open up and they start being full, operational, it reminds us what normalcy used to be like." Speaking of a Rite Aid drugstore that opened after the storm, she said: "I didn't go in to buy anything. I just went in to walk around and be normal."

Steering Clear

In other words, these little communities steered clear of the kind of civic malady described above.

The scholars found that reconstruction ordained from above had less positive results. The much-publicized "Road Home," a state-federal program that provides cash to rebuild damaged homes, has completed contracts with less than a third of the 180,000 applicants. The complex program requires third-party involvement and much paperwork.

The federal government's role can be downright perverse. As the Associated Press reported, tax breaks available under the Gulf Opportunity Zone Act are being used to fund condos with granite countertops and king-sized bathtubs in Tuscaloosa, Alabama, hundreds of miles inland. Some of the condos have ended up being used by University of Alabama alumni as comfy retreats after football games.

FEMA Economy

Other effects are subtler. Federal funding has created what the authors dub a FEMA Economy, after the Federal Emergency Management Agency. Individuals in a recovery area gear themselves toward aid, waiting for the next federal gift, rather than operating on their own initiative.

The authors note that U.S. political culture itself can delay recovery. Politicians love to send signals to voters that they are addressing a disaster — to fly in for that speech. But the same politicians often don't follow through, or their agendas conflict, stalling the process. Such signal noise, as economists call it, has only grown louder since the storm. New Orleans is on its fifth rebuilding plan, and no one from either party or at any level of government is sure where the funding will come from.

The confusion over restoring the Gulf Coast is only likely to worsen in the next 14 months. Election periods are veritable Katrinas of signal noise, alas for New Orleans.

(Amity Shlaes, a senior fellow at the Council on Foreign Relations in economic history, is a Bloomberg News columnist. The opinions expressed are her own.

© Copyright 2007 Bloomberg

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