Fools Rush In

Worth A Look, Role of Government, Frontier Centre

While the tragic events are still unfolding in New Orleans and the rest of the Gulf Coast, it is business as usual in Washington DC. Critics of President Bush are blaming him for requesting less money for programs to guard against catastrophic storms. Yet hurricane preparedness primarily should be the responsibility of state and local officials. And past experiences have taught that Congress will rush to spend funds — often based on political priorities.

Some assert President Bush is to be blamed for the tragedy in Louisiana because he resisted specific projects for Louisiana. However, the Corps of Engineers is getting plenty of money. This year, President Bush requested $4.3 billion for the protection the coastlines, waterways and other areas susceptible to natural disaster. The real problem — to the extent that anyone is to blame for a once-in-a-century storm — is that the agency probably failed to prioritize its projects and its needs. For instance, the agency was often criticized for its inability to be forward looking. A 2003 review of the Corps of Engineers levee and flood activities noted that the Corps should be more pro-active in preventing flood risks rather than reacting to them.

Also, the agency has been found guilty over and over again of pouring billions of dollars into unneeded and environmentally damaging projects in the districts of important members of Congress, rather than focusing its efforts on vital projects for the nation as a whole — as demonstrated in the latest energy bill. In other words, blaming President Bush for the tragedy because he tried to cut the agency’s budget is misguided.

On the other hand, it could be argued that it is the unintended consequences of federal spending through the Army Corps of Engineers that ultimately led to this disaster. As we know, government spending changes people’s incentives and behaviors. There is a chance that the billions spent on building levees over the past several decades — preventing New Orleans from being naturally flooded as it would have otherwise — ultimately allowed the city of New Orleans to continue to grow even though it is under sea level. Without that spending, people in New Orleans may have been prompted to realize that it was too risky to live there and adjusted their behavior accordingly.

But this ignores an equally important issue: The federal government was designed to have specific and limited powers with most basic government functions left to the states. The federal government should only be in charge of delivering goods that promote the welfare of all — public goods. National defense for instance, benefit all the states, so the federal government should make these investments. But the benefits of preparing against and preparing to respond to natural disasters are enjoyed by the residents of a particular state, rather than all states, so these investments should be made at the state level.

This is not to say, of course, that the entire economy will not suffer from the Katrina, but rather that the main economic impact of such an unfortunate event would be felt locally. States at risk of being hit by a hurricane should invest more that they do today in preparing for the event. One reason they don’t is that states have grown accustomed to expect the federal government to spend money on activities that were traditionally reserved to the states.

It goes without saying that the federal government will help pay for the recovery of Louisiana and Mississippi. But once the emergencies have been addressed and the disaster-stricken areas are back to normal (or as back to normal as one can hope), lawmakers at the federal and state level should take a sober look at who should be responsible for minimizing the damage of future disasters.

But that is for the future. In the here and now, Congress has agreed to send $10 billion in emergency funds to the Federal Emergency Management Agency for relief efforts over the next few weeks and an additional $500 million to the Defense Department to defray its own expenses in reacting to the storm’s devastation. Unfortunately, very few voices talked about how to pay for this new spending.

Congress has plenty of options. For instance, lawmakers could rescind the highway and the energy bills and the $30 billion of pork nestled within them. Members could offset the $10 billion by agreeing to approve the $20 billion savings asked by the President in February. The president’s request offers a long list of wasteful spending, ranging from duplicative programs to those that are inefficient. Congress could go after corporate welfare, saving taxpayers $90 billion a year.

Sadly, we are likely now to get the worst of all worlds. First, we will see a federal government even more involved in state affairs then ever before. Second, politicians in Washington are going to approve lots more spending for low priority projects undertaken by the Corps of Engineers. And finally, the federal government is going to continue spending money it does not have without ever trying to offset it by cutting other spending.