Nation faces unprecedented choices:

Nation faces unprecedented choices: How far should U.S. go in making New Orleans whole?

Rex Nutting and William L. Watts MarketWatch, September 9th 2005

 WASHINGTON (MarketWatch) — Initially caught flat-footed by Hurricane Katrina, the U.S. government is settling into its familiar role of fixing up big public works after a major disaster. River channels are open, highways are being rebuilt, railroads are opening and airports are back in operation.  The private sector, too, is doing its part, working hard to restore power, communications and transportation networks in the New Orleans area. Oil and gas production and distribution are coming back. And if necessary to keep their critical operations going, essential workers will be housed at company expense. All that may turn out to be the easy part. For the thousands of small businesses, homeowners and community groups that are critical to making a city whole again, there are no resources to rebuild, even if their properties were left high and dry. Without any insurance coverage and with few assets, the dispossessed of New Orleans — largely black, poor and underskilled — may never return unless the nation mounts an unprecedented effort. Recreating something akin to what was the greater New Orleans community would take billions of dollars, maybe hundreds of billions, including the costs of cleaning up the pollution that’s permeated the houses, buildings and soil of the lowest-lying sections. Ultimately, the decision on how much government effort will be put into the rebuilding of the city will be a political one, laced with the complications of partisan politics, class, race, geography and economics. The contours of the debate are already developing. Once the images of the dead, the dying and the displaced fade from the TV screens, politicians will have to balance their compassion for the victims against some harsh fiscal and physical realities. The Bush administration, for its part, is literally in damage-control mode. “It’s way too early to talk about rebuilding when we are pulling people out of the water,” said White House spokesman Trent Duffy on Thursday. And yet, Duffy said, President Bush has told his top advisers to “think big, be creative and look at a host of ideas.” Bush has vowed to rebuild a better and greater New Orleans. But he has yet to say what he means by that promise. Congressional budget writers have said the rescue and relief efforts could cost the government $150 billion to $200 billion.

Finding the money

“For the moment I don’t think there’s going to be any problem finding the money,” said John Green, director of the Ray C. Bliss Institute of Applied Politics at the University of Akron in Ohio. “But we’re already running a pretty big deficit, and as we go forward it’s going to potentially start conflicting with other priorities. And that’s where there may be some reaction.” Federal spending on Katrina already has dwarfed the $7 billion spent on recovering from the Northridge, Calif., earthquake in 1994 or the $20 billion in relief and recovery from the Sept. 11, 2001 attacks. Since Katrina struck, Congress has moved to quickly approve two separate emergency-spending bills totaling $62.3 billion worth of aid — including funds to provide hurricane-affected households with $2,000 each. The measures were approved overwhelmingly by both the House and Senate. But some Republican budget conservatives are beginning to raise a ruckus. They’re not denying the need to help victims, but are arguing that GOP leaders could be taking concrete action to limit the disaster’s impact on the federal budget. Meanwhile, Senate Majority Leader Bill Frist, R-Tenn., moved this week to postpone a planned vote on a proposal to repeal the estate tax. House GOP leaders have delayed action on measures to cut entitlement spending by around $35 billion over five years, as well as on extending 2003 cuts in the tax rates on capital gains and corporate dividends. They insist these issues will be revisited, but Democratic strategists contend a bleak fiscal picture exacerbated by hurricane-related spending could crimp Republican efforts to extend Bush’s first-term tax cuts, while concerns about the hurricane’s victims could derail efforts to trim spending in entitlement programs, including the Medicaid health-care safety net. “I don’t think there will be specific resistance about spending for the hurricane. There will be a significant debate over our fiscal priorities,” said Marshall Wittman, a senior fellow at the centrist Democratic Leadership Council. Republican strategist Rich Galen rejected notions that tax and spending cuts were imperiled, but argued that it was important for Republicans to crack down on spending. There’s no doubt lawmakers will be ready and willing to invest substantial government money into rebuilding New Orleans. Nevertheless, experts warn that the optimism of Bush’s pledge to rebuild a “better” New Orleans could collide with the pragmatism of House Speaker Dennis Hastert’s opinion — that it “doesn’t make sense” to rebuild a city that would remain threatened by storms and floods.

Economic importance

New Orleans won’t die completely; it’s too valuable for that.  The port facilities in the city and along the Mississippi River are vital to  U.S. economic interests. The ports will survive, regardless of the cost.  Much of the nation’s trade in bulky goods like grain, steel, rubber and  petroleum are handled by the river ports in New Orleans and its environs.  Inexpensive alternatives to the Mississippi don’t exist.  There’s a strong economic incentive for the private sector and the  government to plow money back into the ports, refineries, pipelines,  chemical plants and fisheries that must, for geographic reasons, be located  in the river delta.  The oldest parts of the city, such as the French Quarter, were spared the  worst of the damage, giving some hope that tourists may once again return to  the Big Easy.  Of 620,000 jobs that existed in New Orleans before the storm, about 30,000  were in transportation and utilities, and 86,000 were in hospitality and  leisure occupations.  Those jobs and many more in areas of the city that were not destroyed could  come back within months.   Many of the other half-million jobs in New Orleans may never come back. Much  of the city has been lost to human inhabitation for years, perhaps decades,  by the polluted floodwaters. The population has fled, some of it forever.  The most economically valuable parts of the city were spared. The rest has  been steeped in a toxic soup. An estimated 150,000 homes were lost in the  flood, most of them housing renters who had little insurance coverage. Most  of the property owners in the city did not have any flood insurance.   “It’s a Superfund site,” said Hugh Kaufman, a senior policy analyst at the  Environmental Protection Agency who’s worked on toxic cleanups for 30 years.  He estimates it would cost $80 billion to $100 billion to clean up the  damage caused by the floods. If the area were declared a Superfund site, the  companies and public agencies responsible for the pollution would have to  pay for the cleanup.   Kaufman’s estimate is his own; the EPA has not completed its assessment of  the extent of the pollution or the possible costs.  Polls in the aftermath of Katrina show Americans are very sympathetic with  the plight of the hurricane victims, according to Scott Keeter, director of  survey research at the Pew Center for Politics and the Press. That’s likely  to translate into an ongoing willingness to settle the displaced and help  them find jobs and housing, he said. An AP-Ipsos poll conducted this week found 54% of Americans favored  relocating parts of the city on higher ground. Fifty-six percent of those  surveyed in a CNN/Gallup/USA Today poll said they believed the city would  never be the same, but 63% maintained that the city should be rebuilt.   “But the question of whether the public will be willing to provide full  support to very big-ticket items for the rebuilding of New Orleans in its  present location and its present form, I think, is a more unknowable  question at this point,” Keeter said.