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The Battle for New Orleans 

Fixing New Orleans should make as much sense to conservatives as it does to liberals. So why isn't it happening?

This article first appeared in the April issue of The American Spectator (www.spectator.org). It is reprinted here with permission. Copyright April 2006, The American Spectator.

Some conservatives think that President George W. Bush approved too much federal money in response to Hurricane Katrina. Many liberals think he hasn't approved enough. Nearly everybody believes that whatever money has been spent has not been spent wisely.

They're all correct.

What's most distressing about the Bush response, and non-response, to Katrina is that all the President's promises for a creative new approach to major-disaster relief have gone for naught. One of the world's great cities is dying before our eyes, yet the Bush administration has actively fought against the very recovery proposal that is the most pro-free market, most pro-private enterprise, most taxpayer-friendly, most accountable disaster-relief legislation imaginable. And when under fire for his opposition to that plan, the President instead touted yet another scheme to throw more money down an unaccountable rat-hole -- and compounded the error by including legislative language that would preclude the very uses of the money for which the President explicitly dedicated it.

To understand the tragedy inherent in Bush's opposition to the most promising conservative approach to disaster relief, offered by conservative U.S. Rep. Richard Baker of Louisiana, a little background is in order. The first thing to understand is that the large majority of Louisianans with destroyed property were victims as much of the federal government as of Mother Nature. The second thing to understand is that very little federal money has actually reached Katrina's victims themselves, and even less of that federal spending has gone for reconstruction as opposed to stop-gap relief. The third essential point is that both private and public reconstruction efforts have been delayed by federal red tape. And the fourth crucial fact is that New Orleanians cannot rebuild their own city if they have nowhere to live while doing it -- and that if they cannot return to their properties or pay their mortgages, the ripple effects from bankrupt citizens and distressed lending institutions could damage the national economy and require federal payouts far more expensive than the cost of having the government do the work of recreating the New Orleans housing market from scratch.

Take Point One: Few principles are more important to conservatives than the one that insists on assigning responsibility where it's due. The claim that the feds, rather than Mother Nature, victimized Louisianans is not merely a criticism of what is generally acknowledged as an utterly inept response to the storm after it hit. Such criticism is of course true, but it is for these purposes only of minor relevance. Instead, the most important and most misplaced assignment of culpability comes from the Bush administration and far too many Beltway conservatives who seem to blame Louisiana Katrina victims for building in a flood plain. (Never mind that the White House itself is in a flood plain without anybody thinking that West Wing employees need flood insurance.) The problem with this blame game is that the residents had been assured that they lived in one of the safest flood plains in the country, because the top civil engineering minds in the country had repeatedly said their levee-and-floodwall system could withstand any storm that hit southeast Louisiana with the force Katrina mustered. It was the United States Army Corps of Engineers that built the floodwalls -- and the Corps said the walls would hold.

In just one example of the Corps' engineering errors, The Times-Picayune reported that the Vicksburg, Miss., office of the Corps back in 1990 warned that the designs for New Orleans' 17th Street Canal floodwall were deficient -- that they were only half as thick and about a third as deep as they should have been to remain rooted in the soft, boggy soil of the area. But the chief engineer of the Corps' New Orleans office dismissed Vicksburg's concerns as a mere "engineering judgment" with which he disagreed. Unfortunately, Vicksburg was right, and it was those design flaws that helped lead to the floodwall's collapse.

Robert Bea, a geotechnical engineer at the University of California at Berkeley and a key consultant for the National Science Foundation's post-Katrina study team, told the Picayune this about the Corps: "In my view, in the case of the 17th Street, London Avenue and even the Industrial Canal floodwalls, fundamentally what we are looking at is a failure focused on the institutional side."

In many cases, New Orleans' Katrina victims had no flood insurance specifically because they were advised that they needed none. But he who guarantees against loss -- in this case, the federal government through the Corps -- should be held culpable when the losses occur after all.

It is at this point that many conservatives' eyes start to roll. "We've spent $85 billion already," they say, "and asked for $19 billion more. Even if the feds are at fault, the taxpayers have more than done their duty."

Not exactly.

"In actuality, just a tiny fraction of the money has been spent," said Eric Stewart of the Commerce Department, who runs the Hurricane Contracting Information Center, in a February meeting at the Mobile Register. A few days later, the Picayune confirmed that report: Some of the money was for loans that must be repaid. About $17 billion was paid for flood insurance claims financed less by taxpayers than from pre-paid premiums from homeowners. About $900 million was wasted by FEMA on manufactured homes that are unusable because they don't meet FEMA's own guidelines for use in flood zones. The Government Accountability Office determined that FEMA paid out millions and millions of dollars for some 900,000 questionable, and possibly fraudulent, claims.

Another huge portion of the money was wasted on overpriced debris-removal contracts awarded to companies from out of the region, so the money didn't even benefit the affected states. Other money just replenished FEMA's coffers for the future, and still other funds are stuck, apparently semi-permanently, in some bureaucratic pipeline. FEMA itself admitted that of its first $29.7 billion for 2005 hurricane relief, $7.6 billion -- more than a fourth of it -- was used for "administration."

Finally, of the money that has actually reached victims, most of it supplied short-term needs such as temporary shelter and food. That's not to be sneezed at, but when about three-quarters of one of the world's great cities -- plus many abodes in two neighboring parishes -- have been made unlivable, the need for rebuilding assistance is unprecedented.

It is here that the Bush record, when compared to the opportunities available, is so poor as to go beyond incompetence to sheer negligence. This is where Rep. Baker's bill comes in, and where conservatives more than anybody have reason to be furious with this bullheaded administration.

First, a word about Richard Baker: He's a conservative stalwart and a long-standing supporter of all things Bush. The National Journal recently ranked him as the 17th most conservative member in the House, and he served as the Louisiana campaign chairman way back when for Bush pere. That's why it has been so baffling to see the current Bush White House treat him, with attacking press conferences and op-ed pieces, as if he were a hated member of the Schumer-Pelosi brigades.

Baker was a self-made success in real estate at an early age before entering politics, and he long has been valued by conservatives for his expertise on banking and investment issues. What he alone recognized, and what he developed a solution for, was that devastated south Louisiana faces obstacles to rebuilding that are uniquely extreme in both kind and scope. State officials say that Hurricanes Katrina and Rita destroyed at least 128,000 homes in Louisiana, while at least 75,000 other homes sustained severe damage. Five months after Katrina, nearly two-thirds of New Orleans residences still lacked power.

Enter Baker with a very Jack Kemp-like idea: Help New Orleans and its surroundings by promoting home ownership and private development, specifically in areas deemed safe and sustainable, while "re-creating the market" with a short-term infusion of government cash that itself is reimbursable to the taxpayers.

"The market cannot work," Baker told me, "without some entity to aggregate titles to properties and clean them up." Toward that end, the Baker bill would set up a Louisiana Recovery Corporation (LRC) as a "revolving fund" that effectively would use most of the same money over and over again. The semi-private LRC, overseen by a board appointed by President Bush, would borrow money from the U.S. Treasury, buy Louisiana properties, bring them up to new environmental and zoning requirements, and resell them to private interests. The money earned from those sales would return to the Treasury, to be borrowed again for the next round of properties. It's akin to the lines of credit many businesses use routinely. The taxpayers would get the bulk of their investment back -- rather than just making direct grants never to be repaid -- while the property owners and the financial institutions that hold their mortgages avoid foreclosures and crushing debts.

The Baker bill acknowledges that much of the property in southern Louisiana isn't now worth nearly what it was eight months ago, so it provides for the LRC to buy the properties at a discount. Homeowners would get at least 60 percent of whatever pre-Katrina equity they had in their properties, while the banks would receive up to 60 percent of the outstanding mortgages. In short, nobody would be "made whole," but at least most people and banks would avoid bankruptcies and collapse. Meanwhile, by buying up whole swaths of property at once rather than waiting on individual property owners to scrape up their own resources, the LRC would jump-start the housing market while bringing back whole neighborhoods at a time.

That's an essential concept, because right now even the most active of redeveloping neighborhoods are subject to what locals are calling the "jack-o'-lantern effect," meaning the properties are being refurbished in an almost scary, zig-zag, gap-toothed fashion: one property here, another across the street, a third one catty-corner, and maybe another a block away, while the owners in-between are too broke or otherwise ill-equipped to rebuild. Many owners still are waiting for insurance settlements, while others want to rebuild but can't because the Department of Housing and Urban Development (HUD) hasn't yet promulgated the required new regulations. Some owners might be able to rebuild, but can't risk putting more money into property that will hold its value only if the rest of the neighborhood comes back.

As Baker told me, "Even if you are a homeowner who has money in your pocket and you could elect to rebuild, why would you do it unless you know your neighborhood will be rebuilt: If no one else comes back, you have not restored value because of the desolation of the remainder of the area." Otherwise, as described in The Times-Picayune, the nearby "idle, blighted and unoccupied buildings will pose a fire hazard or become breeding grounds for mosquitoes and rodents."

And those are the good portions of the flooded sections of New Orleans. Worse neighborhoods resemble not a jack-o'-lantern but a ghost town -- which of course is even more frightening. Property owners can't move forward until banks help them out; banks can't move until their cash flows are restored and government regulations say more loans are safe; cash flows and government backing won't come until the economy starts moving at a sustained pace; the economy won't start humming until large numbers of people are back at work; there are plenty of jobs, but no workers to fill them -- because the vast majority of working people have no place to live, particularly renters. It's a vicious cycle.

Under Baker's plan, homeowners would not wonder whether they would be the only ones to rebuild in their neighborhoods, because the LRC would make refurbished properties available in big chunks. To protect taxpayers, the Baker bill would impose a $30 billion limit for the LRC's borrowing. And, as noted earlier, the vast bulk of that would be eventually repaid to the Treasury. Unlike direct, one-time grants for home repairs, the LRC money would, by "revolving" so many times, achieve four or five times the bang for the same bucks. Furthermore, taxpayers would know that the LRC would avoid the problem of funneling money through the supposedly corrupt and incompetent Louisiana state government. The quasi-independent corporation would be free of most governmental bureaucracy, but it would answer to federal standards. To keep the LRC from being a permanent bureaucracy, its mandate would expire in 10 years (or less). But its positive impact would be immediate, as banks probably would stop foreclosures as soon as the Baker bill passed, in anticipation of the coming aid.

Just before Christmas, a key House committee passed the Baker bill by a bipartisan, 50-9 vote, and the bill enjoyed universal support from Louisiana's otherwise fractious elected officials. But the Bush Administration, inexplicably, opposed the plan, and vociferously so. The administration's explanations have been shifting, misleading, and confused. Worse, as late as the end of January, the Bush proposals would have helped repair only 20,000 of the 200,000 damaged or ruined properties. But when in mid-February the Baker plan again seemed to be gaining some legislative momentum, the President hustled to stick taxpayers instead with yet another $4.2 billion in Community Development Block Grants (CDBG) for Louisiana, as part of a "supplemental Appropriations" request for Congress to pass in the spring. He loudly trumpeted the idea that these grants were to help property owners rebuild neighborhoods.

The problems with this approach are manifold. First, the block grants can't be doled out until HUD finishes its regulations. Second, the grants would be funneled through the same Louisiana government that taxpayers in the rest of the country distrust (whereas the Baker plan would set up a quasi-independent, public-private corporation far less hamstrung by the inertia of government bureaucracies). Third, the money won't be recycled: Not a penny would return to the Treasury upon resale. Fourth and most importantly (not to mention most idiotically), the legislative language requested by the Bush Administration would actually preclude the money's use for rebuilding and repairs -- and "in perpetuity" to boot.

It was Baker, again, who found the joker in the deck. The Bush language provided that the funds "be subject to the requirements of section 404" of the Stafford Act -- which is a FEMA-related section that forbids commercial or residential uses of the land forever. Instead, the properties "will be dedicated and maintained in perpetuity for a use that is compatible with open space, recreational, or wetlands management practices."

There can be no doubt that part of New Orleans, maybe 10 or 15 percent of it, should revert to wetlands or other green space. But the President specifically said this new $4.2 billion was for rebuilding, not for eco-management. For his legislation to actually forbid the use that he advertised is a mark either of dishonesty or extreme incompetence.

When the discrepancy was pointed out, administration officials rushed to say that it would be OK in the end because state agencies could just request a waiver from HUD from the normal Stafford Act requirements. Two problems: First, the waiver process is slow, unpredictable, and full of red tape. (Not very conservative, that.) Second, and most amazingly, while CDBG grants are a HUD program, the Stafford Act involves FEMA. How, pray tell, can HUD bureaucrats issue a waiver from requirements under the jurisdiction of a totally different department?

Then there's this: Community Development Block Grants have sometimes been notoriously abused. Indeed, at the very same time that the Bush Administration is touting CDBG as the solution for New Orleans, its own budget request for 2007 proposes ending CDBG altogether by folding it into another program. In short, the program that's supposedly good for New Orleans is otherwise too problematic for the rest of America. Go figure.

All of which is why the whole, bungled Bush response to Katrina has amounted to throwing good money after bad. Way too much money has been appropriated overall, but far too little has been put to good use. And the one creative free-market approach to rebuilding a storied city and region is the one that the Bush administration -- for reasons murky and perhaps uncharitable or even Machiavellian -- has opposed with all its might.

Memo to Bushie: You're doing a heckuva job.

TO BE CLEAR, CONSERVATIVES EVERYWHERE should want to rebuild New Orleans, or at least the 85-90 percent of it that modern engineering makes feasible and safe. For if conservatives are not for preserving what is best of our culture, what are we for? The Crescent City's historic architecture, its status as the birthplace of jazz, its historic importance as the means of opening the West and as the site of the greatest victory of the War of 1812, all argue that this world-renowned metropolis should rise again, better than before but with the best of its character intact, as a monument to the efficacy of conservative solutions applied to special and important circumstances.

Finally, if conservatives value commerce and agriculture, New Orleans must continue to thrive. Its port is the nation's largest by tonnage, the fifth largest in the world, and its health is vital for the health of the farmers throughout America's heartland. Cement, steel, and rubber, meanwhile, all flow upriver to the industrial Midwest. And much of the nation's seafood is spawned in Louisiana's marshes and harvested from its waters.

In sum, the President was correct when he said in Jackson Square on Sept. 15 that "There is no way to imagine America without New Orleans." But his own administration's lack of imagination is condemning New Orleans to ruin.

Quin Hillyer, a New Orleans native, is executive editor of The American Spectator and a former associate editor of Gambit Weekly. Copyright April 2006, The American Spectator (www.spectator.org). Reprinted with permission.

click to enlarge All the President's promises for a creative new approach to - major-disaster relief have gone for naught. - DAVID LEE SIMMONS
  • David Lee Simmons
  • All the President's promises for a creative new approach to major-disaster relief have gone for naught.
click to enlarge The large majority of Louisianans with destroyed property - were victims as much of the federal government as of - Mother Nature. - CLANCY DUBOS
  • Clancy DuBos
  • The large majority of Louisianans with destroyed property were victims as much of the federal government as of Mother Nature.
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