A month after Hurricane Katrina destroyed much of the Gulf Coast, Louisiana’s congressional delegation has presented Washington with a request for $250 billion in federal reconstruction funds for Louisiana alone. That’s more than $50,000 per person in the state. And since the entire country will foot the bill, it will cost $1,900 per American household. This money would come on top of the $62 billion that Congress has already appropriated for emergency relief and in addition to payouts from businesses, national charities and insurers. The long-term cost will be even greater because this is adding to the deficit, and our children and grandchildren will pay interest on the debt for years.
While we all feel for Louisiana’s residents, there are limits to what American taxpayers can — and should — be asked to contribute on top of their already large tax bill. More worrisome, too much federal largesse can have negative consequences on behavior. What are the odds, for instance, of more responsible behavior by state and local officials when the federal government picks up all costs? And will private individuals and businesses make sound decisions — purchasing insurance to cover risks, for example — when Uncle Sam bails out poor choices?
Moreover, there are macroeconomic issues. A $250 billion spending package necessarily means $250 billion of money no longer available for private-sector activity. Research from the academic community has confirmed the adverse impact of government spending on economic performance. Even traditionally left-wing international bureaucracies, such as the European Commission, have published research confirming that larger levels of government are associated with weaker economic growth.
In addition, one’s compassion and generosity is tested when one realizes that the Louisiana lawmakers have stuffed the 440-page bill with numerous items that have nothing to do with hurricane relief. This pork barrel spending includes: $120 million for a laboratory facilities and equipment at the Southern Regional Research Center, $35 million for the Louisiana Seafood Promotion and Marketing Board, $8 million for direct financial assistance to alligator farmers, $25.5 million to complete the Sugarcane Research Laboratory, $12 million for the restoration of wildlife management areas and $28 million for the restoration and rehabilitation of forestlands. The Louisiana legislators appear committed to grabbing as much as they can even if they cannot spend it effectively. For instance, they request $7 billion for rebuilding evacuation and energy supply routes on top of $5 billion for expansion of road and transit capacity. They also demand $20 million for the establishment of development plans for development districts in the State of Louisiana.
They ask for $150 million for small business loans fund and tax breaks on top of $50 billion in block grants. But they also ask for lost sales revenues for many commercial entities. For instance, they request $27 million for lost timber-sales revenues from the Pearl River Wildlife Management Area and $250,000 for dairy-cattle losses of dairy producers along with $11 million for livestock losses.
The Louisianans also request $715 million for diverse military construction projects, including $160 million to implement the 2005 recommendations of the Defense Base Closure and Realignment Commission related to the Federal city development in Algiers, La. Even with imagination it is hard to see what this has to do with Hurricane Katrina.
The delegation requests a gigantic budget for the Army Corps of Engineers. The request for $40 billion is 10 times the Army Corps’ annual budget for the entire nation. It is also 16 times the amount necessary to protect New Orleans from a category five hurricane.
The Corps section of the bill was based on recommendations by a “working group” dominated by lobbyists for ports, shipping firms, energy companies and other corporate interests. Hence, the bill asks for hundreds of millions of dollars for water projects unrelated to Hurricane Katrina. Worse the request features projects that have flunked the Corps’ cost-benefit analysis.
The bill would create a “Pelican Commission” to oversee the Army Corps’s work. But if history is our guide, we know that the opportunity for fraud and waste will be unprecedented. New Orleans is currently the third most-indicted city government in the entire country. (And even before Hurricane Katrina, FEMA was trying to track as much as $60 million in unaccounted funds that it distributed to the emergency office of Louisiana state government dating back to 1998.)
Finally, the bill’s author, Sen. Mary Landrieu, Louisiana Democrat, said, “Louisiana will be rebuilt by Louisianans. New Orleans will be rebuilt by New Orleans.” However Mrs. Landrieu certainly does not expect Louisiana to pay the bulk of the cost. She wants all the power and none of the burden. The bill waves the normal cost-sharing requirements and shift the entire cost to the federal government. In other words, Mrs. Landrieu is expecting federal taxpayers to foot 100 percent of the bill.
For the sake of those harmed by the tragedy and the taxpayers who share the financial burden, rebuilding New Orleans should be done in an efficient manner, free of politics and pork-barrel spending. This proposal does not represent that kind of solution.
Former House Speaker Newt Gingrich is a senior fellow at the American Enterprise Institute and author of “Winning the Future: A 21st Century Contract with America.” Veronique de Rugy is a research scholar at the institute.