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Real Support for a Free Market

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Notwithstanding all the promises of government aid, President Bush is leaving the reconstruction of New Orleans largely to the private sector.  I love markets, but the problem is that while free markets can create great wealth, those markets cannot work without some strong, credible collective action underpinning them.  


Nobel Prize winning economist Thomas Schelling summed it up the problem in New Orleans:  "It is essentially a problem of coordinating expectations.  If we all expect each other to come back, then we will.  If we don't, we won't."  That's where the government comes in--setting the safety standards, building the infrastructure, making the collective commitments--in short, helping parties achieve coordination that they cannot create on their own.  


This morning Peter Gosslin follows families making decisions about whether to rebuild in New Orleans.  His story is a textbook version when collective action is needed--and what happens when it is missing.  Without collective assurances--strong levies and road repairs, for example--individuals don't believe their neighbors will invest and rebuild.  And if they don't know their neighbors are likely to invest, then they can't run the risk of rebuilding either.

New Orleans seems to present the worst of all possible rebuilding options.  Billions of dollars are pumped into disparate projects with no assurance that the basics will be in place for a revitalized city.  There is no national commitment either to do what it takes to build the needed infrastructure or to declare that the old New Orleans is gone and it won't be rebuilt.  The so-called recovery plan in New Orleans seems tailor-made to let private contractors get rich while proving that government can't work.  


The great question facing America is what we can do individually and what we need to do collectively.  Government policies that lean too heavily in one direction or the other will cripple our country.  New Orleans can't jumpstart its free market without some strong collective action.    


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Well, since the part of NO we are talking about lies below sea level, no rebuilding is possible until we know exactly what is to be done about rebuilding the levee system.

And since the recent NYT article shows that the Army Corps of Engineers failed to properly design or construct the 17th street levee that failed, how will anybody know when it is safe?

I know.

Let's use Halliburton. 

Would someone remind me where the Democrat Party went?  The pundit shows are all full of rebuilding Iraq.  Has the Congress become so decadently cynical that it deliberately refuses to rebuild New Orleans while it continues to con us into believing what it won't do In New Orleans in can do in Fallujah?

Would someone remind me where the Democrat Party went?


bluebell, that's what I want to know too.


Certain Republicans are reluctant to give money to New Orleans because Louisiana politics are known to be corrupt.  Can you believe that?  They fear the money will be wasted.  Imagine a government entity wasting money!  Whoever heard of such a thing?  Seems that this would give the Dems a talking point, no?  Something they could take advantage of, right?  Do we have to tell the Dem politicians what to do every step of the way?

There is no national commitment either to do what it takes to build the needed infrastructure or to declare that the old New Orleans is gone and it won't be rebuilt.  Elizabeth Warren

I suggest that before commenters exercize their chops, they state which choice they're opting for and more importantly, why and then, what particular infrastructure the commenter would argue the federal government should be paying for. 

Let me first say I agree very much with Ms. Warren's main point, that we should not let either a rigid ideological approach or politics as usual cause us to miss what may be a never to be repeated opportunity to achieve various kinds of good for New Orleans.

For example, while the need to restore some power right away is certainly understandable, just becasue some interested party (a company such as Entergy perhaps)might profit handsomely from a contract to restore powerlines to all of New Orleans pretty much along the same lines as existed pre-Katrina, does that mean that is the right way to go?

I would like to at least hear some discussion of the possiblity of taking advantage of this unusual opportunity to maybe bury power lines so they would not be vulnerable to any future mega- windstorm (assuming the levees are fixed of course), with the idea of saving on future costs and preventing future losses. And what about the possibility of laying broadband cables at the same time to give much of New Orleans unprecedented high speed Internet access, thus very likely promoting exponential social, educational, cultural and economic growth?

Ellen, the New Orleans flood was a man-made disaster caused by faulty levees built by the U. S. Corps of Engineers.  No. 1 on the list should be for the feds to make a committment to build adequate levees to protect NO.  This is a federal responsibility; no question about it.  Without a commitment over the long term, some folks will be afraid to rebuild.


Again, since this was a man-made disaster caused by a federal agency, the citizens and businesses of NO are owed some form of reparations for what they they lost due to the Corps' incompetence.  What form these reparations should take could be worked out, but IMO these are the basics.  What do you say?

The other commenters, who are probably, like me, political news junkies, are apparently unaware that Congress has appropriated tens of billions for post Katrina reconstruction.  And, Halliburton is getting a big slice.

There's a scandal brewing here, which is unimaginably huge -- the Republican scandal to end all scandals -- corruption and incompetence on a scale not previously imagined.  Billions upon billions are being spent, and the people of New Orleans are not being helped. 

=== Would someone remind me where the Democrat Party went? ===

 Do you mean the Democratic Party?  I am not aware of any Democrat Party on the national scene at this time.

sPh 

The most relevant statement made so far is that the Katrina flood in NO was man made - made by the inept design and building of levees in NO. That is and should be a federal responsibility, for which plenty of money is available. (You doubt this? If it isn't true, how are we paying for the fiasco in Iraq?) So, the first step has to be a federal commitment to rebuild the levees and pumping systems and do it right this time. Until we commit to doing that no one in their right mind is going to put much money into private rebuilding in NO. If we had an opposition party in this country, that party would jump at this chance. They would be talking up the rebuilding at every chance, forcing Congress to take up that bill and pass it. They would be raising the embarrassment quotient for Bush so high he could never veto the bill. But, to my sorrow, we seem not to have an opposition party.

Let me begin by agreeing that the flooding in New Orleans was a man-made disaster in the sense that better engineering, better wetlands planning, better exercise of federal, state, and municipal regulation and oversight responsibilities, and less New Orleanian and Louisianan log-rolling and pork-barreling might likely have averted the disaster.

The faulty levees -- actually faulty canal walls -- seem, in some cases, to have been known to the various city boards and agencies responsible for reporting on them, but no report was made to the Corps of Engineers.  "Levee leaks reported to S&WB a year ago"  Times-Picayune 11/18/05

In another case -- no link; the Times-Picayune seems to have put its post-Katrina reporting behind a subscription wall -- the Corps recommended, years ago, that gates be installed at the heads of canals where they enter Lake Pontchartrain to prevent storm surges from the lake entering the canals.  By law New Orleans would have had to pay a portion of this cost and New Orleans rejected the solution.

Another of the Corps' recommendations was to close the canals and pump street rain water directly into Lake Pontchartrain.  The city rejected this proposal as too expensive.

I mention these facts, because I don't think an argument over liablity for the disaster and restitutionary theory gets us anywhere.

What the Congress should be doing -- and what we should be doing, here -- is debating what a reconstructed New Orleans should look like, what its demography should be, and what infrastructure necessary to that reconstruction should be paid for by those who will benefit only tenuously -- i.e., federal taxpayers.

 

The Corps of Engineers has a long history of incompetence in New Orleans and south Louisiana, going back at least to the flood of 1927.  Why should we think that their recommendations would have served NO better?


I am not saying that local agencies were without fault, but the major fault is with the Corps, because of the faulty construction which the Corps had to sign off on.


In this debate about what NO should look like, would you permit the local people to have a say?  Has it really come down to the costs of letting a great city die because taxpayers from other parts of the country would have to help pay?  Is this how callous we have become?


My taxes are going for a deadly and misbegotten war in the Middle East and so-called reconstruction in Iraq at a cost of 5 billion per month.  Tell me how I benefit from that.  What's in the Iraq War for me?  I don't have a say in that, yet my taxes help pay for that debacle.


It would seem to me that rebuilding a city in the US which has contributed so much to the country would be a greater priority.  


Here's a link to the Times-Picayune front page for today:


http://www.nola.com/news/ataglance/t-p/


You should be able to click on the stories you want to read.

RE: Times-Picayune; until a few days ago -- and it may be my fault I can't seem to find it -- the paper maintained a "post-Katrina news stories" archive.  Now, it's gone and a regular story search seems to go back 14 days, only.

I take a backseat to no one in voicing my dislike for the Corps; it's an old boy nepotistic network worse than the International Olympic Committee.

That said, it's too early in the investigatory process to lay the blame at the feet of the Corps.  In this area of the country the Corps works for the Louisiana delegation.  In the end I think we'll locate the responsibility by following the money trail.  Again though, arguments from equity will stand on shifting ground.

What should NOLA look like?  How much should folks in North Dakota pay as opposed to those people -- principally, a bunch of fat cats -- who will benefit, directly.  Those are the questions I think we should be debating.  

From the Nov. 22, 2005, edition of "Frontline" (PBS), on the political storm created in the aftermath of Hurricane Katrina's devastation of New Orleans:

1) In May of 2001, then-FEMA director (and former Bush campaign director) Joe Albaugh called FEMA "an oversized entitlement program."

2) In 2004, after 20 days and $850,000 spent, the Bush II administration cut the funding for FEMA's New Orleans preparation exercise "Hurricane Pam" (which anticipated a Category Four storm, I believe), ending the program even though a) plans for emergency medical care were "not yet finalized," b) communications problems were "not addresed," and c) transportation decisions were left "to be determined."

3) On the very day FEMA's "Project Impact" was credited with greatly minimizing the damage done to Seattle by an earthquake, the Bush administration cut the entire program from its budget.

4) Contrary to the recommendations of Congress and the US Commission on National Security, the Bush II administration decided to make the new Homeland Security Department the third largest agency in the federal government.

5) $80 million was taken out of the FEMA budget.

Are you referring to Halliburton's CONCAP contracts with the Navy and its FEMA contracts -- $124.9 million for Katrina and $19.5 million for Wilma spent as of early November?  Or something else?

We are all Americans, whether we live in North Dakota, California, or New Orleans. The destruction of NO by Katrina was an American disaster, and all Americans should share the cost of rebuilding it. I find it strange that we even have to debate that idea. Our government has been able to find close to $300 billion to wage a useless war in Iraq, so money is not an issue here. As far as the form or shape or demographics of the new New Orleans is concerned, that is a decision that the citizens of NO should make, by voting. The rest of us should be content to be able to express our desires for what architecture to use, what landmarks to keep or restore, and other esthetic considerations. But, cities need to follow the dictates of their citizens as far as is possible.

As far as the form or shape or demographics of the new New Orleans is concerned, that is a decision that the citizens of NO should make, by voting.  HoppyCalif

I guess Warren's concerns about Congress' lack of action are premature, then.  Afterall, infrastructure can't be funded until what's needed has been determined, and what's needed can't be decided upon until the vote's been had.

Any idea when New Orleanians, who are presently scattered to the four winds, are going to be voting? 

The heartbreaking reality of the report concerning the Army Corps of Engineers was that known engineering principles of construction were violated. The Corps of Engineers figures prominently in Louisiana, not only in the New Orleans levee system, but the upstate Mississippi divergence as well. Up there, the levees are simply enormous. The New Orleans levee system is a mix of old levees and sea walls. In some areas, what can be defined as a sea wall actually sits upon an older levee. New Orleans is not the only area in Louisiana where levees and sea walls are utilized. Morgan City, a port of importance for the oil and gas industry, is virtually surrounded by a sea wall.
The paramount concern of this revelation is that an institution of trust was found wanting. There is no natural law in Louisiana, the river flow of the mighty Mississippi diverts to the Atchafalaya (a cha fa lie la) basin, so named for the river that eventually rolls aside Morgan City. The central thesis being that when it comes to the major river flows of our State, it is all in the hands of Corps Of Engineers.

I guess Warren's concerns about Congress' lack of action are premature, then.

I strongly favor rebuilding New Orleans, but I am not infovor of doing it without a plan, and without all the stake holders at the table. 

We accomplish nothing by looking for single causes -- such as it is all the fault of the Corps of Engineers.  Yep -- they have responsibility, but in fact they only build what Congress (es) emphasis on the plural, actually fund.  And Congresses fund what the various lobbies, and once in a blue moon, a citizen's action organization requests.  And things get short sheated because contractors who are not regulated and inspected properly do tend to get corrupt, and the corrupt only get outed and prosecuted if there is the will to sponsor that by politicians who are elected (State Attorney Generals) or appointed -- US Attorney who serves at the pleasure of the President. 

That's why -- much earlier in this Cafe Fango Dande, I called for something like TVA regional management to first create, and then execute the plan.  I still do.

As to North Dakota.  Not many people, but you know, by golly they grow a whole lot of wheat there -- and it goes down the Missouri on Barges, and then it gets into bigger barge tows, and it ends up in the Port of New Orleans, where it meets up with bulk carriers of an ocean going sort -- and it is off to China or Egypt or Indonesia with the stuff and millions of hungry folk who pay for it.  North Dakota wheat is a big money maker in terms of our foreign trade.  You can't outsource growing wheat.  So yea, every citizen of North Dakota has an interest in the Port of New Orleans, and has had ever since there has been a North Dakota. So the Farmers and Ag impliment sellers -- the local teachers and police all have an interest in what happens in New Orleans.  Along with others -- they need a seat at the table. 

The Port of New Orleans on the Mississippi watches water pass that began its flow in Western New York State -- and includes much between there and a little west of Yellowstone National Park in Wyoming.  The issue needs to be framed in this context.  If ever anything were "national" the Mississippi Drainage basin is that.

Rebuilding the levee system is part of this -- but by no means all of it.  Something has to be done about the Gulf Shoreline, the fact that it is sinking fast, and disappearing.  Apparently much of this can be mitigated, but it will be expensive.  Apparently part of the reasons it is sinking is the result of extraction of oil and gas.  That needs to be on the table.  How much of the cost of mitigation needs to be these industri's responsibility?  What about the environmental pollution caused by the spread of chemicals and oil by the flood?  Who pays for mitigation? 

What about an oh so clever insurance industry that wrote Hurricane insurance but also insisted that a Hurricane was not Water and Wind?  What Dumb State Politicians let them get away with that construction -- remember Insurance is state regulated?  Was it dumbness or corruption? 

Were are the cultural advocates in all this?  What makes New Orleans culturally distinctive is the melding of working class cultures.  The Cusine that is African-american, French, Spanish, Old Southern, Cajain, and Carrabean was not created by rich folk, it was creative working class fare.  You can sell it to the rich in 5-star restaurants -- but the dynamic is in working class kitchens and mom and pop restaurants.  Where is the cultural advocate from among our blessed American Foodies?

Jazz can be played anywhere -- but the roots are in New Orleans and the surrounding regions, and unlike some other musical forms, it needs to be joined at the hip with culture into which children are born, raised with the music, have opportunity to try to play, and if they are any good -- have teachers and venues for performances.  For every Louis Armstrong who "hit the big time" there are 500 nearly as good trumpet players who never left New Orlaans.  You can't reporduce this at Julliard.  Where is the loud advocate for it all?

I could go on -- this is what needs to be either re-built or re-created in a safe venue.  Lots of folk need to be at the table working on the plans. 

I'd like to see good planning go into the reconstruction of NO too.  The fact of the matter is that if your house is less than 50% damaged, you can rebuild now, and some are doing just that.  They are grandfathered into the old flood insurance program.


Whether they are wise to do this or not, I don't know.  Will their neighbors come back?  Will there be a lot of abandoned property surrounding their rebuilt houses?


The horse is already out of the barn.  The very least the feds can do is rebuild the levees properly this time around and make a long-term committment to increase the level of protection for the city.

I'm not sure how this fits in exactly with Professor Warren's post, but it is related and I wanted to promote it.


David Niewart at Orinicus discusses the racial aspect of the rebuilding of New Orleans.

My proposal:  No mortgages can be foreclosed upon in any area until 6 months after a rebuilding plan for that area has been decided upon.  FEMA must house people from areas affected by the New Oreleans levees until one year after the levee plans are announced and funding committed. 

There have been several recent articles talking about the dangers of people in the region defaulting on their mortgages and developers scooping up the land for cheap.  Is the foot-dragging over creating a plan purposeful? Homeowners need to be protected until they know what is happening with the levees and when infrastructure will be replaced.

 The people making the decisions are not facing the consequences of delay.  Changing that should be a priority.

According to an article I saw online yesterday at usatoday.com, President Bush wants to divert $17 billion already approved for hurricane relief for use elsewhere, including rebuilding highways. Does anyone know if this money was approved for Hurricane Katrina relief? The article did not say.

I hope the possibility of burying power lines will be considered, perhaps along with high-speed cable lines.

I was so happy to read this post by Prof. Warren not only because it is sound advice but also because it should be the kind of advice that Dems push for in many policy areas.  With this example, Prof Warren has highlighted a market failure - a time when the free market doesn’t reach equilibrium on its own - something Dems have failed to do with many issues nationally.  The truth is market failures exist and many times government is the natural market-failure-fixer.  We need to be pointing out that the free-market will not solve all problems.  

Another example of a market failure, if you’re curious, is education.  That’s why government subsidizes the cost of education with grants and loans.

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