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Give relief money to the people

Marketplace Staff Aug 29, 2006

SCOTT JAGOW: President Bush prayed with the people of New Orleans today. He called on others to return to the city that was nearly wiped out by Hurricane Katrina one year ago today. He admitted the government’s mistakes in responding to the storm. And promised that federal money is coming as quickly as possible. The government has allocated billions of dollars to rebuild the Gulf Coast. But there are plenty of examples of mismanagement. Economist and commentator Ed Glaeser says there’s another way to go about this.

ED GLAESER: It’s easy to get angry about the response to Katrina. It’s easy to get angry about Louisiana officials whose families got federal rebuilding contracts. It’s easy to fume about Mayor Ray Nagin’s absurd proposal for a $5 billion light-rail project.

But that anger is naive. This isn’t the first time that government has been inefficient, except in its response to interest groups. And private firms aren’t societies of saints either. Their fiduciary duty is to their owners’ pocketbooks. The cooperation of business and government is a particular cause for alarm. Any time the federal government pays billions of dollars to private contractors for a public project with amorphous aims, bells should go off.

But in New Orleans they didn’t. Instead rhetoric about how New Orleans is a national treasure that must be rebuilt at any cost dominated the discussion. The myth that every spot of ground was sacred elevated the place over the people who lived there. And that justified enormous spending that benefits well-connected contractors more than Katrina’s victims.

We have an obligation to people, not to places. If the nation really wants to help Katrina’s victims, we should give our federal tax dollars directly to them. We’ve budgeted $100 billion for rebuilding. That would work out to more than $200,000 for every man, woman and child who used to live in New Orleans.

Whatever the amount, most of the money should be given directly to the flood victims in checks or housing vouchers. Some of it immediately and some over time. And a little bit of the money should be given to the states and towns where Katrina’s victims have decided to live — including New Orleans. That helps compensate for the cost of public services, and provides incentives for localities to compete in caring for the displaced.

We shouldn’t turn our backs on Katrina’s victims. And we should never let the myths of place replace the needs of people.

JAGOW: Ed Glaeser teaches economics at Harvard University.

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