Friday, September 16, 2005

The Biggest Government Program Ever

$200 Billion to Rebuild New Orleans

See the prvious blog here: Katrina was a disaster to my home of almost five years, New Orleans. The human toll, the devastation, we all have sympathy and understanding.

Is the best way to recover from this to have the US Government create the single biggest descretionary program in its history (and therefore by extension, the single biggest government program in the history of mankind)? I would say, no. The distortions and precedences set by this would be terrible.

How can one source of funds spend $200 Billion in an efficient manner. It cannot. It will be like Japan whose large public works programs in the 1990s kept the country in recession for a decade. Government-directed spending is top-down, not demand-driven and therefore an inefficient waste. It's like a giant Soviet socialist experiment where once a town reached 1,000,000 people the government started building a subway whether it needed it or not. Then once the population slipped below 1m the building stopped halfway through! Or like Stalin's electrifikatzia, where every inch of the USSR was to get electricity to show progress, whether it was needed or not. Things too big are bound to fail.

Expansionary fiscal policy (eg deficit government spending) only works when the economy is slack (when there is above-average unemployment) without creating inflation. The US now has low unemployment so this is additionally a bad idea. Expansionary fiscal policy is also a bad idea in ever increasing budget deficits, which we also have now. In a single party government (with Republicans controlling both Congress and the Administration) there simply is not political will to decrease spending either to fund the New Orleans rebuild or decrease deficits once the fiscal injection, in this case the New Orleans spending, is over.

Some say that New Orleans shouldnt exist because it is below sea-level and only public-supported public works projects (levees, seawalls, dredging) kept the city whole for this long.

Yes the city should be rebuilt. By people that want to do it, with their own money and risks and time and effort. Let private funds build the infrastructure to protect the city from natural disasters and an overflowing Mississippi River. Let developers and home-owners, and private insurance, bear these costs. Then when disaster strikes there are no scapegoats and people are ready.

Rebuilding this city of less than 600,000 people is not a 'federal issue', lets not make it one. Just because our federal government might feel it needs to appear sympathetic, lets hope that clearer heads will prevail. This much demand will distort the building industry nation-wide as the industry seeks government largess and as this inefficient spending drives up prices, and crowds-out service-providers in the industry for private citizens with their own money at stake.

The poor who were not able to help themselves were not able to do so BECAUSE of the government. Government welfare over generations took away their sense of initiative and self-reliance. Yes this is shameful, for ourselves and how we are now viewed by the rest of the world. Lets not continue, nor extend, this shameful pattern. No more federal funds for New Orleans. Thank you.