"September 18, 2005 Still Getting It Wrong on Post-Katrina Aid
[Cross-posted on Agoraphilia, where comments are enabled.]
I know almost nothing about Bush's proposed "Gulf Opportunity Zone" except what's in this short MSN article (reporting on his speech Thursday). But from what I can tell, the plan gets almost everything important wrong.
Post-Katrina recovery funds should attempt to do two things: (1) help the people whose lives were disrupted by the storm and its aftermath; and (2) avoid creating incentives for more people to place themselves in the path of future disasters. As I've said before, this is a difficult needle to thread, because any aid sets a precedent for future aid. The Bush plan, however, doesn't serve either goal very well. Several aspects of the plan -- incentives for job creation, tax relief for individuals and businesses, loans and loan guarantees for projects, and homesteading of federal land -- are specifically designed to encourage economic growth in the Gulf region. This approach fails on goal (1) because the incentives are aimed at anyone who might want to settle in the region, whether they lived there before or not. And it fails on goal (2) because it encourages development of the Gulf region in preference to other areas of the country.
A sensible version of the plan would target the tax relief, loan guarantees, homesteads, etc., at displaced persons, but it would allow them to be exercised anywhere in the country. That way we would help the victims without subsidizing excessive risk-taking.
Just to be clear (because I've found that my position on this matter is frequently misinterpreted), I am not saying the Gulf region is economically undesirable and should be abandoned. It should and will be rebuilt. The question is what extent of economic activity should take place there, and how many people should live there. Subsidizing economic development in that region relative to other parts of the country causes more people and businesses reason to settle there than makes economic sense, because they are not exposed to the true cost (including risk-related costs) of their choices.
Posted by Glen Whitman on September 18, 2005"
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