President Bush’s September 15th speech from New Orleans contained two very different visions of the role of government in the Hurricane Katrina crisis and aftermath. One vision reflected the core belief of limited-government conservatism, that individual initiative, local control, and free markets are the indispensable tools of freedom and prosperity. The other, contradictory, vision was one of greater federal control, more central planning, and more bureaucracy. These alternative pictures of reconstruction reflect deep ideological tensions within the Republican party that are likely to determine both the success of the reconstruction effort and the larger progress of the free-market agenda.
The good ideas proposed by President Bush are very good. The creation of an opportunity zone, where tax reductions and regulatory relief encourage entrepreneurship, is critical to the rebuilding effort and will go a long way toward attracting capital investment in the region. Bush was short on specifics, but at a minimum, the capital-gains tax should be suspended in the stricken area and businesses should be able to immediately expense all capital expenditures. The most important principle of the opportunity-zone provisions should be that they don’t pick winners and losers; tax-rate reductions and suspensions should be favored over tax credits and preferences.
The Urban Homesteading Act is a brilliant, innovative concept that will, if implemented effectively, become the most successful low-income housing program in the country. Bush’s plan will allow low-income victims of Katrina to gain title to federal land. The key insight here is that private homeownership is a civic good that is critical not only to rebuilding communities, but to giving individuals a sense of dignity and pride in their homes. This program can achieve the admirable objective of privatizing federal lands, while empowering the neediest among us to begin to build real wealth and enjoy the benefits of homeownership.
Bush’s Worker Recovery Accounts will give each worker in the region control of $5,000 to be used for job training and education. Giving reconstruction funds directly to individuals is a great concept, but its limitations blend into the second, more ominous Bush vision for reconstruction. The choices given to individuals are strictly limited and the amount of money is a fraction of reconstruction spending that already tops $40,000 per person and will likely approach as much as $150,000 per person.
With so little of the reconstruction spending being placed directly under the control of individuals, Bush’s second vision takes shape. The president’s second vision can be interpreted as a call for central planning and increased federal control. Ironically, it was bureaucratic, federal control that left the levees vulnerable to the hurricane. The lesson should be that local communities and individuals need to be empowered, not subject to additional federal control.
This second vision for reconstruction sees armies of federal workers and contractors rebuilding the region according to a Soviet-style central plan. The president is, for instance, proposing the installation of 300,000 mobile homes throughout the region, in effect the largest public housing project ever. These mobile-home parks will be owned and maintained by unaccountable federal bureaucrats. As a result, they are likely to become as squalid and crime-ridden as any public housing project.
The success of the reconstruction effort will turn on which of the two visions predominates. Congressional Republicans must put principle ahead of politics and separate the good from the bad. If the first vision succeeds, individuals and communities will be freed of onerous federal taxes and regulations, empowered with direct aid, and allowed to rebuild their own lives. We will see an unprecedented revitalization of the region and it will become the engine driving our national economy. If, on the other hand, the second vision of federal control, central planning, and paternalism is allowed to cripple the effectiveness of these initiatives, the long-term costs of the relief effort will be much greater than the money that will have been wasted.
– Phil Kerpen is policy director of the Free Enterprise Fund.