Lose the rules


Lose the rules

Sep 14th, 2005 3 min read


Hurricane Katrina has left the congressional agenda in shambles. The sole priority during the legislators' first week back from recess was passing a $51.8-billion relief package for the Gulf Coast.

But hurricane victims as well as general taxpayers need Congress to reorder priorities and spark creative approaches to rebuild. The last thing anyone needs is politicians bidding to outdo each other with displays of "checkbook compassion." What we especially need is the political will to reorder federal priorities and unlock private funds.

Damage to New Orleans alone is estimated by some to exceed $100 billion. Just a few weeks ago, Washington was worrying about federal deficits of more than $300 billion, so blithely writing more checks on the federal purse is irresponsible. Instead, emergency expenditures should be offset with spending cuts elsewhere - just as Congress did for the 1994 Northridge earthquake and the 1995 Oklahoma City bombing. For every dime of emergency spending, cuts were made elsewhere, according to Congressional Quarterly.

Specifically, discretionary federal spending should be frozen until the end of the upcoming fiscal year. This will force Congress to revisit much of its already passed legislation with an eye toward rescinding unnecessary appropriations and redirecting that money to truly critical rebuilding projects.

Congress could free upward of $25 billion just by rescinding the nearly 6,000 earmarked projects in the recently passed highway bill, a breathtaking example of pork that showered federal funds on dubious projects ranging from bus museums to multimillion-dollar bridges for towns with populations that are a tiny fraction of the recent population of the New Orleans Superdome.

After 9/11, many American towns donated police cars and fire trucks to New York City. Imagine new bridges and roads in a rebuilt Big Easy with such plaques as "Funds donated by Rep. Don Young and the people of Alaska."

In addition, Congress should remove tax and regulatory roadblocks to private redevelopment by declaring devastated areas to be "opportunity zones." President Bush has already taken an important step in this direction by suspending federal Davis-Bacon requirements, just as his father and as President Nixon did in response to earlier disasters. That law requires contractors to pay "prevailing wage" on federally funded projects, which inflates costs and could prevent many local workers from getting jobs in the rebuilding of their own cities. Congress can speed reconstruction and redevelopment by eliminating capital gains taxes on all new investment in the zones for the next five years. That could lead to a dramatic infusion of outside investment. Businesses located there should be allowed to fully write off their investments during that period as well.

It's time to modify other regulations that were designed for normal times, not periods of disaster. Already the feds have suspended EPA regulations so that New Orleans could legally pump water out of its streets. But many other federal regulations stand as obstacles to timely, cost-effective reconstruction. The president should convene an emergency board of federal, state and local officials to identify regulations at all levels that should be temporarily modified or waived. Congress also should agree to legislative waivers recommended by the board. When California's governor used the emergency powers given him to suspend regulations - and even statutes - after the Northridge earthquake, highway reconstruction estimated to take two years was completed in about two months.

The IRS can cut some slack for Americans who have lost everything. And just as it did for the victims of 9/11, Congress should let Katrina's victims postpone payment of income taxes, waive penalties for early withdrawals from IRAs and 401(k) accounts and grant relief from death taxes.

Direct, personal assistance to pay for education and other services also is a critical step to recovery. Federal K-12 education funds should be made "portable" so that students may be able to attend public or private schools in areas where they are forced to relocate. The same is true for health insurance or paying rent. Employment-based health insurance can no longer serve the displaced workers whose jobs were washed away. Give these people vouchers to purchase health insurance and housing.

There is much Congress can do in response to Hurricane Katrina. But reflexively pouring money into the Gulf - while continuing other business-as-usual approaches that waste money - simply won't cut it.

Stuart M. Butler, Ph.D., is Vice President for Domestic and Economic Policy Studies at The Heritage Foundation.

First appeared in The Los Angeles Times