Special Report #05
September 12, 2005
As Congress and the nation consider how to rebuild shattered lives and destroyed neighborhoods and businesses after the Katrina disaster, it is important that the need to take action swiftly does not lead to steps that cause dollars to be used inefficiently or to unwise decisions that frustrate rather than achieve long-term success. This makes it imperative that Congress keep the following guidelines firmly in mind.
Recommendations for Rebuilding Lives and Communities
Responding to natural disasters involves two overlapping phases. The first is to get people out of danger and give them the immediate help they need. That requires both public and private organizations to slash red tape that impedes action. It also requires government to change spending priorities, shifting money from low-priority uses to more urgent needs. The second phase is to create the best possible conditions for rebuilding lives and communities, recognizing that many will look very different in the future as people and communities respond and adapt. The key to making this phase successful is to encourage creative and rapid private investment through incentives and reduced regulation, and to channel long-term education, health, and other assistance directly to the people and areas affected so that they can control their future.
Redirecting Federal Spending
Last year, as a precursor to Katrina, several hurricanes in the Southeast, most notably Ivan, damaged communities and vital infrastructure. Though none brought nearly the level of devastation wrought by Katrina, Congress provided emergency relief to the tens of thousands of people seeking to rebuild their lives. But Members of Congress did not stop with true unforeseen emergencies. They also passed funding for a myriad of other projects such as $800 million to NASA for the Hubble Space Telescope and flight program activities, the U.S. contribution to the Global Fund to Fight AIDS, dairy subsidies, and agricultural assistance. Unlike spending for other emergencies such as the Northridge earthquake and Oklahoma City bombing in 1995, however, this spending was not offset by reductions elsewhere, so Congress quickly broke its budget agreement.
This illustrates why federal spending has increased 33 percent since 2001-about $22,000 per household. The real budget problems of Social Security, Medicare, and Medicaid are projected to push that to $36,000 by 2050- an after-inflation increase of 65 percent. While emergency funding is necessary for response and rebuilding after Katrina, Congress should end its habits of funding every conceivable spending initiative, special-interest tax credit, and pork-barrel project and instead set budget priorities, make trade-offs, and, in so doing, eliminate any entitlement expectations for disaster relief.
Clearing Away Red Tape
Rather than have rebuilding efforts across the Gulf controlled or directed by bureaucrats and hampered by endless restrictions and litigation, Congress and state and local governments should eliminate or reduce the regulatory burden and allow communities to decide for themselves how best to rebuild. To that end:
Banks and other financial institutions also need to be given the ability to immediately shift branch locations, open new branches, and close damaged ones without the usual paperwork required by financial regulators.
Other types of businesses need temporary extensions or even exemptions from paperwork and disclosure requirements required by securities laws, pension insurers, or other federal and state agencies. For the most part, regulators already have the ability to suspend certain regulations in areas hit by natural disasters. The Federal Deposit Insurance Corporation, Federal Reserve System, Comptroller of the Currency, Office of Thrift Supervision, and National Credit Administration, for example, are granting financial institutions and others the ability to meet their customers' needs in a time of crisis without worrying that they will be penalized.
Improving Access to Affordable Energy
Under any set of circumstances, Hurricane Katrina would have had a noticeable impact at the pump. However, by hitting America's single largest oil and refining region at a time of already tight supplies and high prices, the effects have been amplified. Of course, weather-induced damage to energy infrastructure is unavoidable, but Katrina's impact on oil and refined products did not have to be so severe, and there are lessons to be learned for the energy debate to come.
Putting aside for a moment the far more important human toll, from an energy standpoint, Katrina hit in the worst possible place. With approximately 25 percent of the nation's oil production and 16 percent of refining capacity located in the Gulf region, the hurricane's impact will be felt nationally at least for a month or two, and quite possibly longer. But both these percentages could have and should have been lower. To improve the nation's access to energy supplies:
Among the rules Congress should change are the tight Environmental Protection Agency (EPA) deadlines for implementing the new National Ambient Air Quality Standard for smog, which limits refinery expansions in many key areas. Congress should also streamline the extremely cumbersome New Source Review permitting process, which delays or prevents refinery expansions.
Among the many challenges confronting New Orleans, Biloxi, and the other damaged communities along the Gulf Coast will be the repair and reconstruction of the public infrastructure that serves the citizens and the economy of the region. As the water recedes and the debris is cleared, it is certain that the roads and bridges, schools and government offices, public libraries and health clinics, buses and trolleys, water and sewage systems, and community colleges and sports facilities will be found to have been destroyed or damaged to some degree and to be in need of significant reconstruction or replacement. While the traditional response would be to fund their reconstruction or replacement by means of government spending and borrowing, innovations in infrastructure funding recently implemented in other states reveal that the private sector has the capability and interest to contribute massive amounts of money for public infrastructure.
Changing Taxes to Spur Investment
Some will argue that the way to rebuild the devastated economy of the Gulf Coast is for the government to mobilize public and private capital in a plan to establish or revive businesses. That industrial policy vision of redevelopment is not the solution.
Bureaucratic planning will frustrate, not enhance, creativity and the search for new types of enterprise that are adapted to the post-hurricane conditions. The way to encourage Americans to invest in the affected areas and mobilize capital in the most entrepreneurial and efficient way is to reduce tax barriers to investment in the stricken area. To be sure, such barriers should be reduced generally around the country to spur growth; but given the goal of getting the Gulf Coast quickly back on its feet, Congress should enact short-term but deep tax incentives to encourage investors to focus on the area. Congress should:
Giving Victims Relief from the IRS
Victims of the disaster need both time to put their lives back in order and breathing room to deal with their financial losses. They do not need to be hounded by the IRS. Just as Congress enacted special provisions to cushion the financial burden facing victims of the September 11, 2001, attack, so it should for the victims of Katrina. Specifically, the government should:
Promoting Permanent Health Care Coverage
Many evacuees need emergency medical help, and most need a range of health services. Urgent services should be given through whatever sources are available and, beyond reasonable volunteer services, reimbursed through emergency funds that have been authorized by Congress. Even where services are available, federal privacy laws mean that doctors and hospitals cannot legally obtain prompt access to needed medical records and patient information. Moreover, even when the immediate medical needs have been addressed, the goal should be to restore long-term coverage for those who have lost employment-based coverage and to provide assistance to evacuees to afford adequate coverage that they can keep when they move back to their homes or move to other areas to rebuild their lives. The key to that is to give them the same tax breaks and other subsidies that apply to employment-based plans for coverage through organizations that they trust and that are close to them. To address these short-term and long-term needs:
In the wake of the hurricane, schoolchildren in affected areas have significant opportunities for a brighter educational future. Public education in New Orleans, for example, has not adequately served the needs of all children: 65 percent of New Orleans schools failed to make the state's performance standard this year, compared to 11 percent of schools statewide. In Orleans Parish, 76 percent of students come from economically disadvantaged households, diminishing their options for alternatives to inadequate public schools.
With schools destroyed and students stranded across several states, federal, state, and local authorities should allow for greater funding flexibility so that students will have access to quality education during their displacement. Over the longer term, the federal government should foster a tax and regulatory climate that will lead to renewal in Gulf Coast school districts.
Encouraging Civil Society and Faith-Based Outreach
Recovery and reconstruction after Hurricane Katrina will require considerable ingenuity and enterprising spirit. Many private organizations and individuals have the necessary skills and flexibility to respond to the wide variety of needs, both immediately and over the long term. These include charitable and faith-based groups, as well as uncertified or non-union individuals. Throughout the months ahead, every effort should be made to eliminate barriers that would prevent all capable groups and individuals from assisting victims of the hurricane in every way possible.
Improving National Response
Much has been done to improve homeland security against terrorist attacks in the years since September 11, 2001. It would be a mistake to judge that improved preparedness by the standard of the response to Hurricane Katrina. It is, however, true that the homeland security grant system and the billions given to state and local governments and to the private sector have not improved the nation's capacity to respond to catastrophic disasters like Hurricane Katrina. This has become only too clear in the past two weeks. In most disasters, even the September 11 attacks on New York and Washington, local resources handle things in the first hours and days until national resources, if absolutely necessary, can be requested, marshaled, and rushed to the scene. Getting them there, however, is a huge logistical challenge and usually takes days. Catastrophic disasters are completely different in character from other emergencies and require a different immediate response. State and local resources are overwhelmed from the onset, as they were along the stricken Gulf Coast. The Administration therefore needs the authority and organization to build an effective national response system that can be quickly activated for such devastating disasters.
Improving the Nation's
Capacity to Respond to
Catastrophic Disasters like Hurricane Katrina
State and local resources are exhausted from the onset of a catastrophic disaster. Since state and local governments cannot respond in such extreme events, providing relief efforts is a federal responsibility. National resources have to show up in hours, not days, in unprecedented amounts, regardless of the difficulties. The United States, however, lacks the means and capabilities to do this. Even years after 9/11, we have only begun to build the system we need. In part, this is because that is how Congress, states, and cities wanted it: All insisted on grants that doled out money with scant regard to national priorities. Katrina shows why that approach is wrong. All of the fire stations in New Orleans have been under water, as was much of the equipment bought with federal dollars. Only a national system-capable of mustering the whole nation-can respond to catastrophic disasters.
Restructuring the National Guard
Most disasters, including terrorist attacks, can be handled by emergency responders. Only catastrophic disasters-events that overwhelm the capacity of state and local governments-require a large-scale military response. Assigning this mission to the military makes sense. The Pentagon could use response forces for tasks directly related to its primary warfighting jobs, such as theater support to civilian governments during a conflict, counterinsurgency missions, and postwar occupation, as well as homeland security. These forces would mostly be National Guard soldiers. The National Guard force needs to be large enough to maintain some units on active duty at all times for rapid response in catastrophic events like Katrina, as well as sufficient to support missions at home and abroad.
The Defense Department should therefore restructure a significant portion of the National Guard into an effective response force.
Strengthening FEMA and the Department of Homeland Security
The organization of the Department of Homeland Security (DHS) as established by Congress fragmented the preparedness and response missions among several agencies and offices. In July 2005, new Homeland Security Secretary Michael Chertoff announced the results of his "Second Stage Review" of the department's organization and missions. He proposed consolidating preparedness activities under an Under Secretary, strengthening the Federal Emergency Management Agency (FEMA), and making it an independent agency of the department, eliminating a level of bureaucracy and focusing FEMA squarely on planning and coordinating the national (not just federal) response to disasters. Hurricane Katrina struck before his reforms could be implemented, and the result was a lack of communication and coordination among state, local, and national responders.
Improving Information Sharing and Coordination
The Homeland Security Act of 2002 required the DHS to propose a regional framework but provided no guidance on how to implement the system or its purpose. The department failed to meet the one-year timeline for developing a plan and has yet to announce a regional framework. This effort should be a top priority because such an organization could have contributed significantly to improving coordination for catastrophic disasters.
Modernizing the U.S. Coast Guard
During the response to Hurricane Katrina, the U.S. Coast Guard (part of the Department of Homeland Security) proved why it is one of the nation's most valuable assets. Coast Guardsmen, under the most harrowing conditions, rescued over 22,000 people and provided essential and immediate major assistance to communities all along the Gulf Coast. In fact, since 9/11 the service has played an increasingly prominent role in domestic security. Yet its equipment is aging rapidly and becoming unsafe. The Integrated Deepwater Program, the Coast Guard's modernization program, has been chronically underfunded. Indeed, the House has proposed to cut over $200 million from its proposed FY 2006 budget.
To respond adequately to catastrophic incidents, the federal government needs to spend its money where it can get the most effective return on investment. The biggest bang in maritime security is spending money on Coast Guard assets that can prevent terrorist acts and that will be truly useful in responding to disasters, whether natural or man-made. This means that funding for the Coast Guard's Deepwater modernization program must be a national priority. Congress therefore should:
Improving Public Preparedness and Personal Responsibility
In comparison to the devastation of the tsunami in Southeast Asia, the U.S. capacity to save lives in the aftermath of Katrina proved unparalleled. This did not just happen. It resulted from the decisions of government leaders, volunteer groups, private-sector initiatives, and the selfless actions of communities and individuals. All are vital components of a national response. Yet more people could have been saved if individuals and communities had met their basic civic responsibilities. America does not have a culture of preparedness.
The Department of Homeland Security's current approach to enhancing public preparedness is deeply flawed. Instead of trying to run an ineffective advertising campaign from Washington, the DHS needs to refocus its programs to empower state and local governments to create effective "bottom-up" preparedness from individuals and communities. Federal initiatives will never be as effective as programs run by communities with the participation and leadership of local citizens.
Improving Medical Response
Unlike many other aspects of the aftermath of Hurricane Katrina, the United States was not (at least thus far) faced with a catastrophic medical disaster. Several hundred thousand people were successfully evacuated before the storm. While the death toll will still take time to assess and the potential for epidemics still exists, in terms of lives lost, the event could have been much worse. Next time, the nation could be hit much harder.
Since 9/11, the federal government has wasted billions of dollars on grants to hospitals that will be of no help in responding to medical disasters where the number of patients might be in the tens of thousands. As seen in New Orleans, hospitals in a disaster area are quickly overwhelmed. Meanwhile, disparate federal programs are not addressing the challenge in an integrated and coherent manner. To deal with this problem, therefore:
"Time to Enact Real Enterprise Zones," Stuart M. Butler, Ph.D., Executive Memorandum No. 438, October 24, 1995, at www.heritage.org/Research/SmartGrowth/EM438.cfm
"Not Again! Congress Evades Its Budget Caps," Keith Miller and Alison Acosta Fraser, WebMemo No. 576, September 28, 2004, at www.heritage.org/Research/Budget/wm576.cfm
"Legislative Lowdown-Week of October 18," Mike Franc, Commentary, October 18, 2004, at www.heritage.org/ Press/Commentary/ed101804b.cfm
"The Katrina Relief Effort: Congress Should Redirect Highway Earmark Funding to a Higher Purpose," by Ronald D. Utt, Ph.D., WebMemo No. 832, September 2, 2005, at www.heritage.org/Research/SmartGrowth/wm832a.cfm
"Why the New Source Review Program Needs Reform: A Primer on NSR," Dana Joel Gattuso, Backgrounder No. 1518, February 21, 2002, at www.heritage.org/Research/EnergyandEnvironment/BG1518.cfm
"Opening ANWR: Long Overdue," Ben Lieberman, WebMemo No. 692, March 17, 2005, at www.heritage.org/ Research/EnergyandEnvironment/wm692.cfm
"No Easy Answers for Post-Katrina Gas Prices," Ben Lieberman, WebMemo No. 831, September 2, 2005, at www.heritage.org/Research/EnergyandEnvironment/wm831.cfm
"The Post-Katrina Jump at the Pump-Unavoidable?" Ben Lieberman, Commentary, September 6, 2005, at www.heritage.org/Press/Commentary/ed090605c.cfm
"President's Bold Action on Davis-Bacon Will Aid the Relief Effort," Ronald D. Utt, Ph.D., WebMemo No. 836, September 9, 2005, at www.heritage.org/Research/Labor/wm836.cfm
"Tapping the Resources and Creativity of the Private Sector to Rebuild New Orleans' Public Infrastructure," Ronald D. Utt, Ph.D., WebMemo No. 837, September 12, 2005, at www.heritage.org/Research/GovernmentReform/ wm837.cfm
"Public/Private Partnerships Offer Innovative Opportunities for School Facilities," Ronald D. Utt, Ph.D., Maryland Public Policy Institute, 2005
"The First Responder Act: Congress Needs to Act," James Jay Carafano, Ph.D., and Alane Kochems, WebMemo No. 742, May 8, 2005, at www.heritage.org/Research/HomelandDefense/wm742.cfm
"Foreign Disasters: Lessons for the Pentagon's Homeland Security Efforts," James Jay Carafano, Ph.D., Executive Memorandum No. 979, August 29, 2005, at www.heritage.org/Research/HomelandDefense/em979.cfm
"DHS 2.0: Rethinking the Department of Homeland Security," James Jay Carafano, Ph.D., and David Heyman, Special Report No. 02, December 13, 2004, at www.heritage.org/Research/HomelandDefense/sr02.cfm
"Organizing for Victory: Proposals for Building a Regional Homeland Security Structure," Edwin Meese III, James Jay Carafano, Ph.D., and Richard Weitz, Ph.D., Backgrounder No. 1817, January 21, 2005, at www.heritage.org/ Research/HomelandDefense/bg1817.cfm
"Making the Sea Safer: A National Agenda for Maritime Security and Counterterrorism," James Jay Carafano, Ph.D., and Alane Kochems, Special Report No. 03, February 17, 2005, at www.heritage.org/Research/HomelandDefense/ sr03.cfm
"Beyond Duct Tape: The Federal Government's Role in Public Preparedness," James Jay Carafano, Ph.D., Executive Memorandum No. 971, June 3, 2005, at www.heritage.org/Research/HomelandDefense/em971.cfm
"Improving Federal Response to Catastrophic Bioterrorist Attacks: The Next Steps," James Jay Carafano, Ph.D., Backgrounder No. 1705, November 13, 2003, at www.heritage.org/Research/HomelandDefense/BG1705.cfm
Kim R. Holmes, Ph.D., is Vice President of Foreign and Defense Policy Studies and Director of the Kathryn and Shelby Cullom Davis Institute for International Studies at The Heritage Foundation.