Emergency Public Finance for Disaster Relief
The governments of the states of Louisiana and Mississippi should enact emergency public finance legislation which would suspend all taxes for 20 years. In each county or parish, the state would establish a community association, which would collect association assessments based on land value. Those who seek government services would join the association. Instead of being a member of the county or parish association, residents could form neighborhood associations, which would in turn be members of the county or parish association. The county-level associations would elect a state civic association, which would coordinate public finances with the state.
by Fred E. Foldvary, Senior Editor
The huge reconstruction efforts that are now commencing will be costly enough without also having the burden of the usual income, sales, and building taxes. A 20-year tax suspension would encourage the needed investments. There would be rush of money pouring into these two states, as they would now have a competitive tax advantage. Rising land values would be tapped by the community associations to provide infrastructure and services, in addition to the large revenues the Louisiana government gets from the oil industry.
The State of Louisiana should take over responsibility from the federal government for the public works in the state. Over a hundred years ago, the federal government took on the task of maintaining the levies and pumps that keep water out of New Orleans, much of which is below the level of the surrounding waters. The rationale was that since much of the produce of the Midwest flows down the Mississippi River or along it by rail and truck to the port of New Orleans, and its importance to the national economy warrants federal responsibility. But recently the federal government has behaved irresponsibly, siphoning off funds from flood protection to anti-terror programs and the War in Iraq.
Global warming is making hurricanes bigger and more frequent. It is foolish to skimp on investments that will make the city withstand the greatest hurricanes, for they will come again. Individual property owners should be responsible to obtaining insurance against disasters. It is costly, but somebody has to bear the cost, and it should be the property owner. The higher cost of stronger construction and more insurance should be offset by the suspension of taxes. It would be ideal if the tax suspension were made permanent. Perhaps after a 20-year suspension, folks would want it to be permanent.
Hurricane Katrina has been called a “natural” disaster, but much of the damage was man-made. It starts with the destruction of the natural vegetation along the coast. The marshes, bayous, and barrier islands provided a natural protection from hurricanes. Due to environmental destruction, coastal wetlands the size of Delaware have vanished into the Gulf of Mexico. The government subsidized development by not requiring it to pay the cost of environmental preservation, and now nature is sending the state the bill.
Delta soil requires a continuous stream of fresh sediment, as the older soil naturally becomes more compact and sinks. The Mississippi River used to provide these. High levees now send the sediments far into the Gulf of Mexico. They protect the New Orleans from flooding, but at the high cost of damaging the natural defense against a catastrophic hurricane like Katrina.
Government engineers have also constructed canals which split up the marshlands. They facilitate ship traffic, but increase erosion and the invasion of salt water. The extraction of oil and gas also depresses the ground level. The environmental destruction is also ruining the great fishing resources of the region. The government has performed a faulty cost-benefit analysis. The costs of a future catastrophe have not been properly accounted for, and now we are all paying the price, but especially the local folks.
All this is well known, and spurred the creation of the Louisiana Coastal Area project. But the federal and state governments did not provide the funding needed for major restoration. Government created this mess. Private enterprise can pay for its own current costs, but it is too taxing an effort for private parties to undo massive previous damage unless the whole economy is totally privatized, which is currently politically impossible.
There should be gated spillways on the levees that would shift some water to the marshlands. We can’t go back to the original natural coastline, but we can stop future erosion. The investment is needed not just for the wildlife but also to protect the oil. The marshes protect the refineries, oil pipes, and the Strategic Petroleum Preserve from storm damage. The US has spent billions of dollars presumably to protect the oil in the Middle East from attack by dictators and terrorists. This huge investment could have been much better spent to protect our local oil resources along the coastal areas of Texas, Louisiana, and Mississippi.
The people of New Orleans should consider rebuilding on platforms which would put buildings above the water levels. Private enterprise can restore much of the damage, if only the government will not disable investment with the usual restrictions and taxes. Just as there is emergency assistance, there should be emergency public finance that suspends the usual politics and lets private enterprise do much of the restoration job, not with subsidies but simply with the abolition of the artificial excess burdens of regulations and taxes.
-- Fred Foldvary
Copyright 2005 by Fred E. Foldvary. All rights reserved. No part of this material may be reproduced or transmitted in any form or by any means, electronic or mechanical, which includes but is not limited to facsimile transmission, photocopying, recording, rekeying, or using any information storage or retrieval system, without giving full credit to Fred Foldvary and The Progress Report.
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