Why are conservatives fighting Spendulus? We remember Katrina

Over $100 billion in government spending and tax breaks were set aside to help the people of New Orleans and Mississippi who were devastated by Hurricane Katrina, and over three years later there is still little to show for it. I’ll let Daniel Rothschild from Reason Magazine add the details:

Talk with people on the Gulf Coast area and you’ll soon learn the primary problem they face is not a lack of funding, but the mass confusion created by federal, state, and local governments about the rules of the game when it comes to rebuilding. Confusing and contradictory regulations, showboating by politicians, and stunningly complex bureaucracy have only exacerbated the problems of people who’ve already been through hell and have kept people from making the decisions they need to make to get on with their lives. This creates what economist Emily Chamlee-Wright calls “signal noise”–the persistent uncertainty created by uncoordinated government at every step of the recovery process.


The federal government has already allocated a substantial amount of money to Gulf Coast reconstruction. According to the Congressional Budget Office (CBO), as of July 2007 the federal government had appropriated $94.8 billion for Katrina recovery. Congress has allowed the National Flood Insurance Program to borrow another $17 billion from the government to cover the deficit it racked up paying out Katrina claims. The federal government has also created $16 billion in targeted tax breaks through Gulf Opportunity (GO) Zone credits and other programs.

So it’s not a lack of funding that’s the problem. It’s spending the money. Under existing laws, FEMA can’t simply write checks to Katrina victims. Some recipients would undoubtedly squander their funds, and there would be widespread fraud. This isn’t idle speculation. According to the Government Accountability Office, immediately after Katrina hit, about a billion dollars of emergency aid–16 percent of the total–was lost to fraudulent claims. Even legitimately obtained pre-paid debit cards given to aid Katrina’s victims were used to buy champagne, guns, tattoos, and porn.

Unfortunately, the other option–the one currently in place–isn’t any better: government micromanagement of payouts. This is where you get the Road Home program’s Byzantine policies, which includes dozens of dizzying, intermediate steps between filing a claim and the receipt of funds and, consequently, the plodding pace of recovery we’ve seen over the last two years. Because of legitimate fears that money will be squandered, mismanaged, or lost to fraud, the money sits unused.

Two years after Katrina, the CBO reports that FEMA had spent only about 66 percent of its supplemental appropriations for Hurricanes Katrina, Rita, and Wilma. Only 28 percent of Community Development Block Grant (CDBG) funding had been spent. A billion dollars in approved Small Business Administration loans have yet to be dispersed. And the Department of Housing and Urban Development (HUD) has yet to even allocate 15 percent of its Katrina-specific budget, much less disperse it. (emphasis added)

Hurry up and wait. Or “FUBAR”. Take your pick.

The stimulus chicken littles are telling us that we have to act now because people are suffering now and they need help now! Admittedly there are major differences between natural disaster relief and economic stimulus, but let me assure you that in both situations one fact remains the same — the most inefficient and problematic way to distribute money is to let the government do it. That being the case, why are Democrats still insisting that most of their “immediate” aid money is to be distributed through bureaucratic channels in the form of red tape-laden government contracts?

Of course with the Spendulus bill there is one ironic ray of hope. If most of this spending is, as many suspect, simply political payola from the President and Democratic Congressional leaders to local political bosses as a post-election “thank you,” the money may get paid out of the government treasury faster; politicians don’t like to wait for payoffs. But even if that happens, the money is still likely to languish while its newly-enriched endpoint caretakers wade through the enormous gulf of government paperwork and rules that must be followed before anyone or anything can actually be hired or purchased.

How is this going to provide an “immediate” stimulus? It isn’t, and most people with common sense know that. We’re not unpatriotic; we’re frightened — frightened of $1 trillion in deficit spending, frightened of inflation as a result of economic tampering and over-regulation by the government, and frightened of a painful recession triggered and prolonged by all of those well-intentioned but poorly-crafted policies.

Again I ask, is this what Americans thought “hope and change” would be?

PS – On yesterday’s Sean Hannity show a guest tossed out the best understanding of Spendulus that I have heard so far: “A sub-prime mortgage on America’s future”. It’s not any harder to understand than that, folks.

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