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Notebook Money


The big difficult

A poll found that 54 percent of Americans favor abandoning the parts of New Orleans that lie below sea level

Liberal journalist Michael Kinsley says a "gaffe" in Washington is when a politician accidentally says what he really believes.

By that standard, House Speaker Dennis Hastert may have offered up the gaffe of the year when he said of New Orleans: "It looks like a lot of that place could be bulldozed."

Mr. Hastert's clumsy comment, given in the midst of the post-Katrina crisis, drew public scolding from nearly everybody in Washington, and the Illinois Republican quickly backpedaled. But since then, an actual debate has started to emerge among economists, geologists, and others about whether below sea level-and near large bodies of water-is a good place to have a city.

"We have an obligation to people, not to places," Harvard economist Edward Glaeser told The Wall Street Journal. "Given just how much, on a per capita basis, it would take to rebuild New Orleans to its former glory, lots of residents would be much [better off] with $10,000 and a bus ticket to Houston."

Such statements incense many of those who lived in and loved the city, and who see the issue in terms of history and culture instead of dollars. "How many of those people have been to New Orleans?" said New Orleans resident Alec Phoenix. "To say the city should be abandoned because it's below sea level is an irresponsible statement."

"The city still exists in these people's minds," University of Illinois planning expert Robert Olshansky, who has studied other disasters and recovery efforts, told Macleans. "There are still social networks and economic networks, the things that really make a city. All those things are kind of floating in the air, waiting for their physical home to re-manifest itself."

But other experts say New Orleans may end up like Galveston, Texas, which was a thriving commercial hub until hit by a hurricane in 1900. The city was rebuilt and fortified with a seawall but forever lost its commercial power to Houston. Today's Galveston is largely a tourist town.

Economic and demographic trends may force a similar future on New Orleans. "Its necessity is no longer obvious to many stakeholders with the money to rebuild it, from the oil industry, to the grain industry, to the commercial real estate industry, to the global insurance industry, to the politicians," writes Joel Garreau in The Washington Post.

The French Quarter, which stands above sea level, will remain a tourist destination, and the port of New Orleans isn't going anywhere. But tourism isn't a solid economic base for a major city, and ports don't require nearly as many workers as they once did. No major company has its headquarters in New Orleans, and the city was already hemorrhaging population before Katrina, with thousands each year fleeing the city's corruption, lackluster economy, sub-par schools, and high crime rates. Many evacuees have told the media that they don't plan to return.

Meanwhile, the taxpayers who will foot most of the recovery bill may not like the idea of rebuilding in the same place. An Associated Press-Ipsos poll this month found that 54 percent of Americans favor abandoning the parts of New Orleans that lie below sea level and rebuilding elsewhere. Forty-two percent favor rebuilding the city as it existed before.

Whichever way recovery efforts go, New Orleans will not just disappear. However, those who want to restore the Crescent City to its former glory will find the task big-but certainly not easy.

The Katrina effect

Remember the good news about this year's budget deficit? In July, the administration announced that the projected deficit for fiscal year 2005 would be $333 billion, down from $412 billion in 2004 ("The last Laffer," July 30). Government spending was surging, but a growing economy was producing even more tax revenue, causing the deficit to fall.

Then came Katrina. Now, with the government having to spend about $2 billion a day on rescue and relief efforts, the deficit picture is suddenly cloudy again. Some conservatives in Washington have called on Congress to pay for the tens of billions in disaster relief by cutting other programs. U.S. Rep. Jeff Flake (R-Ariz.) told the Chicago Tribune that he made such a suggestion in a meeting with colleagues. The reaction: "stone cold silence. You would have thought I was a Martian."

The result is that at least this year's deficit and next year's will be higher than the government had projected. Ultimately, though, budget analysts say the true deficit problem remains about a decade away. They say the fiscal damage from Hurricane Katrina is just a drop in the lake compared to Hurricane Medicare, Hurricane Medicaid, and Hurricane Social Security. Those are the storms that, unless addressed soon, will really break the fiscal levees.