In the Chicago spirit, I thought I'd begin my blogging with a topic that is the stuff of everyday conversation. In my second posting, I plan to turn to a subject on which I am currently writing (obesity regulation). Subsequently, I hope to continue both threads.
The post-Katrina terrain is fairly well known. Media coverage, empathy, and other factors lead the citizenry, and therefore many politicians, to favor large-scale relief efforts. There are occasional suggestions that New Orleans not be rebuilt in its present location, but such dramatic pauses are shot down. There is also the background of corrupt politics. New Orleans has been well-known for its high crime rates, for its ongoing depopulation (even pre-Katrina), for criminal indictments, for a poor school system, and so forth, though much of this has been pushed to the background by the apparent ineptness of FEMA, the indecision of the state government, and the poor performance of the expensive federally sponsored and designed flood-control system already in place. With so much blame to go around, it has been difficult to draw lessons from the disaster, and no easier to feel safe putting the task of rebuilding (or decisions about that strategy) in one level of government.
One lesson that might emerge is more descriptive than practical. It is the unimportance of state governments. In this regard, Katrina resembles 9/11. The local government proves important in rescue efforts and evacuation plans, and the federal government is important if only because of its ability to deploy resources among regions and to generate new resources in repsonse to emergencies. But the state governments seem like accidents of history. Our history and Constitution make them important, but the right level of problem solving rarely seems to be found at the state level. In N.Y.. Governor Pataki is an important force in guiding the rebuilding of the World Trade Center area, but that is partly the result of the state's ownership of important assets. Even there, the aftermath of the disaster drew attention to the Mayor and to the federal government (fighting terror and legislating relief packages), and various claims about precaution-taking have also involved those two levels of government.
Much the same can be said about other problems and opportunities we face. None of the biggest issues we face draws much attention to state government, though the governor's office seems to be important as a launching ground for presidential candidates. Among the areas that could plausibly occupy any or all of the three levels of government, let's take health care, retirement, crime-fighting, and educational systems. In all these areas there is room to think about the division of labor between the private and public sectors, but it is unlikely that the future will see the growth of state government because of its role in solving one of these problems. States could prove to be important in experimenting with different health-care delivery systems, but given the importance of the federal tax system (in promoting employer-sponsored health care) and given the cost of providing emergency medical services in some locales and not in others, even in this arena the future is likely to be about the pros and cons of local versus national decisionmaking. States are neither here nor there.
A second topic returns us to the rebuilding question, and the danger of wasting enormous amounts of resources in the wrong place or in the hands of the wrong government. There is the possibility of privatizing relief, in a sense, by giving funds to directly to affected individuals rather than to projects or local governments. A plan of this sort has been suggest by Ed Glaeser. Federal relief post-9/11 did both, it will be recalled, but very little about 9/11 gave us reason to think that recipients would take the money and leave New York. In contrast, if the federal government created categories of Katrina victims and disbursed monies directly to them as property owners, survivors, evacuees, and so forth, the local governments would become much less involved, for better or worse. No doubt there would be some fraud regarding claimant status, but it is not obvious that there will be less waste if the money passes through local governments or even private contractors, who bid and lobby for projects.
A serious problem with such privatization, in the form of direct payments to individuals, is that it ignores a collective action problem. A family that received $50,000 might be inclined to start a new life out of the region, but it is much more likely to do so the more it thinks that other families will do the same. Cities are networks; if a critical mass remains, more individuals will choose to remain and join that mass. Property values might be low if most people emigrate, so there is some appeal to a ship in the process of abandonment, but city life is otherwise unattractive without a critical mass of residents. A substantial majority might therefore prefer that the money not be paid directly to individuals. An alternative is to condition payments on residency, but that will encourage fraud as to residency or intentions, and it will be unpopular or politically unviable because truly sympathetic victims, who now need to live or simply remain elsewhere for one reason or another, will emerge and gain media attention. If we like privatization, then a slightly better plan might be to pay some money directly to individuals, but to double the payments, say, for those who stay in town. Again, this will not be easy to police.
We might also imagine payments, not to individuals but, as is more conventional, to the local government or for specific projects, that depend on the population. A depopulated New Orleans with 100,000 residents will require less rebuilding, and therefore less money, than would be needed for 400,000 returning evacuees. This strategy, of promising more federal money as there are more people, holds some promise because those who are deciding whether to return, or even to move there for the first time, will be able to observe the behavior of others. I think I like this strategy best. Even if contractors and the city government pay people to move in, what might seem wasteful is really little more than another means of privatization. One way to think about this strategy is as a compromise. The plan on the table pays money to local governments and for specific projects. The suggestion is that these payments should increase as the returning population rises (with a ceiling on payments and an end date) -- and if this causes New Orleans to make payments to individuals in order to encourage their return, then we will in the end have some privatization in the form of payments to individuals, with the local government in the role of intermediary, or disbursing agent.