Big Easy Bail Out Shouldn't Discriminate

Among the uglier responses to the devastation wrought by Hurricane Katrina were those who suggested that the hurricane was some sort of divine retribution for the moral shortcomings of New Orleans and, more broadly, the United States.

Such silly sentiment came both from the right -- religious fundamentalists who said Katrina was God's way of punishing New Orleans' reputation for sin and decadence; and from the left -- fringe environmentalists who asserted Katrina was Mother Nature's way of punishing the United States for pollution, global warming, and all other matter of sins against the environment.

Now, as the Gulf Coast cleans up and attempts to recover, the same kind of disturbing moral judgmentalism is creeping into the aid packages being considered by Congress. Included in the $8 billion aid package recently passed by the House of Representatives was a provision authored by Rep. Frank Wolf that would exempt businesses Wolf considers unwholesome from getting any aid at all. Included among Wolf's disfavored businesses are liquor stores, casinos, tanning salons, and strip clubs.

Let me start by saying that in principle, I'm opposed to federal business subsidies. Moreover, I'm not crazy about the idea of using taxpayer dollars to bail out business that chose to locate in disaster-prone areas. That said, Katrina was a bit different. By co-opting the federal flood insurance program, for example, the federal government distorted the natural risks and incentives associated with doing business in hurricane prone areas.

Worse, by assuming responsibility for the levees, then neglecting them, the federal government also created a false sense of security among both the citizens and businesses of New Orleans. Of course, now offering subsidies to both citizens and businesses to come back is really only asking for more trouble. A better solution would be for the federal government to get out of the flood insurance and subsidizing game altogether. Let businesses and citizens repatriate New Orleans at their own peril, assume their own risks, and endure the next hurricane knowing they've gotten their last taxpayer bailout.

All of that said, Rep. Wolf's prohibition amendment to the aid package is, nonetheless, reprehensible. It's a naked attempt to impose his own morality on the victims of a natural disaster. In some ways, it's not all that different than the fringe fundamentalists who proclaimed that Katrina was some sort of divine wrath for New Orleans' penchant for indulgence. They believed liquor stores and casinos didn't deserve to be spared. Wolf's amendment says they don't deserve to be rebuilt.

Wolf's proposal is also bad economic policy (accepting the fact that such aid programs aren't great economic policy to begin with). Good developmental economic policy lays down a few general ground rules establishing property rights and enforcement of contracts, then lets businesses thrive or bust, flourish or wither, based on how well they meet public demand. The aid bill was purportedly aimed at getting businesses wiped out by this year's hurricane season back on their feet. Wolf's amendment turns it into a social engineering bill.

Wolf in fact was so sure of his moral rectitude in this matter, he didn't even want an honest dialogue on the matter. In a "Dear Colleague" letter circulated to his fellow members of Congress, Wolf wrote, "Prohibiting massage parlors, liquor stores and casinos from getting tax breaks is not a tough call. In fact, there really shouldn't be any debate."

Politicians on both sides of the aisle might also pause to consider the repercussions of exempting some businesses from a blanket federal policy because some find them morally repugnant. It's not difficult, for example, to see leftist politicians applying the same treatment to gun shops or corporations with insufficiently "progressive" business practices, such as Wal-Mart. And it's not difficult to see the right zeroing in on birth control providers, or openly leftist companies like Ben & Jerry's.

Add to all of this, of course, the fact that this is New Orleans. The city thrives on tourism. And whether Wolf wants to admit it or not, a big part of the Big Easy's tourist draw is that -- well --- it's called "The Big Easy." It's a city whose history is bustles with grand traditions in music, culture, and food, but it's also a city whose history and culture are ground in a kind of carefree approach to sin and indulgence. It's a city known for its hedonism.

From his home in Virginia (where, incidentally, the state government both profits from and operates the liquor stores), Wolf wants to remake New Orleans into a city more to his liking. He may well get his way. But if he does, it'll no longer be New Orleans.

Radley Balko maintains the The Agitator weblog.

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