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State Democrats want handout rather than hand up

As usual, Louisiana politicians have commenced their whining and moaning upon being informed that the gift they are getting from the generosity of the American people to alleviate a problem in part caused by Louisianans’ own doing just isn’t big enough. It crosses partisan lines and, for the most part, resembles the reaction of a spoiled child being told by a parent to grow up and to be more responsible.

Two separate developments triggered the latest tantrum. First, the federal government restricted the use community development block grants totaling $6.2 billion for use only to compensate homeowners flooded in non-floodplains, about 20,000, leaving out another 185,000 who could have had flood insurance (and perhaps half did) and about $5.8 billion estimated to cover all. Second, the White House signaled that it would not support the bill by Rep. Richard Baker that would have created a federal corporation to buy up distressed property from victimized homeowners at 60 percent value, mortgages paid if any, in the hopes of redeveloping and reselling it.

When added to this Pres. George W. Bush’s comments that he didn’t see any plan from Louisiana for recovery, these prompted the biggest crybaby of the past several months, Gov. Kathleen Blanco, to squeal long and loud about the unfairness of it all and that she really did have a plan – Baker’s bill. Of course, because it typifies the primary plank of her recovery platform which has been to stick out her hand in expectation that the federal government would stuff unimaginably-large amounts of cash into it, which Bush correctly identified as no plan at all.
Thus she gets annoyed at the conditions attached to the grants. At least Baker’s bill had the good sense to keep recovery resources out of the hands of state politicians who have yet to prove they can spend money prudently, but even his idea has potential problems. Besides the obvious identified by the White House (creation of a new, huge federal bureaucracy that would be around a very long time), it’s not at all certain Baker’s plan could have worked as well as he intended, also noted in the White House objection.

Baker hoped that a good portion of the properties bought could be resold, perhaps after some kind of development. But chances are good that the vast majority never would be as valuable as they were prior to Hurricane Katrina’s reality check, and so if the government ever could even sell them, it might get far less than its compensation costs. Again, that meant a hit of tens of billions of dollars to the American taxpayer and would make the federal government the largest landholder in Orleans Parish for decades to come.

Louisiana’s congressional Republicans have smartly vowed to keep working on it, but they must realize they cannot win with Baker’s bill in its present form. Indeed, what they should do is work to loosen up the grant requirements, as a quick overview of the numbers shows.

Even if it sensationalizes its conclusions, this research more soberly indicates the potential extent of the damage done by Katrina. If you take 2000 census data (median value per parish of owner-occupied houses which probably is too high for Orleans damage but maybe lower for other parishes given the actual distribution of the damage), assuming all housing is totally damaged the amount comes to about $20 billion and almost 226,000 units.

But the median value of such housing, assuming non-floodplain houses equally are distributed, is only about $88,500. If the state estimates that’s about 20,000 houses, that’s only about $1.77 billion spent (surely overhead wouldn’t be almost 70 percent of the total?), leaving almost $4.4 billion that could be distributed. If Congress would go in and loosen up the grant requirements to encompass owners who had flood insurance but cannot get the full value of their property back even with it (up to the grant stricture of $150,000 each), this probably could bring tens of thousands, maybe even 100,000, houses, into eligibility.

As for perhaps the other hundred thousand homeowners who lived in floodplains but did not exercise common sense in insuring their properties against flooding, what’s stopping Louisiana from having its own version of the Baker bill? The state could sell $9 billion worth of bonds by amending the Constitution (it went down this road before for far more trivial reasons) to create a state authority to issue that amount of debt (without additional taxes). If the buy low/sell high theory of the bill works, the state would get a good chunk of its money back, and it could be backed by some capital outlay funds (instead of wasting them on trivialities) or maybe even the federal government itself will buy some of the bonds and/or pay the interest on them. It may even donate some money for the purpose, if the state shows the money will be well-managed.

There are plenty of options, but if you listened to the complaining of Democrat politicians like Sen. Mary Landrieu on the matter, you’d think the world had ended. That’s because their political world is based upon taking from others for themselves and their allies, not upon providing fresh ideas and leadership. Blanco, Landrieu and others need to understand from the federal government Louisiana can expect a hand up to pull the state out of this situation, not a handout.

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