NCPA - National Center for Policy Analysis


February 10, 2006

Rep. Richard Baker (R-La.) proposes creating a new federal bureaucracy, the Louisiana Recovery Corp. (LRC), to buy damaged properties in New Orleans, repackage them and sell them for redevelopment. Baker's plan is gaining traction in Congress and plaudits in Louisiana, says USA Today.

At first glance, it appears promising. But look deeper, and costly flaws appear, says USA Today:

  • The plan would allow the new corporation to borrow up to $30 billion from the U.S. Treasury, but there's no limit on how much could ultimately be spent to set up and run this entity. And no hard figures on how much taxpayers might hope to recoup.
  • The LRC would buy homes from sellers for at least 60 percent of their fair market value before Katrina struck -- an interesting, if expensive, goal. But the land would be acquired in disconnected chunks. There's no provision for emptying flood-prone areas and scant help for homeowners who want to rebuild safely, not sell.
  • Though the New Orleans flood was an unparalleled disaster, this vast new program would lead homeowners to expect similar aid in the next catastrophe. The poorly run National Flood Insurance Program is nearly bankrupt after Katrina; this is no time to create a bureaucracy with an open checkbook.

The Bush administration wisely opposes Baker's plan, but despite the passage of time, it hasn't proposed an alternative.

Aid programs that lack accountability to taxpayers or a clear plan for rebuilding would make matters worse. Nor should the federal government usurp local responsibility and control. New Orleans needs a sound state and local rebuilding plan. Neither the City Council nor the state has adopted one, says USA Today.

Source: Editorial, "Rebuild Louisiana, but not by creating federal money pit; Congress weighs relief plan; cost control, accountability missing," USA Today, February 10, 2006.


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