What measures should a government take after a disaster like Katrina?

Katrina is a problem of people and places. The storm destroyed a significant chunk of the residential and nonresidential property in a large region encompassing the coastal areas of Louisiana and Mississippi.

Other areas were damaged as well. More than 1 million people have been displaced. Many have fled to the homes of relatives, but thousands still depend on shelters in public facilities throughout the country. As of Sept. 8, there were 235,200 evacuees spread across 750 shelters.

Many areas hit by Katrina are uninhabitable. These places rely on a highly developed public infrastructure. That infrastructure must be fixed, and fast. Water must be drained, roads rebuilt, bridges restored. Those are government assets, and government rightly bears the responsibility. Government must decide its role in dealing with private property as well. Should the federal government help rebuild everything?

Snip the Red Tape

Then there are the people. There are two big immediate problems in trying to help them. First, they may be hard to find. Assistance and Social Security checks need to get to their intended beneficiaries. Making this connection is an enormous undertaking.

Second, many recipients of state-provided assistance, such as Medicaid, find themselves living in a different state. Even if officials know where they are, coordinating the transfer of coverage between states for such a large number of individuals is a daunting task.

These problems suggest several policy prescriptions. For starters, the president should appoint a hurricane czar in Washington who is the representative of all the victims. That person's job would be to make sure people are found and that red tape is eliminated.

In the longer run, individuals have to decide whether they want to return to the damaged communities, or move on to a different part of the country. Normally, one might urge them to return to their hometowns, collect insurance, and start to rebuild their lives.

Victims' Dilemma

Not in this case. Especially in flooded New Orleans, it appears likely that it will be months, if not years, before some semblance of normalcy can return.

So disaster victims face a terribly difficult decision. Should they keep their lives on hold indefinitely while their hometowns recover, or should they simply start all over somewhere else?

Any policy aimed at helping the disaster victims should recognize this dilemma. If individuals feel they need to get on with their lives in a new town, they should be allowed to do so. We should be flexible, and tie the aid to people, not places.

So far, the resources made available by the Department of Housing and Urban Development focus on places, including incentives for lenders to finance housing in the stricken areas. The Small Business Administration is offering loans to repair homes and businesses, but incredibly, only victims who are forced to relocate by state or local officials are eligible to use the funds to start fresh in a new location.

Jobs Question

Banks probably won't want to lend to individuals and firms who have lost everything. So there may well be a charitable role for government in providing loans to help victims begin anew. But this aid and similar programs shouldn't be tied to specific areas. If someone wants to start over in Madison, Wisconsin, or Newark, New Jersey, let's help make that happen.

Think of it this way. If you lost everything, even your job, and received an insurance payment to help you recover, would you want to be ordered to rebuild the same house (in a flood plain, say), or would you want the flexibility to use the money to buy a house someplace else? How would you like to be unemployed right now, and told that you must find a new job in New Orleans? That is what we will do to the victims of Katrina if our aid is attached to places.

One concern with this idea may be that the destroyed towns will never come back if not enough people choose to return. But against this we should weigh the possibility that aggressive, place-based subsidies may lure individuals back to New Orleans, and businesses may not follow--perhaps rationally given future risks. We may rebuild a city of nice houses but few jobs.

New Orleans and the surrounding area is a national treasure, with geography, culture and history that will surely draw back many of those who have been displaced. I have every confidence that Mardi Gras will be the same again. But it's important to let markets decide how fast New Orleans springs back.

So yes, let's fix the public infrastructure. Let's also give aid to people, not places.

Kevin A. Hassett is a resident scholar and the director of economic policy studies at AEI.