Post-Katrina: Getting the Incentives and Priorities Right

As Americans prepare to spend billions of dollars on the reconstruction of New Orleans and the other devastated Gulf Coast cities, here's a question:

Who, exactly, is going to decide how those billions are to be spent? Who is going to set priorities, and ensure that the first hasty round of projects don't pre-empt the big policy decisions that lie down the road?

Already money is being funneled to a variety of federal agencies, and untold hours are being spent by staff at a panoply of federal departments to coordinate and communicate their responses to these natural disasters. Past experience suggests that doling out large quantities of federal dollars to existing bureaucracies does not result in the efficient and effective use of the money.

Typically, when the carrot is large --- and in this case it is very large --- the result will almost certainly be mission creep, in which pet programs already on the drawing board somehow are retitled "reconstruction" projects and money that should go to rebuilding New Orleans and the other communities along the Coast will go to activities that at worst will contribute nothing to improving the lives and well-being of the people affected and at best would be way down any rational priority list of what needs to be done.

Spending money in a piecemeal fashion not only makes it impossible to truly set priorities, but it makes it extremely difficult to ask the fundamental policy questions that need to be asked.

Political leaders are talking confidently about rebuilding New Orleans just as it was before the hurricanes, but better. The Dutch have demonstrated that it is possible to give coastal cities a high degree of protection from storm surges and flooding. But Dutch-style barriers are fiercely expensive. Sooner rather than later, some public authority needs to consider whether it wouldn't be less costly and safer to buy out the property owners in the low-lying neighborhoods of New Orleans, those that have now been flooded twice in less than a month, and put the new residential construction elsewhere on higher ground. No matter how difficult a question this is politically --- and it is difficult --- it still needs to be asked.

That's the kind of basic policy decision that needs to be settled before, not after, the money starts to flow for higher levees and new housing in the endangered areas. It's a local decision, but it's also a national decision and needs to be worked out cooperatively by city, state and Washington.

While this may be the most important decision, there are myriad other smaller decisions with similar implications. Do we build roads first, and then worry about environmental cleanup, or vice versa? The order in which questions are asked, and decisions are made, are directly related to how well we use scarce taxpayer's dollars to rebuild the areas hit hard by Katrina and Rita.

The pain and loss inflicted by this season's two hurricanes put new pressure on the government to create the right incentives for the wisest use of ever-scarcer federal dollars. Setting the right incentives means two things. Each and every spending and policy decision needs to be focused on making the best decision for the reconstruction effort as a whole, not for one agency or organization. And in making decisions, policy-makers need to be pushed to focus on the long-term, not on today's politics or today's media coverage. That requires, among other things, a consolidated budget for renewal and rehabilitation administered by a strong decision-making team that cuts across agencies.

What's emerging is a test of our capability to govern well in the aftermath of a real catastrophe. If the country meets the test successfully, that success will serve us well in other emergencies that lie ahead.