Tuesday, August 29, 2006

Where Was the Economic Vision?

The Wall Street Journal editorial, “The Tragedy of New Orleans,” quite rightly points out that President Bush and the Republican Congress have spent the utterly mind-blowing sum of $122.5 billion on Hurricane Katrina money largely designated for New Orleans.

One can only imagine the almost incomprehensive number of better purposes to spend this astonishing sum of money. And, still, leading Democratic politicians want to spend even more taxpayer dough as many New Orleans neighborhoods remain underwater (to coin a metaphorical phrase).

A much better approach would have been to employ the capitalist laws of the market economy and simply make New Orleans a tax-free zone. Though some tax abatements have been employed in enabling congressional legislation, neither the White House, nor Congress, ever went full bore on the supply-side to attract private capital investment and business to New Orleans.

Think of New Orleans as an emerging economy in the Third World, desperately seeking private investment flows, and perhaps the picture becomes clearer. Capital to finance human ingenuity, entrepreneurship, and the love of New Orleans that many have, would be a much more efficient, timely and simpler solution than the gargantuan, bureaucratic spending plan which was doomed to failure from the very start.

Let’s say for example, a zero capital gains tax. Or, perhaps, any new businesses started up in New Orleans would be tax-free for 5-10 years. This would include cash expensing for the building or rebuilding of any plant, home, office building or mall. Eliminating the tax costs of rebuilding New Orleans, coupled with high incentive rewards, after tax, would do the trick a lot quicker than this horrible central planning experiment.

Frankly, this is a case where neither the Bush Administration, nor the GOP leadership in Congress, gave New Orleans (or the United States for that matter), any economic vision at all. It is a shame.