Thursday, January 05, 2006

Katrina Federalism

This week begins the Winter term of programming at the Rockefeller Center. We are pleased to feature Nan Aron, President of the Alliance for Justice, and Congressman Artur Davis (D-AL) among our public events. The Winter Newsletter is also online. Here is my Direct Line column, with links where appropriate:

Like many people safely removed from the events, I watched the images of the aftermath of Hurricane Katrina and wondered how every layer of government could appear to have failed so resoundingly in serving the residents of New Orleans and the Gulf Coast. Many answers to the question of "What went wrong?" have suggested that an important part of the explanation is, in fact, that we have a layered government—our federalist system in which sovereignty is shared among the national, state, and local levels. As of this writing, a Google search for "Katrina federalism" generates over 250,000 results.

We should not take such charges lightly. Along with the separation of powers among the three branches of government and explicit protections for civil rights, federalism is one of the key elements of our constitutional republic. The presence of a multi-layered government is a strong impediment to abuses of freedom by any one of those layers. If breakdowns like the one we witnessed in September are symptomatic of federalist systems, then the greater centralization—less federalism—needed to protect the welfare of citizens would come at the high price of weaker protection of individual liberties.

I do not believe that federalism is an important explanation for the failures of government in the preparation for and response to Hurricane Katrina. The underlying problem is a bloated government generally disdainful of both entrepreneurship and accountability at every level. In this case, the presence of multiple layers of government compounded the critical lack of communication and coordination that was also present in each separate layer of government.

In February 1962, then-Governor Nelson Rockefeller delivered the Godkin lectures at Harvard on "The Future of Federalism," which were subsequently published in a book of the same name. He identified three pervasive attitudes that were damaging to the process of government in his era: political aloofness, in which the need to engage in active and aggressive political debate is evaded by a condescension and contempt for political life; an obsession with political labels, which substitute slogan for thought and the false label for the serious goal; and a timidity in the exercise of political leadership, particularly at the state level of government.

He could have been describing equally well the obstacles to effective government today, and until those obstacles are overcome, our society is susceptible to continued breakdown of government in the most critical times. The policy response to Hurricane Katrina should not be less federalism, but better federalism—more reliance on elected rather than appointed officials to make decisions and implement policy and greater citizen participation in the political process. Elections and the people who stand for them matter. They bring with them the accountability and entrepreneurship that are required to provide the solutions to deal better with the challenges we face, both natural and man-made.

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9 comments:

JG said...

"The policy response to Hurricane Katrina should not be less federalism, but better federalism—more reliance on elected rather than appointed officials to make decisions and implement policy ..."

This is not at all self-evident, I am afraid. As one example, note the post 9/11 distribution of "Homeland Security funding" in a hugely disproportionate manner to locales facing no security threat at all. This was of course the direct result of the elected representatives from such areas who voted on the funding bills taking their cut in exchange for their vote. One can easily imagine an unelected agency adminstrator making more efficient decisions -- and hardly imagine one making worse.

As another clear example (among many) take the NYC subway system's history.

Stage I: Built by the private sector on time and under budget, operated by same, it immediately became famous world round for its quality of service and low cost, while returning a healthy profit to both the operators and the city that guaranteed its construction financing.

Stage IIa: Elected politicians price control the fare for political reasons, making preserving the "nickel fare" a local third rail of politics like Social Security today, and bankrupt the system.

Stage IIb: Elected politicians take over direct management of the bankrupted system, politicizing and porkifying its management, multiplying operating costs and the fare, driving the system to literal collapse. The system becomes famous world-wide through the movies et. al. for graffitied trains, crime, breakdows, etc., a symbol of the collapse of New York.

Stage III: Control of the subways is removed from elected politicians and given to a government agency, the MTA. This admittedly is a patronage empire that is as transparent as mud -- but with elected politicians removed from management it is depoliticized at the operating level, trains are fixed and cleaned, graffiti disappears, and things actually run well again.

The result of control by an "unaccountable agency" is much, much, better than was that of control by elected local politicians who were held directly accountable in local elections every two years from 1920 to 1980.

Elected politicians have their value, but should never have direct control over how funds are spent on the ground. The direct accountability they face in elections is exactly what guarantees the shipping of Homeland Security funds to Utica.

(BTW, shall we also propose that the Federal Reserve BOG, an appointed committee in large part insulated from politics, have its powers transferred to directly elected politicians to increase accountability?)

Computer Bruce said...

We are a having a natural experiment in the United States. First, we have a competent, well-educated, ambitious, caring figure administered the government as President for 8 years, and, then we have an incompetent, lazy, incurious fool lead the government for eight years.

After only five years experience with President number two, I am ready to conclude that it matters who is President. We have a corrupt government, led by an inarticulate and not very bright man, and things are not going well. Go figure.

Andrew Samwick said...

JG,

You raise several interesting points. But I wonder whether they pertain to a different matter--government overreach into areas where it doesn't belong rather than poor implementation of policy by elected officials in areas where those elected officials should be acting.

For example, in your Homeland Security case, I believe that there is no reason for the Feds to be involved here. This is the protection of life and property against localized dangers. Local officials should be raising revenue and implementing policy.

In your subway example, the overreach is that the local government "nationalized" the industry and wrecked it.

In the case of Katrina, one can see a role for government in coordinating evacuation and relief efforts in the event of a disaster. Regarding infrastructure, most of the benefits of, say, better levees accrue to the local area (assuming they can tax the shipping that goes through the ports). "Better federalism" in this case would have meant more local control and responsibility for the infrastructure for protecting the city.

Anonymous said...

Even though there is room for significant improvement on Katrina, it could have been a lot worse. Katrina also illustrates that the press may be working okay in the U.S.

GWB may need more genuinely "urban" people in his administration. Cheney is from Wyoming, which is not exactly comparable to New Orleans or other urban areas. Palo Alto is not exactly urban either. A lot of the FEMA people were not from major metro areas and did not have deep or broad experience in markets such as LA, Detroit, or NYC.

Tom C said...

I think the problems are pretty subtle here. Let me give an example. As a member of a local school board in Vermont, I can tell you that our state is in the end stages of a 20-year transfer of authority from the local level to the state level. We are in an impossible situation now: all funding comes from the state, which is not enough to run a decent school, but all expenses are decided by the local board, except for special ed, (driven by Federal entitlement laws) which is now over 25% of our operating budget.

This is not "checks and balances"; this is lunacy. Now my illustrious governor wants to put price controls on the schools (just announced yesterday) and blames local school boards for spending too much. Predictably. But he can't stop us, he can only complain or underfund.

The conclusion is that higher levels of government constantly do power and money grabs on lower levels, unless the judiciary is vigilant. My guess is that the state and local governments in Louisiana and New Orleans had little or no authority or funding to do what you'd think they should do, and waiting for funding and permission, every step of the way, is the real issue.

JG said...

"JG, You raise several interesting points. But I wonder whether they pertain to a different matter--government overreach into areas where it doesn't belong rather than poor implementation of policy by elected officials in areas where those elected officials should be acting."

I'd say the incentives felt by elected politicians rarely line up four square with the public interest or sound management. Often very far from it. Their "overreach" is a result of this -- but it's so even when they act in their own proper spheres.

"In your subway example, the overreach is that the local government 'nationalized' the industry and wrecked it."

The overreach started well before then -- follow this string of perversity:

First the city issued the bonds used to finance the initial capital construction of the subway, while the private operators serviced the bonds and paid the city a fee. Everybody made money, but the subway company made a lot more (20% return on equity) so...

In the next round of construction the city, to make more money, issued bonds and contributed the proceeds to the subway companies outright in exhange for equity in them. It was a good deal for the city, sharing the 20% return, until...

A dose of inflation hit, causing the elected politicians to price control the fare at a nickel -- thus wiping out the subway's profits and the value of the city's own equity while leaving it fully on the hook for the bonds!

Clearly, the elected politicians' interests conflicted outright with the city's own plain fiscal interests, the taxpayers' interests, the subway companies' interests, and the riders' (all but shortest term) interests. The "nationalization" followed about 20 years later.

I'd say this type of conflict between elected politicians' interests and most everybody elses is the normal state of affairs (FEMA, subways, Homeland security, tax policy, whatever) and inherently so -- sometimes more so or less so, and I have no glib solution for it, it's why Churchill called democracy the worst form of goverment except for all the rest.

The one thing to do is to keep it in mind at all times when considering policy, and not be deluded by dreams of gov't efficiency on matters like, oh, national health care.

For example, politician run health care in the form of Medicaid is very credibly reported to be fully 40% fraud, "legal corruption", and waste in both New York and California, many billions of dollars worth annually.

But here in New York, the state attorney general who is legally charged with watchdogging it is instead pursuing radio payola and restaurant bathroom attendants, saying he doesn't have a budget line to watch Medicaid -- which is true, because the politicians here bipartisanly see zero-to-negative votes in cracking down on health care recipients. And I'm sure the same is true in California.

Yet proponents of national health care constantly argue that it is more efficient because of lower overhead cost. Never dealing with the fact that 2% overhead administering 40% fraud and waste does not seem particularly efficient. ;-)

Anonymous said...

a quote from the Crimson article:

"the relatively 'modest' rise in the non-defensive outlays of the federal government."

Given this insight and the DeLay turnover, it might seem worth a re-look at the recent energy and transportation bills. If the government is giving away money to the energy industry, it might think about reclawing some of it.

Also, to fund the new *federal* medicare drug benefit, the 85% in the URL below should be raised to 100%.

http://www.ssa.gov/history/taxationofbenefits.html

Also, Feldstein has an interesting article on the dollar in today's FT. This may have a federalist tint to it. Part of the deficits may be due to oil consumption (not sure - Feldstein did not talk about this in the article - i may be stretching). Year 2005 was a record for oil consumption. Local govts may want to provide attractive alternatives to oil consumption.

http://www.greencarcongress.com/2006/01/us_petroleum_co.html

If Feldstein is right and the dollar is overvalued, local govt's and municipalities may want to be prepared.

Middle East countries, ex-Iran and Iraq, are likely prospering during year 2005. They should be leaders in rebuilding Iraq and containing Iran.

Aaron said...

I completely agree with your Katrina discussion along with federalism. If the State of Louisiana had taken more responsibility and the U.S. Federal government been less culpable for emergency response, the results would have been much better.

I hope that the confirmation of Alito will eventually give a voice to greater federalism in our country and less centralism in Washington D.C. I hope issues regarding the 10th Amendment will be revisited.

Has anyone given thought to catastrophes like the imminent entitlement issues surrounding Social Security, Medicare, and Medicaid? I am certain they can be best handled at the state level too.

JG said...

Re: "Also, to fund the new *federal* medicare drug benefit, the 85% in the URL below should be raised to 100%."

and

"Has anyone given thought to catastrophes like the imminent entitlement issues surrounding Social Security, Medicare, and Medicaid?"

Adding the accruing, unfunded net liabilities of SS, Medicare and federal employee/military retirement benefits (larger than those of SS, though rarely mentioned) the US deficit in 2005 was over $3 trillion (with a "t"), says the US Treasury.

Here's the numbers. with a link to the Treasury report.

A $3 trillion annual deficit is more than 2.5 times all federal income tax collections, about 30% of national income, about equal to all current federal, state and local government expenditures combined.

This perhaps gives witness to the incentives facing elected politicians, regarding accountability and related issues.