CEPR - Center for Economic and Policy Research

A Marshall Plan for the Gulf Coast

John Schmitt
Topeka Capital-Journal (KS), October 22, 2005 
Northwest Arkansas Times, October 23, 2005
(SC), October 25, 2005
Progressive Populist
, November 15, 2005

As the scenes of devastation from Hurricane Katrina gradually fade from the media, we face the long and difficult task of rebuilding over 90,000 square miles that might have been better off if only a war had been fought there.

In fact, in many respects, the task facing the Gulf Coast is not terribly different from the one that faced Europe after World War II. The United States responded then with the Marshall Plan -a massive aid program that cost over one percent of our total incom
e between 1948 and 1951.

The results were, of course, enormously successful. A continent in tatters quickly rebuilt itself, laying the groundwork for fifty years of unprecedented economic growth and prosperity. Certainly, our own citizens deserve no less than what we did for Europe at a time when the we were a much poorer country, straining under our own post-war economic burdens.

Once the immediate job of relief is finished, what would a full-scale Marshall Plan for the Gulf Coast look like? Any serious plan would have to aim, first and foremost, at the region's poverty and inequality, which has probably done more damage than the actual storm and subsequent flooding.

As the images of Katrina's refugees exposed so clearly, Louisiana, Mississippi, and Alabama are three of the poorest states in the country. Low incomes and the resulting low tax bases, combined with the Gulf Coast's appalling economic inequality, are what really wreaked havoc. If you doubt this, think back to September 11th, when stock brokers and office cleaners, merchant bankers and parking-lot attendants, all died together. Brokers and bankers may have lost their homes in New Orleans, but they weren't trapped on their rooftops or in the Superdome and, few, if any, died.

A first concrete step in a Gulf Coast Marshall Plan would be to install a world-class transportation and communications infrastructure, including fiber optics, high-speed internet, local public transportation, regional rail, airports, and seaports. To the extent possible, reconstruction efforts should focus on using local companies and local workers, in jobs that pay good wages with health insurance. The emergency relief bill just passed by Congress, which allows reconstruction contractors to pay below the "prevailing wage" in the area -- just $9 per hour -- takes exactly the wrong approach. In the medium term, these kinds of public investments in basic infrastructure would raise the productive capacity of the local economy, attracting new private investment and better-paying jobs.

Second, no amount of re-investment will make sense unless the region builds a functioning environmental infrastructure. Repairing and improving the levees is an obvious place to start. But, as environmentalists in the region have been arguing for years, the best protection against the storm surge that ultimately swamped New Orleans would have been large and healthy wetlands and barrier islands, which absorb storm surges more effectively than anything humans can build on their own. Unfortunately, coastal developers have converted large swaths of these incomparable natural barriers into commercial and residential areas, leaving the rest of the coast exposed to the full brunt of the storm surge.

Third, the Marshall Plan worked so well in Europe, in part, because Europe invests so heavily in its people. Europeans generally offer free education from before kindergarten through college, as well as free health care to all. For the moment, universal health insurance probably lies outside the realm of the politically feasible, but surely we could make a national commitment to give the Gulf Coast the finest educational system in the country, with first-class school facilities and the best and the brightest teachers.

This will cost billions, of course. But, President Bush is already looking to spend over $50 billion for relief and reconstruction. His administration has already spent over $190 billion to invade Iraq and rebuild its infrastructure, schools, and hospitals.

Just as our "greatest generation" shouldered the responsibility for rebuilding Europe, we, much richer today than they were then, have a profound obligation to the Gulf Coast. Anything less would betray the thousands of American refugees whose suffering has passed before our eyes on televisions and computer screens for more than a week.

John Schmitt is a Senior Economist at the Center for Economic and Policy Research, in Washington, DC.