Constant's pations

If it's more than 30 minutes old, it's not news. It's a blog.

Monday, October 10, 2005

Contrasting Congressional appropriations for Katrina and Iraq

Amazing how easy it is to get money if you're fighting a war.

But if you're stuck in the Americna Gulf Coast, you better be prepared to wait.

If only Congress were as generous with Americans as it is with DoD and foreign battle fields.
* * *

There was some legislation passed recently stating the loans to the US Gulf Coast could not be written off or turned into grants.

Under the Stafford Act, there are some provisions that allow this to occur.

Putting aside the details of the act, I wanted to focus on the simple principle of "not allowing the loans to be written off."

* * *

In principle, I understand the RNC approach: It's to ensure that the sense of accountability and funds management remains prudent and under a watchful eye.

However, the contrasts with Iraq prove striking.

The US has poured billions of dollars into Iraq to provide at no cost free security. What has the US done for the Gulf Coast? Simply offered loans with the explicit statement that they cannot be written off.

Indeed, I am simplifying the issue, but that's the point: Why are we so quick to pour money into Iraq, but reluctant to not at least do the same at home?

* * *

Funds management is important. We don't want the money wasted.

Also, when did the RNC suddenly become the "party concerned about auditing the money?"

Again, if the RNC is going to impose this standard on the US states, then why not impose the same standard on Iraq?

* * *

I'm not asking the question for an answer: I'm asking it with the hopes that we simply contrast what was approved in 2002-3 for Iraq; and what's approved for the United States in 2005.

* * *

Some might suggest that the scope of the Katrina disaster is "much larger" than 9-11; so unlike 9-11, we can't possibly give money away.

Actually, despite "giving money away" in 9-11, there's still a hole in the ground.

Thus, if we do worse in the Gulf Cost, and explicitly state that the money will never be a grant, then I would presume that the "time to get a result in NYC WTC" will be at least as long in the Gulf Coast, multiplied by the number of areas equivalent to the WTC.

IN short, we're talking about potentially decades before the Gulf Coast comes back.

* * *

There are, in a general sense two factors investors take into consideration when they are planning: It it time, and the complexity of not just the budget but the schedule.

These go into forecasting the actual costs, and then you can contrast these with the alternatives.

With the US Congress decision to "not allow the funds to be converted to grants," this sends a big message: The uncertainty is up, and the prospects for investment are falling.

* * *

Another way of thinking about this is to think about a wave pattern in a pond. If you drop a small pebble at the edge of the pond, you can see the ripples go out.

This movement of the wave is analogous to how money flows through the economy.

Each time someone invests, spends money, or creates a contract, this is like throwing a rock into the lake. The more action there is, the higher the waves and volatility.

The key factor is that at the other side of the pond, there are reflective waves. These are also parts of the economy.

* * *

If you can imagine the wave action subsiding, you can get an idea of what happens when an economy slides to a halt.

Congress and the Federal Reserve help to keep the wave action both rising and increasing in rate. They also help the pond get bigger with adjustments in policies and interest rates.

* * *

Think of this Congressional action as something that throws some glue into the water pump. It slows down the rate of investment. People who are looking at this "nothing will turn into a grant," aren't thinking, "I'm going to lose out."

Rather, they're looking at the entire pond: What's most likely; and how are others going to react. Will they increase their rock-throwing?

Congress sent a very big signal: It's willing to face risks and throw money in a more risky situation in Iraq; but not willing to do that at home. That sends a message about the prospects that other rock-throwers are going to stick around this pond.

Self-evidently, the rock-throwers are leaving, abandoning their business.

* * *

In order to keep an economy going, it's not just a simple matter of setting up shop.

Rather, you have to keep an eye on the edge of your pond.

In this case, the edge of the barrier between "Katrina" and the "stuff that's not affected" is roughly the shape of an oval extending inward from the Gulf Coast.

But as more and more business on the edge of that barrier are affected by the "lack of rock throwers", they're going to suffer.

* * *

Before Katrina hit, if you were to go to the northern edge of Mississippi, there were generally three ways rock throwers would arrive: From either the north, east, or west.

Now, if you include the affected areas in this model, the crossflow isn't there. There's nothing to go to in the middle of the pond.

This means all the cross-flow traffic that was coming from either of these three directions is suddenly falling.

Which means, at the edge of the pond in Northern Mississippi, the edge of that pond no longer has 4-directions of rock throwers.

Rather, it has just one.

* * *

This means that the effective "range of the still pond" is spreading, and the edge of the affected area is getting bigger.

I'm not talking about Katrina-destruction; I'm talking about the net slowdown in economic activity.

* * *

There is no solid barrier to this "region with slower economic activity."

Money is needed to prime the pump. Essentially, we have a total breakdown of all economic activity that's been built up since the 1600s.

That's alot that's fallen apart.

The longer Congress waits to "get to the level of rock throwing" that we had in 2005, the more difficult it is to get restarted.

* * *

One of the ideas of a Federal System of government is that the states, when they faced an external enemy could rely on a broader approach to the problem.

The Federalist papers discussed this.

Katrina shows us that the Anti-Federalists were right: That the Federal Government isn't there when you need it.

* * *

At the same time, we're seeing how the US government will meddle to "justify why it is needed," but then when it's needed isn't not there.

Also, the US works to assert the "benefits of Democracy" in Iraq, but what do we see at home? I don't see the benefits of the US government; I see excuses.

* * *

It's interesting to see the US government, that compels people to pay taxes, to then twist the hands of citizens to donate money, something the US government says it will not do.

That's essentially saying, "The Federalists were wrong: A strong central government not only doesn't exist; but the only thing that will save you is a strong, central populace."

* * *

By stating emphatically that the money allocated to the Katrina region will not be turned into grants, Congress increases the risks.

The prospects for economic growth are falling at the very time that Congress needs to send the opposite signal: That the prospects are resign.

Other businesses aren't going to get up and commit funds when they see the risks rising. The region has a shrinking pool of people with weal to attract other businesses.

* * *

To look at what is really happening, need to go back in time to when there were 60% fewer businesses in Louisiana. That's not all that long ago; but that's alot of cumulative wealth that's wiped out.

Our wealth isn't just measured in what we have, but also in what we can enjoy: Roads, travel, ease of movement.

Now, everything is complicated: It takes hours simply to call out, get connected, and then find someone to talk to. Mind you, that's after you've drive X-miles just to get connected to a cell-line.

* * *

NYC lobbyists were far more effective at getting funding after 9-11 than others after 9-11.

The problem in the Gulf Coast is alot bigger than Iraq: We've gone backwards, and rather than send in money and supplies like we've done in Katrina, the US is treating the Gulf Coast as if it were part of Cuba, to be blockaded.

* * *

The smart thing to do would be to have a Marshall Plan for the Gulf Coast. And I do mean that: A plan.

Right now, we have no plan. We're watching the White House implode from within as it chases its tail.

The RNC is like a drunken captain, too annoyed by his hangover to bother to care, and more inclined to inject more spirits to take off the edge.

* * *

It's disappointing to see the contrast between how the US treats the US Gulf Coast -vs- what's gone on in Iraq.

I'm not calling for frivolous spending.

I'm calling for some sort of national awakening: What's gone on in Iraq since 2002-3 has been absurd; there's no sense to "right that wrong" by being absurdly arrogant to those who are most vulnerable: American citizens who are homeless and facing a cold winter.

* * *

If we don't take care of what's currently in trouble, the size of the problematic pond is going to grow. It won't be a pond any longer, but a larger swamp that is that much harder to clean up.