Blowback From Katrina


WASHINGTON, D.C.—President Bush’s very general proposals last week for recovery of the hurricane-devastated states is PR. As everyone must know by now, Bush never changes his position on anything. He just keeps going—celebrating the government workers who fought the hurricane, commiserating with survivors, and calling on God. In New Orleans he threw in a few gimmicks, like a homesteading lottery and a Gulf Opportunity Zone. Serious measures to confront the needs of survivors are fixed in the conservative ideological agenda. It broadly calls for removal of the last vestiges of the New Deal social-welfare programs and institution of free-market, survival-of-the-fittest economics. A serious effort at recovery must directly address at least three basic issues:

Health care: This situation is horrendous. The only vehicle for delivering health care is Medicaid. But in today’s aftermath of the storm, if you are, say, a 60-year-old man without income and suffering from heart disease, you would not be eligible for Medicaid assistance. The best you could do would be to try to find some emergency room or charity hospital to take you in on the theory that it might get paid back by the government in the future.

To qualify for Medicaid you must fit into several narrow categories: be 65 or older, seriously disabled, a child, or a parent of a child on Medicaid. Poverty isn’t the sole determining factor. The National Governors Association is asking the government to suspend these categories and make Medicaid available to every hurricane victim on a temporary basis, and the Senate, in a bipartisan move, is readying legislation to do that. But the White House is balking, refusing to drop the categories and insisting that each state come to Washington to negotiate a backroom waiver deal. Last week, the White House negotiated such a deal with Texas that maintained the categories the governors want removed. Because FEMA has not promised to reimburse states taking in evacuees, both Texas and Florida have begun denying benefits to them. That is a particular hardship for the many mothers with small children among the thousands of stranded victims. Some states do provide benefits. Whether you get covered depends on what state you are dumped into. Conservative Republicans have been trying to gut Medicaid for years, and they are wary of any foot-in-the-door maneuver. Still, the Senate may well enact this legislation. Then it’s up to the conservative Republicans in the House led by Tom DeLay.

Unemployment insurance: Many people along the Gulf Coast were without jobs before the storm, and the prospects over the next year are iffy. A building boom may produce local jobs, or it may result in importing workers from elsewhere. Louisiana had a 6.1 percent unemployment rate before Hurricane Katrina hit, and now hundreds of thousands are out of work. According to Labor Department statistics, 10,000 people in the affected region filed last week for unemployment benefits. Newsday reports, “The nation could lose as many as 400,000 jobs through the end of this year because of the destructive storm, according to estimates from the Congressional Budget Office.”

If the government doesn’t move fast to help Alabama, Mississippi, and Louisiana by refinancing their unemployment insurance trust funds, these hard-pressed states are likely to cut unemployment benefits overall and raise business taxes, worsening the situation, according to analysts with the Center on Budget and Policy Priorities.

Bush’s remedy for unemployment is to drop wages. He signed an executive order that lets states pay substandard wages for cleanup and repair work. Wages in Louisiana are already 19 percent below the national average. In Mississippi, average wages are $586 a week, 28 percent below the national average.

Housing: FEMA is not a housing agency, and its past experience with disaster relief in this sector revolves around small-scale provisioning of trailers, roof repairs, and help in paying mortgages. Bush now promotes the idea that victims can live on contracted cruise liners tied up in the New Orleans harbor. The most direct way to provide housing for hundreds of thousands of people is through existing Section 8 provisions. Under this program, the government pays landlords the rent for qualifying families. There are perhaps 100,000 housing vouchers already approved. But Congress has never funded them, so they are useless. Bush would have to take an active role in pushing for this funding.

In his speech last Thursday night, the president revived a perennial proposal for government assistance in the form of homesteading. In this case, evacuees could enter a lottery for vacant federal land. If you win the lottery, then you would have to demonstrate you had income to pay the mortgage on a home—impossible for most of these people.

The right-wingers are worried about overspending for the hurricane and somehow getting the country back into a New Deal frame of mind. They need not worry. The proposals above are short-term. As for paying for the recovery: Why not cancel, or at least defer, two tax cuts scheduled to take effect in January that offer no help for middle-class or poor people. For those making
$1 million or more, the tax savings would be in the neighborhood of $130,000.

More slick maneuvering

Bush repeatedly alludes to a shortage of crude oil, which he sought to mitigate by releasing part of the nation’s strategic petroleum reserve. (In last week’s speech, he acknowledged that the industry now is back on its feet and doing well.) In fact, there is no shortage of crude, but a surplus. The Petroleum Economist, in its September issue, says Ed Galante, senior vice president of ExxonMobil, addressed “the perception” earlier this year. The industry journal quoted Galante as saying, “Despite the number of refineries in the U.S. dropping more than 50 percent—from [a peak of] 325 in 1981 to about 150 today—total capacity has decreased by only 10 percent. [And] over the same period, refinery output is up by about 25 percent.”

Rather than build a slew of new refineries, the industry is pulling supplies from elsewhere around the world. Western Europe, which is moving more and more to diesel, is one growing source; Russia supplies refineries there, and fuels will also come from such places as Iran (with whom we don’t trade), Kuwait, and Saudi Arabia.

The Bush administration aimed to rely less on foreign sources, but in reality, its reliance will grow, not diminish. The one new American refinery on the horizon is scheduled for construction in Arizona’s Yuma County, not far from the Mexican border, by a private company called Arizona Clean Fuels (ACF).

“Up to now, it had been thought that U.S. environmental regulations made the construction of a new refinery impossible,” says Petroleum Economist, “but ACF disagrees. Glenn McGinnis, the firm’s chief executive officer, told Petroleum Economist last month that the Clean Air Act operating permit had been issued in April—after a four-year application process. The environmental-impact statement, for which the Bureau of Land Management is the leading agency, is under application.” The refinery will draw its crude oil from Mexico via a pipeline.

Additional reporting: Isabel Huacuja and Ali Syed