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How to Spend (Almost) $1 Billion A
Day
Time
DANIEL EISENBERG
September 26, 2005
Every single purchase during a natural-disaster-relief operation is billed
to a four-digit federal code. In accounting terms, Hurricane Charley was known
as 1539 and 1543. Ivan had nine codes, starting with 1548, one for each state
affected by the emergency. Hurricane Katrina is such a vast and expensive
undertaking that it has been assigned 45 separate codes: 1602 for Florida, 1603
for Louisiana, 1604 for Mississippi and 1605 for Alabama, plus one for every
state taking in evacuees. For months and perhaps years to come, those codes
will be used by the Federal Government to pay for, and keep track of, the
billions of dollars required to rebuild. The Federal Emergency Management
Agency (FEMA) will end up reimbursing the Coast Guard for fuel used to power
helicopters in rescue missions, the city of New Orleans for the overtime of its
police and fire departments, and Houston for the costs of housing evacuees in
the Astrodome.
The receipts for such expenses during the first couple of weeks of Katrina
relief have been collected. The tab so far: $9.8 billion, including $1.8
billion for the reimbursement of lodging expenses and $1.3 billion on trailers
and temporary homes. And that is just the beginning. Shortly after Labor Day,
the Bush Administration asked Congress to sign off on an additional $51.8
billion--roughly what the U.S. spends in Iraq each year. Unlike the Persian
Gulf, though, the funds earmarked for the Gulf Coast were expected to last a
month or two. House Republicans were so spooked by the size of the request that
the White House dispatched Budget Director Joshua Bolten to Capitol Hill on
Sept. 7, where he made an unusual, late-evening appeal to nearly 200 skeptical
Representatives.
One can only imagine what they were thinking as the President addressed the
nation about a week later from an otherwise desolate Jackson Square in New
Orleans' soon-to-reopen French Quarter. The man who said during his re-election
campaign that "government is limited in its capacity to heal and help" spoke in
bold terms about "one of the largest reconstruction efforts the world has ever
seen," proposing a tax-advantaged Gulf Opportunity Zone to create jobs,
worker-recovery accounts to help evacuees pay for job training and child care,
and even an Urban Homesteading Act to let some low-income victims of Katrina
build homes on cheap federal land. Think of it as George W. Bush's New
Deal.
As money flows into the Gulf States faster than water is pumped out of New
Orleans, it's safe to say the recovery from Hurricane Katrina has entered a new
phase: the financial free-for-all. The President was careful not to get
specific about what the "generosity of a united country" might cost, but
economists estimate that Katrina's final price tag could easily top $200
billion. While frugal Republicans like Senator Tom Coburn of Oklahoma and
Arizona Representative Jeff Flake (one of 11 members of the House to vote
against the President's relief bill) instinctively called for budget cuts to
offset the cost of the recovery effort, few cuts seem politically realistic.
And much to the dismay of many of his colleagues, House majority leader Tom
DeLay proclaimed that the G.O.P. had already trimmed most of the fat from the
federal budget.
Beyond saying that "unnecessary spending" must be targeted, the President
has suggested few specific cuts of his own so far. During a news conference
with Russian President Vladimir Putin the day after his televised speech,
however, Bush stressed that more tax cuts remained a top priority. Neither side
of the aisle has seemed capable of demonstrating fiscal prudence and compassion
simultaneously, while the President, hobbled by a $331 billion budget deficit,
an unpopular and expensive war in Iraq, and an official admission that he
mishandled the initial crisis, could neither afford his Gulf Coast
largesse--nor afford not to extend it.
With money flowing so freely, nearly every group--from hard-hit farmers to
federal contractors--is angling for its piece of the action. The Federal
Government is forking over as much as $800 million a day to cover everything
from temporary housing and debris removal to generators and bottled water. The
next stage of the gold rush should take place near the end of October, when the
White House expects to return to Congress for another cash infusion, an
Administration official tells TIME.
On Capitol Hill, both parties are trying their best to harness the massive
Katrina rebuilding effort to propel their own ideological agendas. Democrats
view this as a once-in-a-generation opportunity to try to reduce poverty and
racial inequality, touting more investment in public school construction and
housing vouchers. At the same time, they are showing a renewed spirit in
fighting the President's proposed Medicaid cuts and a slew of G.O.P. tax
reductions that were on the verge of passage. But conservatives could see at
least some of their handiwork in the Administration's initial proposals for
job-training accounts and private- and parochial-school vouchers--as well as in
the President's earlier controversial decision to suspend rules requiring
federal contractors to pay "prevailing wages" in the region. Alabama Senator
Jeff Sessions has even tried to use the tragedy to fuel support for his
faltering legislation to repeal the estate tax, which brought in $24.8 billion
to the Treasury last year. After his prodding, activists were busy trying to
identify a victim whose estate would get hit by the current tax.
Back on the ground, the Administration and Congress have had to prove they
are at least attempting to mind the store. To help win passage of the $51.8
billion relief bill, Congress allocated $15 million to the Department of
Homeland Security to closely monitor the spending, a sum DHS inspector general
Richard Skinner termed "a good start." His office, along with the White House
Office of Management and Budget, is required to give Congress weekly briefings
on how the money is being spent. The first such report spanned 10
spreadsheet-packed, rather puzzling pages--including a two-page
glossary--breaking out spending into numerous categories, including human
services and infrastructure. "You can't prevent [abuse]," says Clark Kent
Ervin, the former inspector general at the DHS. "The issue is what you can do
to minimize it."
As part of that expanded oversight, FEMA is sending some 30 auditors to the
Gulf to follow the money. Not to be outdone, Congress has its own team of 24
investigators hot on the FEMA auditors' heels. But unless the President
appoints an independent czar to oversee the entire reconstruction operation,
Democrats and Republicans alike fear it may be as poorly managed as the initial
response to the storm. FEMA's track record before Katrina isn't too
encouraging: during last year's $2 billion cleanup of Hurricane Frances,
millions of relief dollars ended up in the hands of residents in the largely
unaffected area around Miami.
So even after last week's resignation of FEMA director Michael Brown, it may
be a long time before the agency stops being politicians' favorite punching
bag. No wonder the challenge of spending all that money seems to hold no joy
for those grinding away at FEMA's National Response Coordination Center located
in a sad annex behind a southwest Washington Holiday Inn. "The size of it is
daunting. The speed with which it needs to be delivered is very difficult,"
says Bob Spaulding, project manager for Fluor Corp., one of the companies
awarded $100 million to help provide temporary housing to nearly 1 million
people in the region. To help quicken the pace of rebuilding, the government
has relaxed some of its normal rules, guaranteeing contractors a certain profit
regardless of what they spend, allowing many contracts to be signed without
competitive bidding, and raising the amount federal employees can put on their
credit cards without getting special approval, from $25,000 to $250,000.
But cutting corners doesn't necessarily make things run faster. In many
parts of Louisiana and Mississippi, frustration is building over the slow
recovery. Relatively few of the promised federal help centers to coordinate
assistance have been opened, while some local officials have struggled to get
contracts for cleanup projects approved in Washington. Numerous victims of
Hurricane Katrina have had trouble applying for assistance, whether online or
on the telephone, though bandwidth and staffing have been greatly increased in
recent days. One of three Carnival Cruise Lines ships that was chartered to
house thousands of relief workers and possibly evacuees for at least six
months, at a cost of around $220 million, was still docked in Mobile, Ala.,
most of last week and empty, as Alabama, Mississippi and Louisiana jockeyed for
the vessel. More ominously, in the wake of the horrifying discovery of 34
bodies at a Louisiana nursing home and an additional 45 at New Orleans'
Memorial Medical Center, a very public dispute about the slow pace of gathering
bodies in New Orleans erupted between FEMA and Kathleen Blanco, the Governor of
Louisiana. Claiming that it needed better coordination with local authorities
to get the job done, Houston-based Kenyon International Emergency Services
canceled its temporary contract with FEMA and signed on with the state instead.
By the end of the week, the official death toll from Katrina had risen above
800.
Most of the major Katrina contracts doled out so far have been for temporary
housing, and they have gone, by and large, to companies with strong ties to the
Bush Administration, including Bechtel, Fluor and the Shaw Group, which
recently built a helicopter pad for Vice President Dick Cheney's home in
Washington. A $3 billion engineering-and-consulting behemoth that has equally
close connections to the Louisiana Democratic Party, the Shaw Group, based in
Baton Rouge, La., counts former Bush campaign manager Joe Allbaugh as one of
its lobbyists in Washington and has scored two separate $100 million
Katrina-related contracts--one to help the Army Corps of Engineers pump water
out of New Orleans and another to help FEMA provide temporary housing. Soon
after the deals were announced, Shaw's struggling stock soared from $16 to $24
a share.
Congress has allocated enough money to purchase almost 300,000 trailers,
18,000 of which have already been delivered to victims of the storm. Still, few
people in the industry think it can come up with anywhere near that many units
in the next few months. Ed Unger, director of operations at Tom Raper RVs in
Richmond, Ind., says it took about a week on e-mail to complete a $15 million
to $20 million contract to provide from 1,000 to 2,000 trailers. Under FEMA
guidelines, he'll have to wait until all the trailers are delivered down South
before he gets his check. The only real snag was that after the dealership had
come up with the idea of filling each trailer with donations of food and
clothing, FEMA informed Unger that rules stipulated that each trailer had to
arrive empty. Instead, Unger is sending the supplies down by tractor trailers
to church groups doing relief work in the area.
The very idea of using trailers and other mobile homes to house so many
evacuees has also come under attack. House Democrats have complained that the
approach could "result in segregating poor people into unsustainable,
artificial communities." A more sensible plan, many of them insist, would be to
expand the government's Section 8 housing-voucher program. Meanwhile, President
Bush's "urban homesteading" plan has received a lukewarm reception. "You're
asking people who make less than $10,000 to build their own homes?" says Bruce
Katz, a housing-policy expert at the Brookings Institution in Washington.
How the crucial housing issue is ultimately handled--much like the final
bill for rebuilding the Gulf--is anybody's guess. For all the imposing dollar
figures and bold proposals being bandied about, it's clear that Washington is
making this up as it goes along. "It's going to cost whatever it costs," is how
the President put it last week. Given the battering his reputation has taken in
the past few weeks, that open-ended approach makes perfect sense. After all, no
matter what it ends up costing, the White House has learned that the price of
inaction is much, much higher. --Reported by Mike Allen, Perry Bacon Jr., Brian
Bennett, Timothy J. Burger, Massimo Calabresi and Matthew Cooper/ Washington,
Michael Peltier/ New Orleans and Cathy Booth Thomas/Baton Rouge
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