Katrina a Blow to Economy; and a Lesson to Us: Make Shore Zones Off Limits for New Building

The devastation and death that Hurricane Katrina left in its wake once again tests America’s inexhaustible ability to quickly recover from catastrophe.

That’s happening in New Orleans, La., and the other Gulf Coast regions that have been laid waste by a storm of previously unimaginable destruction, which led to the population’s exodus to higher ground and shut down key parts of our energy industry.

As bleak and chaotic as things may look across the shattered coastal states, this is a region that is going to be hit by an even greater force than Katrina: the power of an $11 trillion economy to rebuild, repair and reclaim what was lost and destroyed.

An early sign of what is to come was evident on Wall Street last week in the immediate aftermath of the storm, when stocks were tanking (before Wednesday’s rally), but construction company stocks were flying high.

Investors knew that one of the economic benefits of natural disasters is the explosion of insurance claims, reclamation projects and reconstruction spending that over time will total in the tens of billions of dollars.

As the waters recede and the massive clean up and rebuilding begins, the one thing New Orleans and other besieged communities will need are construction crews to restore bridges, repave roads, and repair and reinforce levies breached by the storm. That’s going to require an army of workers including engineers, electricians, telecommunications workers, reclamation companies of all sorts, carpenters, plumbing contractors, health-care professionals and many others.

The Big Easy is one of the most exciting cities in America, with a large tourism industry. But it has had a troubled history of massive poverty and one of the highest crime rates in the country, as we saw in the hundreds of looters who ravished downtown stores.

But this city and other devastated areas will become employment central in the weeks and months to come as a wave of businesses move in to take advantage of an explosion in private and government construction projects.

The region is also going to benefit from significant federal spending as well. "As much as it takes," Michael Chertoff, Homeland Security secretary, said last week. Even as he spoke, the government was moving an armada of equipment, personnel and relief supplies to the affected regions.

While President Bush was criticized for not responding quickly enough last week, he mobilized a recovery effort by Wednesday that included a dozen departments and agencies — from the Pentagon to the Federal Emergency Management Agency.

An emergency assistance bill that, as of this writing, was speeding through Congress Friday will pump $10.5 billion in federal disaster aid to cities and towns to cope with the recovery costs. A much bigger assistance bill is expected to pass in the weeks to come.

But there were even bigger economic problems at stake as a result of the Gulf disaster, principally the shut down of Gulf oil rigs and oil pipelines and refineries in the region. Forecasters say that this and other collateral economic interruptions in communications, railroad and interstate trucking will slow the nation’s economic growth. But that remains to be seen.

Bush has correctly tapped into the Strategic Petroleum Reserve to keep oil supplies at existing levels. But that didn’t prevent the price of gas from shooting up to $3 or more per gallon in many areas on fears of oil shortages and a decline in refinery production.

One possibility: A temporary cut or suspension in federal gas taxes that would help beleaguered drivers cope with rising prices until all the oil rigs and refineries in the Gulf region are fully operational.

But after all is said and done, some fundamental things will not change. New Orleans will still be below sea level and vulnerable to future storms, which could be even more powerful than Katrina. This means that the infrastructure of this region has to be reinforced with stronger sea walls and levies and more sophisticated drainage systems.

Stricter building development regulations will have to be imposed as well. All those homes, casinos and other developments that were foolishly built along the coast took the full brunt of the storm and were demolished. Shore zones have to be off limits for new building.

The path hurricanes take are often unpredictable. But one thing we can be sure of is that the Gulf will spawn more of them in the future, and it’s a good bet that one of them could make Katrina seem mild by comparison.

The time to better prepare for that event is now.