CHAPTER ONE
Risk Shifting, from Coolidge to Katrina

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ON AUGUST 29, 2005, the powerful hurricane Katrina hit the U.S. Gulf Coast, flooding 80 percent of New Orleans. An estimated one million people were evacuated from the area, though many of the poor, old, and ill were unable to leave and seek higher ground. Moreover, those left behind were overwhelmingly African American. The nation watched in horror as death and destruction flashed across our TV screens. We were inured to seeing such events unfold in third-world countries. How could they possibly occur in a major American city?

Equally unbelievable, the government response at all levels was late, insufficient, and widely considered by all sides to have been lethally bungled. President Bush, on vacation at the time, appeared not to grasp the magnitude of what was occurring until a day or two later. Even then, he was uncharacteristically off-key in his response. His initial comments that “America will be a stronger place” for going through the disaster seemed like spin, especially given the inadequate federal response.14

As the tragedy wore on, the feds and local politicians started blaming each other. The Federal Emergency Management Agency, though created to react to such emergencies, was particularly inept. As reported by Los Angeles Times journalist Peter Gosselin, FEMA underwent a renaissance under Clinton, “speedily responding to the 1993 Mississippi flood, the 1994 Northridge earthquake, and other disasters.” When George W. Bush was elected, he gave the job of heading FEMA to his campaign manager, Joe Allbaugh, who criticized his new charge as “an oversized entitlement program,” suggesting that states and cities would be better off relying on “faith-based organizations.”

Much of the public became transfixed by the disaster and its aftermath. For the media, it was all Katrina, all the time. As an economist who often comments on government data releases, I was asked in every interview about the economic impact of Katrina for weeks after the storm. As the days wore on, we learned to our disbelief about victims dying in homes, in hospitals, and on the flooded streets of their cities, especially New Orleans. It seemed incomprehensible that we as a nation would be unprepared for such an emergency, especially after the terrorist attacks of 9/11.

Right underneath the surface of all this anxiety could be felt the pulse of a critically important national discussion about the role of government. A critique of the political and social philosophy I’m calling YOYO (“You’re on your own”) coalesced amid the storm’s wreckage. To be sure, there were those who dismissed the significance of FEMA’s performance as just another example of governmental failure, but these were largely anti-government ideologues whose views appeared to be out of step with the mainstream. Few took seriously the notion that less government was necessary, before or after the event. To the contrary, the conservative majority in the federal government immediately began spending billions (over $60 billion in the first week, with billions more to follow, the most ever in response to a natural disaster) to redress the damage.15

A conversation broke out on the op-ed pages, in blogs, in letters to the editor, wherein citizens actively wondered if we’d gone too far down the YOYO path. Liberal columnists like Paul Krugman lambasted the administration, connecting the dots between its ideology of individualism and its failure to rise to an occasion of such dire need. In an op-ed entitled “Killed by Contempt,” he wrote:

The federal government’s lethal ineptitude wasn’t just a consequence of Mr. Bush’s personal inadequacy; it was a consequence of ideological hostility to the very idea of using government to serve the public good. For 25 years the right has been denigrating the public sector, telling us that government is always the problem, not the solution. Why should we be surprised that when we needed a government solution, it wasn’t forthcoming?

Letters to the editor during this period express with crystal clarity the stakes invoked by hyper-individualism. One letter argued that this breakdown of the social contract was directly related to the “starve the beast” mentality of those who would cripple the government by cutting off its revenue stream. The writer went on to assert that, contrary to the belief of those in charge, “‘the beast’ is not government. It is the insolence of those who believe that helping one’s fellow citizens is not a duty, but an option.”

Another letter writer summed it up this way:

We have a president… and a Congress whose agenda is to privatize risk by reducing public financing and dismantling public safeguards, including bankruptcy, Social Security, health insurance, and environmental and disaster protections.

The level of the government’s response to Katrina was as predictable as the hurricane itself. You get what you pay for.

This is what an ownership society looks like. This is what an ownership society means: we are each of us on our own.

Even conservative columnists such as David Brooks talked about the hurricane’s aftermath as a unique opportunity to use the tools of government to address the deep economic and social inequities that remained so stark even as the floodwaters receded.16

I’m not citing those letters and opinion pieces because I think they’re right. I do, but what of it? There are surely letters and op-eds saying just the opposite. I’m citing them because they so precisely capture my point. Even before Katrina, many of us shared a sense that something was wrong with the extent to which we were shifting economic and social risks from shared sources to individuals. The privatization efforts by the government, the defunding of safety nets, the decision of businesses to drop worker pensions, changes in corporate norms that in earlier times protected jobs but now made workers more disposable—all of these ongoing risk shifts were already leading to a heightened sense of YOYO-induced insecurity. But the storm, and particularly its aftermath, shoved these concerns to the front burner for a growing number of citizens.