What Bush’s “opportunity zone” should look like.

Mallory Factor wrote in National Review The reconstruction of the Gulf Coast in the wake of Hurricane Katrina is a forgone conclusion. The question is not will the region be rebuilt; the question is how — and what role the government will play. The resources are there for successful reconstruction, but the challenge is to use them effectively.... If we have learned anything from this natural disaster, it’s that more central planning and greater federal control only help to make matters worse. Bush’s opportunity zone, if it is to succeed, must be a Liberty Zone, where limited government unleashes the power of individual initiative. What should the zone look like? Lawmakers have a unique opportunity to return us to free-market first principles and demonstrate the power of individual liberty to achieve economic success. The physical rebuilding of the Gulf Coast should encourage private ownership, which we know works, rather than public ownership, which badly exacerbated the hurricane’s impact in the first place.

And private ownership is completely consistent with Bush's idea for an Ownership Society.

Developers and insurance companies are the ones who should buy folks out and redevelop the area in an economically rational manner. As for the levees, they are too important to entrust to Washington bureaucrats. Instead they should be locally owned and controlled, ensuring that they are maintained by people who have a vital interest in their soundness.

Certainly government should not control them: Federal, State, or Local. Personally I dont like the idea of levees trying to protect an area that is 7 to 15 feet below sea level. I think reconsturction should be moved to an area that is above sea level, and if people in the parts of New Orleans that is above sea level want to continue living there, they should build new levees to protect their property, and then the old ones should be torn down, an allow the below sea level parts to become Lake New Orleans.

Federal flood insurance should be phased out or privatized, discouraging irrational building in areas where the true risks, as priced by private insurance markets, are too great. This would lead to a rational redevelopment of the region that would dramatically improve safety and end the irrational practice of subsidizing the very rich and their beachfront homes.

This should be true not just in New Orleans, but elsewhere in the country when Federal Flood Insurance or other FEMA funding just helps rebuilding over and over buildings that should never be built there in the first place.

Individuals, meanwhile, should be empowered with smart cards or vouchers for all vital government services, especially health care. Such cards should be linked to health savings accounts for purchasing insurance, which would create a consumer-driven universal coverage system. In other words, the Hurricane Zone should be transformed into a true Liberty Zone, where the policy mix will pare back the tentacles of Leviathan and allow the full creative force of individual initiative to restore the region.

Sounds good to me.

A Liberty Zone would suspend federal regulations by default unless they can be justified by cost-benefit analysis. Justifiable regulations should be implemented only through market-based mechanisms, not command and control. In such a zone, we should stop taxing capital gains and allow businesses to immediately expense their capital purchases. We should suspend all tariffs on imports to the zone, reducing the cost of materials and allowing the benefits of free trade to drive the reconstruction process forward. The possibilities are limited only by the scope of our imagination. The guiding principle should be the empowerment of individuals, whose new ideas would leave big-government bureaucracy behind. Unfortunately, calls for tax relief to spur redevelopment in the region are already being co-opted by every special interest in Washington. As the government does a notoriously poor job of picking winners and losers, what’s needed is genuine, across-the-board tax relief as part of the policy mix.

Along with complete suspension of all taxes on capital to encourage investment, the individual income tax for those who actually live in afflicted areas year-round should feature substantial rate reduction or be suspended outright. This would encourage the large-scale return of human capital — that is, people — to the region. It is critical that all of the tax and regulatory relief included in the recovery package be neutral, avoiding special-interest subsidies and tax breaks that substitute government whim for market rationality. If we are bold and pursue an agenda based on the principles of free enterprise, we will transform a region now suffering incredible hardship into an engine of prosperity — into a Liberty Zone that will show the world just how freedom works.