Benefit-cost Analysis and Federal Water Projects
14 May 2006 in Regulatory Economics
Two articles of interest appeared in the Washington Post Sunday "Opinion" section, one by reporter Michael
Grunwald and the second by freelance author John
Barry. Grunwald and Barry say the Army Corps of Engineers is
a failed civil works agency whose errors were responsible for the
flooding of New Orleans after Hurricane Katrina. Moreover,
they place the blame for the Corps' failure squarely on
Congress.
One thread running through both articles is that it really doesn't
matter whether these projects actually deliver any of the benefits
promised. The essence of earmarking is that Federal spending is its own
reward. It is in every Member's interest to deliver the largest
possible share of federal spending to his own district or
state.
Spending on construction projects is especially attractive because
it creates or sustains employment.
ABUSES OF BENEFIT-COST ANALYSIS
Another thread in both articles is that the Corps
systematically exaggerates the benefits of its proposed projects and
grossly understates their costs. This leads to serious resource
misallocation, as many projects are funded and built that do not
generate any net public benefit. Projects in New Orleans that could
have protected against the flooding from Hurricane Katrina were not
build in favor of projects that either offered no flood protection
benefits, or made the flooding worse. But Congress is complicit in
these abuses of benefit-cost analysis, say Grunwald and Barry, and the
Louisiana delegation was responsible for
misallocating billions of dollars that led to the disaster in New Orleans:
Neutral Source cannot find any Executive order that says what Barry alleges. Grunwald and Barry are hosting a web discussion at noon on Monday, May 15. We have submitted a question in advance asking for a citation.After Katrina, the Corps said that all of its failed floodwalls had been overtopped by a hurricane too powerful for the Category 3 protection authorized by Congress, while Bush's critics said the administration's budget cuts had hamstrung the Corps.
Both were wrong. Katrina was no stronger than a Category 2 when it hit New Orleans, and many Corps levees collapsed even though they were not overtopped. Bush's proposed budget cuts were largely ignored, and were mostly irrelevant to the city's flood protection. New Orleans was betrayed by the Corps and its friends in Congress.
PROPOSED: A WATER ENGINEERING BOARD MODELED AFTER BRAC
Barry proposes that Congress establish a Water Engineering Board, "which would define national water policy, set priorities, integrate projects and apply peer review to proposals." Although Barry doesn't say so explicitly, it appears that the Board would rank proposals based on net social benefits. According to Barry:
The board could review Corps decisions during the public comment period, so as not to delay projects. And just by identifying priorities, it could force Congress to address them, at least before money is spent on less important plans. A commission might even be set up in such a way as to limit the choices Congress makes.
But why would Congress ever want to "limit the choices Congress makes"? Barry doesn't say, but he thinks he has a proven mechanism to do it if Congress is interested.
The BRAC process has indeed been successful, but Barry errs in explaining how it came to pass. He implies that the president simply imposed this new decision-making regime on Congress, but no president has that kind of authority. BRAC was the brainchild of Rep. Dick Armey (R-TX), who secured an amendment into the 1988 defense reauthorization act that created the commission and required Congress to approve or disapprove its recommendations as a single package.When the Pentagon needed to close domestic military bases, it knew that it would face guerrilla war in Congress over each proposed closing, and that the victors would be determined not by the national interest but by which members of Congress had the most power. So it created the Base Realignment and Closure Commission; Congress still has a say, but it can only accept or reject a package of recommendations.
A "BRAC" for water projects is an interesting idea. Who would comprise the political factions that would garner majority support in the House and 60 votes in the Senate?
