Big Easy's Boondoggle

So, the president and Mrs Bush went down to New Orleans to commemorate the second anniversary of Hurricane Katrina. Who knows? Maybe over a latté with leading Democratic candidates Hillary Clinton, Barack Obama, and John Edwards they discussed spending even more money down there. After all, everyone seems to be saying New Orleans needs more cash.

Here's a pop quiz: How much money has Uncle Sam spent on New Orleans and the Gulf region since Hurricane Katrina ripped the place apart?

I'll give you the answer because you'll never guess it. The grand total is $127 billion, including tax relief.

That's right: a monstrous $127 billion. Of course, not a single press story has highlighted this gargantuan government spending figure. But that number came straight from the White House in a fact sheet subtitled, "The Federal Government Is Fulfilling Its Commitment to Help the People of the Gulf Coast Rebuild."

Huh?

This is an outrage. The entire GDP of the state of Louisiana is only $141 billion according to the U.S. Department of Commerce. So the cash spent there nearly matches the entire state gross GDP. That's simply unbelievable. And to make matters worse, by all accounts New Orleans ain't even fixed.

You might be asking, Where in the hell did all this money go? Well, the White House fact sheet says $24 billion has been used to build houses and schools, repair damaged infrastructure, and provide victims with a place to live. But isn't everyone complaining about the lack of housing?

Perhaps all this money should've been directly deposited in the bank accounts of the 300,000 people living in New Orleans. All divvied up, that $127 billion would come to $425,000 per person. After thanking Uncle Sam for their sudden windfall, residents could head to Southern California and buy homes that are now on sale thanks to the subprime mortgage crisis and bid up the sagging house prices in the state.

The fact sheet goes on to say that $7.1 billion went to the U.S. Army Corps of Engineers to rebuild the levees; that the U.S. Department of Education spent $2 billion on local schools; and that the Laura Bush Foundation for America's Libraries has awarded more than $2.5 million (the pikers). The administration also provided $16.7 billion as part of the largest housing-recovery program in U.S. history.

So the billion-dollar question becomes: Where did the rest of that money go?

Meanwhile, according to an article by Nicole Gelinas at the Manhattan Institute, New Orleans has earned the distinct honor of becoming the murder capital of the world. The murder rate is 40% higher than before Katrina, and twice as high as other dangerous cities like Detroit, Newark, and Washington, D.C.

Think of this: The idea of using federal money to rebuild cities is the quintessential liberal vision. And given the dreadful results in New Orleans, we can say that the government's $127 billion check represents the quintessential failure of that liberal vision. Mrs. Clinton calls this sort of reckless spending "government investment." And that's just what's in store for America if she wins the White House next year.

Remember President Reagan's line during the 1980 campaign about how LBJ fought a big-government spending war against poverty, and poverty won? Well think of all this Katrina spending as the Great Society Redux. And it failed. I suppose the current Bush administration would like to label this "compassionate conservatism." But guess what? That failed, too.

Right from the start, New Orleans should have been turned into a tax-free enterprise zone. No income taxes, no corporate taxes, no capital-gains taxes. The only tax would have been a sales tax paid on direct transactions. A tax-free New Orleans would have attracted tens of billions of dollars in business and real-estate investment. This in turn would have helped rebuild the cities, schools, and hospitals. Private-sector entrepreneurs would have succeeded where big-government bureaucrats and regulators have so abysmally failed.

This is the real New Orleans Katrina story. It's a pity that the mainstream press isn't writing about it. Call it one of the greatest stories never told.

Mr. Kudlow is host of CNBC's "Kudlow & Company."