Scorn on the Bayou The Political Economics of Katrina

For two weeks since hurricane Katrina made landfall, Americas media have been presenting startling images of an impoverished New Orleans. Unfortunately, many journalists have been as inaccurate with their economic assessments of this region as they were in estimating how much time it would take to drain all the water from the city.

     While cover stories at TIME and U.S. News and World Report this week focused on the flawed response to Katrina and who was to blame, Newsweeks senior editor, Jonathan Alter, presented an array of inaccurate statistics to exaggerate socio-economic problems nationally as well as in the hurricane-affected areas of New Orleans.

     In his cover story, The Other America, Alter painted a picture of life in this country, and on the Bayou, that is substantially worse than reality: But this disaster may offer a chance to start a skirmish, or at least make Washington think harder about why part of the richest country on earth looks like the Third World.

     Having set the tone, Alter offered some dubious and misleading conclusions about Americas poverty rate: But after a decade of improvement in the 1990s, poverty in America is actually getting worse. A rising tide of economic growth is no longer lifting all boats. For the first time in half a century, the third year of a recovery (2004) also saw an increase in poverty.

     As recently reported by the Business & Media Institute, the 2004 Census Bureau survey indicated that poverty in America is actually lower than the average rate achieved during the decade of the 90s. In addition, even though the early 90s recession ended in the first quarter of 91, poverty actually continued to rise that year, as well as in 1992 and 1993 when it peaked at 15.1 percent. This means that the current period is not the first time in five decades that poverty has increased for three consecutive years into a recovery.

     Alter didnt do his homework on Louisianas poverty, either. Even though the nation has seen its poverty rate increase from 2000 to 2004, Louisiana is one of the few states where poverty decreased in the past four years. In fact, a 17.2 percent rate of poverty in 2000 declined to 16.7 percent in 2004.

Whos poor?

     Next, Alter made unsupportable claims about how poverty in America compares with other countries across the globe: The poverty rate, 12.7 percent, is a controversial measurement, in part because it doesn't include some supplemental programs. But it's the highest in the developed world and more than twice as high as in most other industrialized countries, which all strike a more generous social contract with their weakest citizens.

     Curiously, he didnt include specifics for which countries in the developed world supposedly have a lower poverty rate than America, or what the poverty line is in such countries. For comparison purposes, the World Bank calculates international poverty two ways: people who live on less than $1 per day, and people who live on less than $2. This equates to $365 and $730 annually. If America determined its poor using these benchmarks, our poverty rate would be close to zero. Instead, in the most recent survey, the poverty line for an individual in our country is income less than $9,060 per year, or 12 to 24 times what is considered poor by the World Bank.

     Further contradicting Alters international poverty comparison is Great Britain, a country that is certainly developed and industrialized. According to the New Policy Institute, 12.4 million United Kingdom residents fell below that nations poverty line in the most recent survey done in 2002-2003. With a population of 60 million, this is a poverty rate of more than 20 percent, which is significantly higher than Americas, and, coincidentally, is also higher than Louisianas. Within this 12.4 million, it would be interesting to find out what percentage have cars, indoor plumbing, phones, microwaves, televisions, and DVD players like much of Americas poor.

Louisianas Reality

     Yet, Alters economic assessments of Louisiana were even worse: The primary economic problem is not unemployment but low wages for workers of all races. With unions weakened and a minimum-wage increase not on the GOP agenda, wages have not kept pace with the cost of living, except at the top.

     According to the Louisiana Department of Labor, the average weekly wage for employees in that state has gone from $565 in the fourth quarter of 2000 to $658 in the fourth quarter of 2004, a 16.5 percent increase. This compares to an average national increase of 8.5 percent during the same period. Louisianas 2004 average annual wage of $34,216 is 1 percent higher than the nations average of $33,846.

     This means that workers in Louisiana have seen their wages increase at almost twice the rate of the rest of the country in the past four years. In addition, as the Consumer Price Index has risen by 9.2 percent during this period, wages in this state are growing 79 percent faster than inflation contrary to Alters assertions.

     In the area in and around the city of New Orleans, the picture is even better. From the end of 2000 to the end of 2004, average weekly wages rose from $607 to $714, a 17.6 percent increase, or more than $5,500 per year. As a result of this wage growth, workers in this area earn 8.5 percent more than the national average. This means that since Bush was first inaugurated, workers in the most hurricane-impacted areas of Louisiana have seen their wages increase more than twice as fast as the rest of the nation. In fact, this part of the country has been experiencing a stronger economic recovery under the current administration than most of America.

     Also counter to the bearish tone of Newsweeks article is how well the poorest areas of this Gulf Coast region fare compared to the wealthiest. For instance, the parishes in the New Orleans area with the lowest income levels, St. Bernard and St. Tammany, both saw average wage gains of 25 and 17 percent respectively since the end of 2000, or triple and double the rate of the rest of the nation. By contrast, the wealthiest parish of St. Charles only experienced an 11 percent average wage gain. So much for tax cuts only helping the rich. Finally, the two poorest parishes have average weekly incomes that are only 10 and 8 percent lower than the national average, respectively.

     Recent economic data for the areas in Louisiana most hurt by Katrina give a significantly brighter picture of this region than what was portrayed by Jonathan Alter in his most recent article, and what has largely been reported by Americas press the past two weeks.

Noel Sheppard is an economist, business owner, and contributing writer to the Business & Media Institute. He is also member of the Media Research Centers NewBusters squad. Noel welcomes your feedback at slep@danvillebc.com.