The $140 Billion Failure: Why New Orleans never recovered from Katrina
In the grim weeks that followed, bodies were disentangled from trees, axed out of damp attics and stacked in makeshift morgues. In all, 1,800 people across the Gulf Coast died.
Twenty years ago this week, Hurricane Katrina drowned New Orleans.
In the grim weeks that followed, bodies were disentangled from trees, axed out of damp attics and stacked in makeshift morgues. In all, 1,800 people across the Gulf Coast died.
Most Americans soon moved on, but the federal government did something extraordinary: It committed more than $140 billion toward the region’s recovery. Adjusted for inflation, that’s more than was spent on the post-World War II Marshall Plan to rebuild Europe or for the rebuilding of Lower Manhattan after the Sept. 11 attacks. It remains the largest post-disaster domestic recovery effort in US history.
For a moment, the investment created a rare opportunity: to reimagine a major American city as a model of innovation and resilience. What instead emerged was the uncomfortable truth that America isn’t good at long-term recovery. If the reconstruction of Lower Manhattan and the Marshall Plan are hailed as triumphs of American exceptionalism, then the response to Katrina belongs in a darker corner of US history: the Afghanistan or Vietnam of rebuilding — painful, expensive and, ultimately, a failure. It is now a cautionary tale for every place in America that will one day face its own disaster.
We saw the destruction firsthand, and like many, we believed in the promise and possibility of our hometown’s jubilant rebirth. For years, we tried to make it work in New Orleans. But we eventually left — first for greater opportunities, then for stability. And now, like so many in the post-Katrina diaspora, we observe the city from afar with equal parts love and frustration.
Today, New Orleans is smaller, poorer and more unequal than before the storm. It hasn’t rebuilt a durable middle class, and lacks basic services and a major economic engine outside of its storied tourism industry.
The core problem was the inability to turn abundant resources into a clear vision backed by political will. Federal dollars were funneled into a maze of state agencies and local governments with clashing priorities, vague metrics, and near-zero accountability. Billions went to contractors and government consultants while public institutions such as schools, transit, health care, and housing barely scraped by.
The focus of the effort became replacing what was lost, not building something stronger and better. For example, public funds poured into several flood-prone neighborhoods below sea level, while smarter plans reimagining New Orleans as a modern, sustainable, water-resilient city remain neglected.
Some Katrina rebuilding programs were little more than corporate bailouts. The state directed $200 million in federal aid to Entergy, the main provider of electricity in New Orleans, without requiring it to rebuild its grid to withstand future storms. Sixteen years later, when Hurricane Ida ravaged many of the same Louisiana communities Katrina had destroyed, thousands of the utility’s customers were left without power for weeks.
Nearly $2 billion in Federal Emergency Management Agency and Department of Housing and Urban Development grants has poured into the Recovery School District, a new system created in 2003 to take control of persistently failing schools. New Orleans ended up becoming the first major American city to convert almost entirely to a charter school system.
While some academic outcomes have improved, equity remains a profound concern. Data from the Louisiana Department of Education in 2023 revealed that white students make up a far larger share of the population at the city’s better-performing schools, while Black students are overrepresented at schools given the lowest rating.
Today, New Orleans ranks near the bottom among major US cities for GDP per capita and is one of the nation’s weakest employment markets. Its population is roughly 23% smaller than it was in 2000, with about 37% fewer Black residents. Economic output per person lags the national average, and while the city has seen modest recent job gains, job growth remains uneven and slow overall.
New Orleans now ranks as the most income-unequal major city in America. Nearly one in three children live in poverty — and for Black children, the rate is 43%. While recent data on wages vary, many workers still earn less than what’s considered a living wage.
Eventually, the post-Katrina funding was exhausted, leaving behind a city that feels unfinished without a successful version of what recovery should look like. In once-thriving Black neighbourhoods, schools and libraries never reopened. Bus routes were cut and never restored. Hospitals closed and never came back.
As wildfires, flooding, and hurricanes grow more intense, nearly every city in America is now vulnerable to its own Katrina-level disaster. And yet there’s no agreed-upon national framework on how to effectively spend recovery dollars. There’s no national post-disaster work force strategy. No plan to rebuild civic infrastructure in ways that make cities livable and competitive.
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