I think Daren is correct regarding the appropriate “Republican” response–transfer as much as it takes to keep from looking less compassionate than the Democrats. Probably the conservative response is not all that different except the conservatives want to funnel the money into private initiatives, empowerment zones and the like, and pay for it by reducing “pork” in other parts of the budget. It’s funny; I’ve heard several Congressmen say lately that the cost of Katrina should be paid for by reducing “unnecessary” spending in other parts of the budget. What an admission.
Now, a libertarian response would be a little more encompassing. Since all coercive wealth transfers are theft and therefore immoral, the feds should not be spending anything. If libertarians were in charge there would have also been no government owned levee to break apart in the first place and no government subsidized flood insurance programs, all of which have created a moral hazard problem and over development in the area. Insurance companies would be charging rates that acurately reflect risks. My guess is that these rates would have deterred a great deal of development in this area. If there were a privately owned levee the owners would be liable for any damage caused by its breach, which would provide a huge incentive to build it so that it would handle high-powered hurricanes like Katrina. Again, the levee owners would be charged insurance premiums that accrately reflected the risk posed to the residents of the area by the levee.
Under a philosophically libertarian government this would not have been as large a catastrophe as it was and the aid would not have to have been as large. This means that private efforts alone, including insurance companies and private relief, could handle the problem. Remember with most of what is now tax money remaining in people’s pockets they would have a lot more left to show real compassion by dipping into their own pockets and voluntarily helping their fellow citizens. If I had to guess, the commitment of all this federal tax money will crowd out future private contributions to the Red Cross, etc. It is amazing what people are freely willing to give, just think of how much more generous they would be if their incomes were all 10, 15 or 20 percent higher than they currently are.
