Before Congress passed $9.7 billion in Hurricane Sandy relief spending today, Governor Christie made headlines for his angry response to the House GOP’s delay in approving relief funds. The new spending will provide FEMA with money to pay out claims to those holding federal flood insurance. While the Hurricane Sandy relief effort gives political immediacy to FEMA funding, the Center for American Progress proposes a longer term strategy for dealing with natural disasters:
There must be a dedicated source of revenue to fund predisaster mitigation programs that is not susceptible to budget cuts or political manipulation. Since the frequency and/or severity of extreme weather events will be exacerbated by climate change, it makes sense to raise revenue for resiliency from the fossil fuels whose combustion emits carbon pollution responsible for climate change.
The perspective that disaster recovery is a core responsibility of the federal government is widely shared, and voices as diverse as Governor Christie to the Center for American Progress express this opinion. However, the Mercatus Center’s Gulf Coast Recovery Project conducted in the wake of Hurricane Katrina demonstrates that funneling federal dollars toward disaster relief does not guarantee positive results for disaster victims. While the FEMA response to Hurricane Sandy went more smoothly than the Hurricane Katrina response, the federal government simply doesn’t have the capability to respond quickly and efficiently to individuals’ needs following a disaster, and channeling more resources to FEMA from any revenue source will not change the this fact.
As Pete Leeson and Russ Sobel write in a 2007 paper (pdf):
Following a natural disaster, on the one side there are “relief demanders”—individuals who desperately need disaster-relief supplies, including evacuation, food, shelter, medical attention, and so forth. On the other side, there are “relief suppliers”—individuals ready and willing to bring their supplies and expertise to bear in meeting the relief demanders’ needs. On both sides of this “market,” information is decentralized, local, and often inarticulate. Relief demanders know when relief is needed, what they need, and in what quantities, but they do not necessarily know who has the relief supplies they require or how to obtain them. Similarly, relief suppliers know what relief supplies they have and how they can help, but they may be largely unaware of whether relief is required and, if it is, what is needed, by whom, and in what locations and quantities.
[. . .]
Government’s informational deficit in the disaster-relief context is an unavoidable outcome of the centralization of disaster relief management when relief is provided by the state. Disaster-relief reforms that leave government as the primary manager of natural disasters are thus bound to fail. Correcting government’s information failure in the context of disaster relief requires eliminating its root cause: government involvement itself.
Researchers on the Gulf Coast Recovery Project found that non-profits, civic organizations, private firms, and individuals were more successful at providing the goods and services needed for recovery than the federal government.
Aside from the inherent challenges facing federal disaster response, funneling federal tax dollars to coastal areas prone to flooding leads to moral hazard. Because residents of flood-prone areas purchase federal insurance, taxpayers subsidize those who choose to live in these high-risk areas. Eli Lehrer of the R Street Institute explains this aspect of the Hurricane Sandy Relief Bill to Climate Wire:
“The mitigation piece of it is problematic,” said Eli Lehrer, president of the R Street Institute, a conservative organization that works with environmentalists and insurers to reduce subsidies in public insurance programs. “I think the bill should be drastically scaled back overall.”
He suggests that the disaster supplemental package could be cut in half. That would save taxpayer money, he says, now and in the future — by reducing incentives to develop coastlines. Lehrer also proposes cutting the federal share of post-disaster rebuilding costs to 50 percent. Currently, the government pays for 75 percent of recovery efforts, and Obama is asking Congress to increase that to 90 percent for Sandy survivors.
Politicians and activists who support a large role for the federal government in responding to disasters may have the best of intentions, but these intentions cannot circumvent the knowledge problems that government faces in disaster relief. By reducing the cost of developing in flood plains, greater reliance on the federal government for disaster mitigation and relief will be a costly effort unlikely to provide an adequate response when the next disaster strikes.