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Commentary By Nicole Gelinas

Storms Will Get More Expensive Until We Change How We Spend Disaster Relief Money

Cities, Governance Infrastructure & Transportation

Since 2005, Washington has spent nearly $300 billion on disaster assistance, and state and local governments have shelled out billions more. This figure doesn't include the nine-figure toll that the 2017 storm season likely exacted across Texas, Florida, Puerto Rico and the Virgin Islands. If trends hold, it's not unreasonable to predict a half-trillion-dollar storm year within the next decade, an amount that would consume half the nation's annual Medicare bill.

Much of the spending goes to repairing flooded properties after a hurricane. If the government keeps spending massively on what should be a private-sector concern, rebuilding or repairing individual homes, it won't be able to afford to invest in what is properly a public-sector concern when it comes to destructive weather events: building or upgrading infrastructure to limit potential storm damage and providing immediate relief after a terrible storm has struck.

“Taxpayers and people living in harm's way shouldn't be the only ones concerned that this system is unsustainable.”

Taxpayers and people living in harm's way shouldn't be the only ones concerned that this system is unsustainable. Long-term municipal bondholders, too, should be skeptical about additional lending to states and localities at the greatest risk for major storms.

In 2017, a trio of powerful storms, Harvey, Irma and Maria, made landfall between August and October, causing at least 345 direct deaths and wreaking havoc across southern Texas, southwestern Florida, Puerto Rico and the Virgin Islands. Hurricanes Harvey and Irma inflicted more than $200 billion in damages, private and public. The damage from Maria, which slammed Puerto Rico and the Virgin Islands, probably totals in the tens of billions of dollars.

The U.S. government's bill for these storms has yet to be tallied, but in 2017 Congress approved $51 billion for disaster relief and another $81 billion already in 2018. This money goes to the three pillars of modern post-storm aid: immediate relief in the form of food, shelter and medicine to displaced or otherwise disrupted individuals; help for state and local governments to repair and replace public infrastructure; and financial aid for people to rebuild their homes.

Big numbers for disaster relief no longer surprise. Katrina consumed $108 billion in federal spending; Sandy, $51 billion. Historically, such mass-scale payouts are an aberration. For the seven major storms before Katrina, dating back to 2002, the federal government paid out, on average, 17 percent of the total economic cost of a major hurricane. After Katrina, the figure rose to 45 percent for the subsequent nine storms to 2015, according to the Congressional Budget Office. (The remainder of the loss is borne by private insurers and individual businesses and families.)

Several factors have helped transform multibillion-dollar "emergencies" into regular occurrences. First, there is the weather itself. A well-documented rise in sea levels of more than a foot over the past century, which means more flooding, according to National Oceanic and Atmospheric Administration scientist Martin Hoerling. "High water levels ... led to [Superstorm] Sandy's primary impacts on coastal New York and New Jersey," he notes.

The second factor is population. Between 2000 and 2010, America's coastal populations grew by 22 percent, faster than the country as a whole, says the CBO.

Third, and relatedly, more people and higher incomes mean more property -- and more valuable property -- at risk.

Observers could consider this development an unalloyed good, and a product of the free market, if the U.S. government hadn't unwittingly subsidized it through persistent distortions, a byproduct of the growth of government throughout the 20th century, as America sought to cope with a more complex, more populous country.

Before 1950, Washington had few institutional mechanisms to deal consistently with disasters. But, as the CRS reported in a 2011 paper for Congress, "the approach to disaster relief changed from 1950 to 1979, transitioning from a largely uncoordinated and decentralized system of relief funding" led by states, cities, and towns, and private charities "to one dominated by the federal government."

Hurricanes and floods have afflicted coastal Americans for as long as there have been coastal Americans, native or otherwise. But the Mississippi River's spring flooding of 1927 marked a turning point. Causing what then-commerce secretary Herbert Hoover called "the greatest disaster of peace times in our history," the surge displaced 700,000 people and destroyed millions of acres of cropland, businesses and homes. The flood also changed the way people think about government's responsibility toward individuals, says John Barry, a New Orleans resident and author of Rising Tide, the 1997 book that chronicled the flood. Public opinion was "absolutely overwhelming that the federal government had some responsibility to help."

America mobilized historic aid. The Army, Navy, Coast Guard and National Guard rescued 300,000 people. The Red Cross, a private relief organization, set up camps for more than 325,000 evacuees, complete with plumbing and electricity.

At this point, Washington radically changed its philosophy in infrastructure: the federal government, not individual states, would be mostly responsible for long-term flood-protection infrastructure, such as levees and flood walls. States had previously had to pay up to half the cost of construction. Now Washington, largely through the Army Corps of Engineers, took responsibility; state and local governments would maintain only levees, once built.

But Washington largely remained in the background on the final pillar of current-day storm assistance: long-term help for people to rebuild their houses. Of 32 engineers, bankers and civic leaders queried by the Timesafter the 1927 disaster, only one suggested helping farmers, many of them subsistence sharecroppers or tenant farmers, "rehabilitate" their houses. The Red Cross, thanks mostly to its private donations, sent people home to rebuild as the water receded, armed with "two weeks' supply of food and seed for a vegetable garden," plus, "if their home had been destroyed, their tents and camp bedding."

In the postwar years, worries over nuclear conflict and heightened national attention to storms spurred Washington to take an even bigger role in providing relief. In 1950, lawmakers passed the Federal Disaster Relief Act, which established the modern framework for response: when a governor of a state or territory declares a disaster, the federal government steps in to alleviate acute conditions. Amendments to this law over decades culminated in the Federal Emergency Management Agency, created by President Jimmy Carter in 1979 via executive order.

Even as Washington bureaucratized disaster management, though, lawmakers were slower to take on the responsibility for rebuilding private homes. Presidents Harry Truman and Dwight Eisenhower floated the idea of government-subsidized flood insurance in the 1950s, ironically, to save taxpayers money: Public officials thought that charging people premiums up-front would at least defray some relief costs.

But Congress balked for more than a decade, heeding warnings such as this one in 1955, from a Times roundup of expert opinion: "general flood damage has been uninsurable -- except for a few tries that ended in failure -- from the time Noah rode out the deluge." It wasn't until 1968, toward the end of the Great Society program creation, that President Lyndon Johnson signed the National Flood Insurance Program into law. FEMA, which administers the program, now insures 5 million residential buildings in flood-prone areas.

“Washington must stop spending so much of its disaster aid in a way that encourages individuals, as well as state and local officials, to keep building in harm's way.”

Together, these two of the three pillars of modern disaster philosophy -- disproportionate rebuilding help for state and local governments and for individual citizens, via flood insurance -- have produced perverse results. Developers build in low-lying areas, encouraged by state and local officials who bear little of the cost of such unwise choices, while reaping a short-term benefit: bigger populations and higher tax revenues.

In the decades before Harvey, for example, Houston approved the development of more than 10,000 homes in a floodplain, inside the very reservoirs that take in the water spillover when federal dams that protect older parts of the city reach capacity. As the Texas Tribune reports, most residents of the upper-middle-class neighborhoods built within the reservoirs seemed to have no idea that they were living in a dormant, man-made lake until Harvey inundated them with days' worth of standing water last summer.

The episode points up how federal incentives interact with the local imperative to build: The national flood-insurance program's official flood maps put the reservoirs outside of floodplains, on the grounds that they are manmade "flood pools," indicating to residents and home lenders that it was safe to build, according to the Houston Chronicle. For that reason, mortgage lenders did not require homebuyers there to take out federal flood insurance, though residents have received temporary housing and other assistance after Harvey -- and are now suing the Army Corps of Engineers for not deliberately flooding the area to protect its dams, exactly what the corps was supposed to do under the dams' design.

This problem won't end until the government changes the distorting signals that it sends to the market. Washington must stop spending so much of its disaster aid in a way that encourages individuals, as well as state and local officials, to keep building in harm's way.

As Washington protects private homeowners from loss, it neglects what it should be doing: working with state and local governments to build better public infrastructure.

Overall, of FEMA's disaster-relief fund, which constitutes about half of all federal disaster spending, 53 percent goes to helping governments replace what they lost and 22 percent to helping people rebuild. Only 7 percent goes to "hazard mitigation," or prevention. The Army Corps of Engineers' annual budget to build and maintain levees is just $4.1 billion.

Flood insurance is in obvious need of reform. "There needs to be some grandfathering" of existing policyholders as the government slowly raises premiums and refuses coverage for new properties in risky areas, says Barry, pointing out that many flood-prone residents "aren't millionaires, but working-class people" in the energy, fishing and tourism industries along the coast. "They have done nothing wrong."

First, FEMA should stop covering second homes -- 19 percent of policies, according to a CBO report. Second, payouts should be means-tested; with median incomes of $75,000, policyholders are wealthier than their peers, says the CBO, and should pay higher premiums and higher deductibles before insurance kicks in.

Coastal lawmakers will resist change. In 2012, Congress passed a bill to bring premium payments gradually in line with costs and to exclude particularly at-risk properties, including those with repeat past losses. But after an outcry from key lawmakers, Congress watered down some of these provisions. More recently, the House financial-services committee killed a proposal to eliminate coverage for homes worth over $1 million. The committee has also backed away from excluding houses with a history of past flooding.

In letting state and local governments, as well as individual homeowners, take on more responsibility in recovering from predictable storms, the federal government could turn its focus to helping the constituents of weak and incompetent governments that subject people to sustained humanitarian crises after disasters. In Puerto Rico, nearly half of residents remain without power three months after the storm.

Puerto Rico's plight is a reminder of 1927: The government's most important job, after a storm, is humanitarian. Washington should similarly concentrate less on insuring the contents of coastal middle-class homes and more on saving the lives of people going for months on end without power, water and medicine.

This piece originally appeared in the Dallas Morning News


Nicole Gelinas is a senior fellow at the Manhattan Institute and contributing editor at City Journal. This piece was adapted from the Winter 2018 Issue of City Journal. Follow her on Twitter here.

This piece originally appeared in Dallas Morning News