How to pay for disasters
The federal government’s approach to emergency relief has long been to open its checkbook and pay whatever it took to get communities back on their feet. Agencies had budgets for disaster response, but nature defied prediction; overruns were the rule, not the exception. After Hurricane Irene flooded large swathes of the Northeast, however, House Majority Leader Eric Cantor (R-Va.) declared that the era of the open checkbook was over. Instead of borrowing from the future to pay for repairs, Cantor said, Congress must offset any new relief spending with cuts in other programs. He’s right that Washington needs a better approach to disaster relief, but that’s not it.
Events such as Irene or the earthquake last week that rattled the Eastern seaboard prompt conflicting responses. As a nation, we feel a duty to help our compatriots who fall victim to natural forces beyond their control. But a federal backstop of that sort creates a moral hazard, enabling people to take — and local governments to tolerate — risks that they couldn’t afford if they knew there would be no federal aid forthcoming. Agencies try to reduce that hazard by offering aid only to individuals and communities that meet certain standards, such as carrying flood insurance in flood zones. But those steps haven’t prevented costly losses, particularly to major public facilities such as roads, sewers and schools.
Washington needs to do more to encourage people and local governments to mitigate risks and insure themselves against nature’s wrath. The more progress they make on that front, the less help they’ll need from the federal government.
Yet the sheer destructive power of the worst of these events means that there always will be a role for Washington to play. The White House should acknowledge as much and take a more realistic approach to budgeting based on historical needs, instead of routinely underfunding the Federal Emergency Management Agency and counting on Congress to step into the breach with extra dollars whenever they’re needed.
Even if all those steps are taken, there will still be times when disasters overwhelm communities and surpass the funding Congress has set aside. That’s when it’s appropriate for Congress to use its unique ability to borrow money and spread the costs out over time. Governments routinely borrow money to rebuild bridges or water lines; there’s no reason not to do so just because the improvements were necessitated by a disaster. Cantor has become so obsessed with belt-tightening that he sees every bit of new spending as a problem, even when it’s a crucial part of the solution.