All week, Congress has been bickering over a $60 billion aid package for super-storm Sandy. It started when the House GOP failed to take up the bill last session, triggering angry outbursts from Republicans in the Northeast. "Shame on you. Shame on Congress," said New Jersey Governor Chris Christie.
At this point, though, it's worth stepping back and noting that these sorts of disaster-aid fights in Congress have become much more high-stakes over the past decade. According to a new report by the New York Fed, the federal government now plays a far bigger role in hurricane relief than it used to:
Between 1989 and 2004, the federal government typically only covered around 26 percent of the costs of a major hurricane. Private insurance companies picked up most of the tab, while state and local governments, individuals, businesses and charities paid for the rest.
That changed after Hurricane Katrina, with the share paid by the government averaging 69 percent since 2005. In recent years, Congress has started fully reimbursing state and local governments — and it's also begun paying for more projects to mitigate the damage from future storms. (That's why the numbers add up to more than 100 percent.)
This isn't a fluke. The federal government has become steadily more involved in all forms of disaster relief over the past few decades, as a recent NBER paper by David Cummins, Michael Suher and George Zanjani reveals. Since the 1980s, Congress has been picking up a bigger portion of the tab for damage caused by tornadoes, hurricanes, snowstorms and all manner of disasters.
Now, there are arguments for and against the federal government getting more involved in disaster relief. On the plus side: It's easier for Congress to borrow money for emergencies than it is for state and local governments. On the minus side: Many federal aid programs encourage development in disaster-prone areas. That makes future hurricanes and floods even more expensive.
But whatever the merits, the authors point out that Congress has never planned for this rapid growth in federal disaster aid. A huge portion of relief spending isn't budgeted ahead of time — it's just approved on an emergency, ad hoc basis. That's not very transparent, and it's not a great way to make policy.
How big a deal is this? Quite big: "Given the current approach to disaster relief funding," the NBER authors write, "we project an 'unfunded' liability for disaster assistance over the next seventy-five years comparable to that of Social Security." And the problem could get worse still as climate change and sea-level rise make floods and other natural disasters more frequent and more destructive.
Now, understandably, few politicians want to grapple with major aid reforms when tragedy strikes. The NBER authors include a telling quote from Missouri Gov. Mel Carnahan after the Mississippi River flooded in 1993: “This is not the time for debating the fine points of long-term policy!" But these issues rarely get tackled at other times, either. Which means we can expect these fights over disaster aid in Congress to get worse and worse.