Should The Federal Government Just Write A Blank Check To Cover The Flooding In Houston?

You have to be impressed with the response so far by the Texans to the massive floods in the Houston area.  Media reports are filled with images of fleets of privately-owned boats joining in rescue efforts, of hundreds of people lining up to join in volunteer efforts at shelters and food pantries, of brave volunteers carrying old people and children and dogs through the flood waters to safety.  These people are remarkably and commendably self-reliant and immediately willing to pitch in to help their neighbors when trouble hits.

And then yesterday Texas Governor Greg Abbott came out and said that Texas will "need" a federal "relief package" (aka handout) "in excess of" $125 billion.  Whoa! -- What happened to that old Texas self-reliance, Greg?  Not to be outdone, Houston-area Democratic Congresswoman Sheila Jackson Lee immediately upped the ante to $155 billion.  Next thing you know, seemingly conservative Republican and budget-hawkish Senator Ted Cruz was joining Lee to make the demand for the massive federal handout "bipartisan."  Back in 2012/13 Cruz had earned himself much scorn from New Yorkers for providing at least a little token push-back against the then-proposed $60 billion federal "relief" handout after Hurricane Sandy.  I guess that was then.

Actually, I can't say I blame these Texans.  Katrina in 2005 and then Sandy in 2012 set the new parameters for federal handouts after natural disasters, which basically come down to this: When people are dying in the streets, the feds can't say no; so now is your chance to get everything on your wish list and then some paid for by the infinite bag of free federal money.  Louisiana and New York played this game brilliantly, and got all the other states to pay for everything with even the most tenuous relationship to their hurricanes.  Having been on the paying end a couple of times, you can't expect the Texans to sit back and fail to collect when their turn comes.

In a post way back on January 2, 2013 I warned New Yorkers that they were playing a dangerous game by demanding a massive blank-check handout from the feds for recovery from Hurricane Sandy, because New York is not much subject to natural disasters like hurricanes and tornados, and we would end up paying ten or twenty times over to the other states by the time we were done:

Federal government open-check-book disaster relief is . . . a particularly terrible idea for New York and New Jersey, because these areas, thankfully, are not very subject to natural disasters.  We almost never get a serious tornado or earthquake, and hurricanes, while they do occur, are quite rare here compared to other areas like the Gulf Coast and Florida.  According to data from NOAA here, in the 50 years from 1961 to 2010 some 27 "major" hurricanes (categories 3, 4 and 5) made landfall in the United States.  Of those, 23 hit the Gulf Coast or Florida; 3 hit the Carolinas; and just one (Gloria in 1985) hit in the mid-Atlantic.  While we may be looking to get a big handout at this moment, over time the disaster relief game is a massive transfer away from New York and New Jersey and to other areas far more susceptible to hurricanes, tornados and earthquakes.  By demanding this relief now, we are encouraging more building in those areas and setting ourselves up to pay 10 or 20 or more times any amount we can hope to get in today's handout.         

Ability to do this kind of simple arithmetic was never the strong suit of New York progressives.  Things have been relatively calm in hurricane world since 2012; however, we are now seeing the early stages of the inevitable turnabout.

But, you ask, isn't paying the bills for recovery from a big natural disaster a basic job of the federal government?  Actually, not at all.  From the beginning of the republic through well into the twentieth century, the federal government provided nothing at all in the way of disaster relief funds.  Consider this history from the Texas Almanac of the Galveston hurricane of 1900.  The town was literally wiped out.  Almost all the buildings were destroyed and something close to half the people died.  Disaster relief poured in from charitable efforts, from other states, and from the state of Texas.  The feds contributed not a dime; and what's more, it seems that nobody even thought to ask them.  In those days, this just wasn't viewed as part of the federal mission.

And that wasn't much changed well into your lifetime.  FEMA was only created in 1979.  As recently as 2000, the feds contributed relatively small amounts for hurricane recovery to supplement state, local and charitable efforts.  At this link, CNN helpfully compiles the losses from hurricanes since 2000 that have caused $1 billion and more of damages, and how much of those losses have been paid for by the federal government.  Pre-Katrina in 2005, the federal contributions were remarkably small:  Of about $2 billion in losses from Lili in 2002, the feds covered only about 7%; of about $8 billion from Isabel in 2003, the feds covered about 18%; of about $21 billion from Charley in 2004, the feds covered about 10%; and so forth.  Summarizing the pre-Katrina situation, CNN states:

In the half dozen storms that caused at least $1 billion in damages immediately before Hurricane Katrina, the federal government contributed funds to cover only 17% of estimated damages in federal aid, on average.    

Hey, we're just trying to be nice!  The problem is that once the feds got into paying something, there was no limiting principle.  If you have an infinite pile of free money, and you recognize a responsibility to pay something, why shouldn't you pay everything?  Then Katrina (2005) blew the lid off any restraints of any kind on the federal handouts.  The losses from Katrina were in the range of $160 billion, and the cable news networks ran nonstop footage of the drowning and the suffering and the destruction for weeks on end.  By the time it was over the feds had paid about $115 billion, or some 72% of all losses.  

And once that had happened, why should anybody else with a natural disaster on their hands settle for a federal contribution of a lousy 10 or 20 percent?  Federal contributions for run-of-the-mill hurricanes immediately ratcheted up to the 30-60% range.  Then, with Sandy in 2012, New York and New Jersey put on a full court press to squeeze every possible dollar out of the feds, with a supportive Obama administration that thought that passing out the free money was their highest calling in life.  According to the CNN chart, the feds paid almost $60 billion, some 80% of around $75 billion in losses from that storm (that barely qualified for hurricane status).  Over to you, Texas!

So, other than the Manhattan Contrarian, is there anyone else out there who might advocate for putting any kind of reasonable limits on the federal contributions to Hurricane Harvey relief?  I can't think of who in Congress might do it.  President Trump?  I suspect he will be only too happy to see a big payoff go to people who are essentially his core supporters.  The media?  They're looking for any excuse to excoriate Trump for being too stingy.

Meanwhile, I'm sorry but $150 billion or so is real money.  With the federal money, Houston will be rebuilt bigger and better than ever in the same flood plain, waiting for the next "500 year flood" -- of which they've already had three in the past three years.  The current dearth of major landfalling hurricanes will inevitably end.  Does anyone care if this is a sustainable model? 

UPDATE, September 5, 2017:  With Hurricane Irma now a Category 5 and approaching the Gold Coast of Florida, I'm wondering if another big strike might knock some sense into anybody.  Even if we've gotten to a point where $150 billion seems like just a rounding error in the federal budget, how about $300 billion?  Tens of billions to restore the ocean-facing condos of the wealthy?