Special Report

Compounding Disaster

Once nature has done its ugly work the federal goverment invariably piles on.

By 8.31.11

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The ever-reliable supporters of big government at CNN offer this interesting insight: Political antagonism toward deficits may exacerbate the long-term impact of natural disasters by lessening the federal government's ability to help.

This, like the approach to every other issue that becomes the subject of liberal cogitation, assumes that humans are too stupid to change their behavior when their environment changes.

To wit, if states know that there isn't a free bucket of federal money awaiting should something bad happen, they will prudently build up their reserves, creating "rainy day funds" for disasters like Irene. The same goes for individuals who, whether self-insuring like states or purchasing insurance policies, will better prepare for disasters rather than relying on the forced charity of residents of other states to subsidize their bad luck or intentional risk-taking. Furthermore, the discipline imposed by self-insuring or by the provisions of a private policy will improve not only the financial preparations for disasters, but also the physical preparations for them. (How many of you have added an alarm system to your house or car to lower your insurance premiums and your own risk?)

I like the part of the story in which the Federal Emergency Management Agency, commonly known as FEMA, says it won't immediately honor what certain Senators think are its responsibilities but are not yet funded. Here's the relevant section of the piece:

FEMA is making its own adjustments. To make room in its budget for cleanup efforts after Irene, the agency is delaying some rebuilding projects in Joplin, Missouri, where devastating tornadoes struck this year.

"For any projects that have not come in for approval, we're not going to be able to fund those at this point. We're going to postpone those," FEMA Administrator Craig Fugate said at a White House briefing Monday, referring to some efforts in Joplin.

Missouri's two U.S. senators released statements blasting the bureaucratic move.

"If FEMA can't fulfill its promise to our state because we have other disasters, that's unacceptable," Republican Sen. Roy Blunt said in a statement. 

The lesson here is that Missouri and other states shouldn't rely on the federal government in the first place if their goal isn't to make war (whether on foreign soldiers or on American entrepreneurs). After all, if the federal government can't even do well those few non-military things it's actually supposed to do, like immigration, why do we want or expect it to do a good job with things it was never supposed to do, like being involved in flood insurance (or health insurance for that matter)?

Like the famed blind squirrel, Ron Paul gets it right when it comes to FEMA, arguing that it completely perverts the idea of insurance through the National Flood Insurance Program. Since when is it the responsibility of a Coloradoan to subsidize the risk taken by someone who doesn't just build a beach house in a hurricane-prone coastal region, but who then uses other people's money to rebuild it when big bad hurricane Wolf blows it down?

Sure, when private markets provide flood insurance, the price is higher than the government-issued and taxpayer-subsidized program we have now and would thus likely pressure the real estate values of homes whose owners need the insurance. But that's life. Among the rights granted in our Constitution, one does not find the right to have others assume your risk. Such socialization of risk (as seen most famously in the TARP program, other bank bailouts, and the Obama Administration's destruction of decades of law in the reorganizations of GM and Chrysler) is anathema to the Founders' explicit aims. After all, the conception of the role of the state to protect "life, liberty and property" as originally drafted for the Declaration of Independence wasn't about government making Mr. Smith protect Mr. Jones' property. If Jones' property is more likely to be destroyed in its particular location, then it is worth less than it otherwise would be without that risk… and it shouldn't be Smith's problem.

FEMA's most famous adventure was their disastrous handling of Hurricane Katrina. While President Obama called FEMA's response to Hurricane Irene "exemplary," perhaps the reason it seems so is that governors along the East Coast took the lessons of Katrina to heart and did their jobs as chief executives rather than relying on Big Brother. FEMA seems like it did a good job because it was asked to do so little -- so far. However, with requests for federal aid coming from states along our Atlantic Coast, FEMA will have plenty of opportunity to show whether it is still the dysfunctional bureaucracy we've come to know and, to put it kindly, be somewhat skeptical of. But, like a Yugo, even if it performs OK, that doesn't mean it's a good idea.

And to the extent that FEMA's role in the Irene disaster ends up being handing out checks, it inevitably drifts into another vote-buying scheme for whichever administration is in power at the time, leading bureaucrats into the irresistible temptation to make Smith feel good about the government by using Jones' money. As Milton Friedman said, the least careful way that money is ever spent is when someone (like government) is spending another person's money on yet another recipient. When A is spending B's money on C, neither A nor C care how much or how wisely that money is being spent. That's actually putting it kindly, as both A and C have the incentive to spend as much of B's money as possible, thus adding government budget disaster to natural disaster.

Instead of complaining about the limitations of the federal government when it comes to disaster relief, the obvious lesson of Hurricane Irene is that even for storms that ravage a half dozen states in a weekend, local response and responsibility is preferable to relying on a federal organization. FEMA, like all federal bureaucracies and despite what I assume to be the best intentions of most of its employees, is run by people who are unlikely to understand local subtleties in any given disaster area. And, as we're seeing now, disaster response by a federal agency allows federal politics to interfere in what are truly the most localized problems where localized knowledge and incentive to help one's friends and neighbors should be of great benefit.

For example -- and understanding that the scale of the disasters was different and that New Orleans had more than its share of problems prior to Hurricane Katrina -- four years after Katrina, New Orleans was still waiting for the federal government to take care of its lingering school problems. In a way, Katrina did the educational system in that city a favor, "wash[ing] away the old, failed system of public education." Yet the public school system there, despite the mostly beneficial addition of many charter schools, is still far behind schedule and over budget on rebuilding as they live in a world where fiscal responsibility is deadened by the opiate of OPM (other people's money.)

In Joplin, Missouri, on the other hand, where fully a third of the city was erased by a tornado in May, schools opened on time just three months later, including a high school that the city creatively fashioned from what used to be a department store. As a commenter on the left-leaning Huffington Post website opined, "I agree those in Joplin helped each other out after the devastating tornadoes. They did not wait for FEMA or the federal government to intervene. They got to work. I do feel for those people in Irene's path. But self reliance and common sense go a long way too."

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About the Author
Ross Kaminsky is a self-employed trader and investor and is a senior fellow of the Heartland Institute. He is the host of The Ross Kaminsky Show on Denver's NewsRadio 850 KOA on Saturday mornings from 6 AM to 9 AM. You can reach Ross by e-mail at rossputin(at)rossputin(dot)com.