An inconvenient truth: an $80B Hurricane Sandy supplemental budget request teeters on the fiscal cliff

State-level requests for federal funding to cover disaster relief for hurricane Sandy are starting to come in. The New Jersey and New York requests alone total some $40B apiece. Expect further but smaller requests from Delaware, Maryland, and Virginia.

The story is getting extensive coverage, especially in the affected area. Here’s an excerpt from just one of many articles, this published in the New York Daily News: To buttress the governor’s funding request, Cuomo’s office offered some startling numbers comparing Sandy with Hurricanes Katrina, and Rita, which struck a month after Katrina in 2005.

Louisiana lost 214,700 homes as a result of the two storms; Sandy wrecked 305,000 homes just in New York. There were 800,000 power outages in Louisiana, compared with more than 2 million in New York.

And while 18,700 businesses were lost to the hurricanes in Louisiana, Sandy affected more than 265,300 businesses across the Empire State.

“This storm affected many, many more people and places than Katrina,” Cuomo said.

“Katrina had a human toll that thankfully we have not paid in this region. And Katrina was a different story of government involvement and government action. But, just in terms of impact, at the end of the day I think you have a very strong case just in terms of the numbers.”

Sandy is blamed for 135 deaths in the U.S., including 60 in New York. Katrina was responsible for 1,833 deaths.

[Obviously, just as the scale of loss is greater in these respects, so too is the population of the region, and the size and strength of the region’s economy.]

Now compare this request with the some $50B in such aid that Louisiana received over the several years following Hurricane Katrina. Most parties seem to agree that Katrina relief funding did indeed stimulate the economy of the Gulf coast. Those who remember the discussion at the time will recall that there was much stewing over the Katrina relief, occasioned in part by the sheer magnitude of the funding required and in part by concerns that the funding would do little to reduce future hurricane vulnerability across the region, but rather tee up future, repetitive, risk. [The to-and-fro had additional overtones reflecting a Democrat-Republican partisan divide and the role played by poverty and race in the sequence of events and outcomes.] At the time, it felt as if a long-honored American social contract – no matter how risky your behavior, building on earthquake fault zones or in a floodplains on substandard construction, all Americans will still bail you out should the worst happen – chanced being thrown in the trashbin. A subsequent injection of funds was required following the BP oil spill.

One difference between the Hurricane Sandy case and Katrina was that the United States felt more flush in 2005. The financial sector collapse of 2008 lay ahead. And in the oil spill event, much of the relief was being sought from BP itself as well as public sources.

By contrast, the Sandy appeal comes at the moment the country and its leaders are in the throes of the debate over the fiscal cliff; how, and even whether, to avoid a re-imposition of taxes, a sequester that will trigger massive, thoughtless cuts in federal defense spending and other programs, in a way likely to drive the United States into another deep economic recession. Leaders on Capitol Hill struggle to accommodate the Sandy supplemental request into this contentious, dangerous, and confusing picture. As was the case with Katrina, there’s talk of failing to honor the request, or of stretching the payments over a number of years.

Two points stand out. The first is that while our ways of doing business build up vulnerability to hazards over time, nature strikes at the moments of its own choosing, not ours. This timing is no respecter of our agenda or preoccupations of any particular moment.

It therefore shouldn’t surprise that this timing is often inconvenient.

The evidence is that Sandy’s timing and extent itself influenced the outcome of a close Presidential election. Now it appears that the timing of the Sandy supplemental budget request will find itself wrapped around the axle of the fiscal-cliff deliberations. This reminds us of why we should avoid self-imposed brinksmanship of this sort in our politics. Suppose, for example, the next few days or week or so should see a massive earthquake along Oakland’s Hayward fault. Or an earthquake and tsunami along the Cascadia subduction zone, mirroring a tragedy in the Pacific northwest comparable to that triggered in Japan last year. We would struggle to grapple with the consequences, but our difficulties would be compounded by the vulnerable state of play of our politics. The effects on international financial markets would be substantial in the short run, and the effect on the U.S. would linger.

The second point to note is that the hundreds of billions of dollars in losses represented  by these natural hazards are dwarfed by the self-inflicted wound of the 2008 financial-sector collapse, and the similar risk we’ve created for ourselves in the form of the fiscal cliff.

We seem to be our own worst enemy. We can do better.

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