Nicole Gelinas and Brian Anderson discuss recent disaster-relief efforts in the United States, the federal government’s role in such assistance, and how national flood insurance and other recovery programs could be reformed.

Since 2005, Washington has spent nearly $300 billion on disaster recovery, with state and local governments spending billions more. This figure doesn’t even include last year’s devastating storm season, which ravaged Texas, Florida, Puerto Rico, and the Virgin Islands.

Federal and local authorities should concentrate the bulk of their spending on the infrastructure necessary to limit storm damage, and on immediate relief after storms have struck. Right now, however, the majority of disaster-relief expenditure goes toward repairing flooded properties after hurricanes—a task better left to the private sector.

Read Nicole Gelinas’s story, “Storm Surge,” in the Winter 2018 issue of City Journal

Audio Transcript

Brian Anderson: Welcome back to 10 Blocks.  This is your host, Brian Anderson, editor of City JournalSince 2005 the federal government has spent nearly 300 billion dollars on disaster assistance, not counting last year’s devastating storm season, which ravaged Texas, Florida, Puerto Rico and the Virgin Islands.  Much of the nation’s spending on disaster relief goes to relief efforts after a major hurricane has hit, for example, providing food and shelter for residents, rebuilding flooded homes and businesses, and repairing damaged infrastructure.  What are we doing, though, to mitigate the effects of storms before they hit?  Should we try to make our coastlines more resilient?  In the winter 2018 issue of City Journal, Nicole Gelinas discussed the role of FEMA in spending disaster recovery funds and looked into ways to reform the National Flood Insurance Program.  We will talk to Nicole after this.  Joining us on the show today is Nicole Gelinas.  Nicole is a contributing editor of City Journal, a senior fellow at the Manhattan Institute and a writer for the New York Post.  You can follow her on Twitter, @NicoleGelinas.  Her newest essay for City Journal is called “Storm Surge – The federal government is spending too much on post-disaster rebuilding and too little on prevention.”  And it appeared in our winter 2018 issue.  Nicole, welcome back to 10 Blocks

Nicole Gelinas: Thank you, Brian, for having me.

Brian Anderson: Let’s start with some basic definitions.  What is the federal Flood Insurance Program and what are its origins and how does it work exactly?

Nicole Gelinas: Well, the National Flood Insurance Program is one of three big portions of our national disaster relief spending.  The other two, as you mentioned, are immediate relief after a disaster in just getting people food and medicine, and infrastructure investment, hopefully, to prevent a disaster or to mitigate its effects once it comes.  But one of the most problematic areas of disaster relief is this federal flood insurance.  Where did this come from and what did it do?  Federal flood insurance came out of the mid-20th century as the population was growing, as more and more people were moving to coastal areas, coastal Florida, coastal Louisiana, coastal Texas, these were relatively little populated parts of the country until the middle and towards the end of the 20th century.  They started building more expensive properties along these coasts and as they were hit by storms the government would, of course, provide immediate relief, but different federal administrations wanted to have a more rational approach.  And, ironically, they created federal flood insurance to save money.  Eisenhower and Truman both thought about creating a federal flood insurance program so that people who were in a place that was likely to be flooded, they would pay for insurance and that way when they were flooded the federal government had at least collected this insurance money from them before the storm.  But they were never able to get it implemented because there were a lot of concerns that it would become a big government program that wouldn’t pay for itself.  It was finally enacted toward the end of the Lyndon Johnson administration.  And unfortunately that is exactly what happened.  The Federal Flood Insurance Program is in perpetual deficit.  The flood premiums that people pay are not enough to compensate for the risk that their home will flood, in some cases multiple times, and the program encouraged people, encourages people to live in danger.  It encourages developers to build in places where it otherwise would be uneconomical to build and purchase houses.

Brian Anderson: Why would that be the case?  Because you could not get private market insurance?

Nicole Gelinas: Right.  You could get private market insurance, but it would be very expensive.  And, you know, people might say well wait a minute, I might get in a car crash and I have car insurance, my house could catch on fire, I don’t have trouble getting those types of insurance, but those are idiosyncratic events.  You know, most likely, if my house has a fire, the whole town is not going to burn down.  And so everybody else who has paid fire insurance in the town subsidizes the one person who is unlucky enough to have a fire.  Same with car insurance, although of course if you are a risky driver you pay a very high rate of insurance, in some cases so much that you can’t get car insurance.  And with flood insurance, if one house floods, all of the houses in that area are going to flood.  So it’s too much of a risk for private insurers to take on, at least at any rate that would be low enough for working class, middle class, housing.

Brian Anderson: Before the 2017 storm season, Hurricanes Katrina, which was in 2005, and Sandy in 2012 were two of the worst American storms, both in terms of the lives damaged and the cost to rebuild.  Can you give our listeners an idea of how the money was spent in those cases and is there a way we could have done it better?

Nicole Gelinas: Sure.  Well, Katrina was really a beginning of a new era in flood claims and the federal government’s expanding role in disaster relief.  This was our first storm that topped a hundred billion dollars in federal payments for the storm.  Now, of course, the storm was a historic storm.  It flooded much of coastal Louisiana and Mississippi, but just to give you an idea of how quickly things advanced, the first time we had a storm that topped ten billion dollars was only a little bit more than a decade before Katrina, Hurricane Andrew, in south Florida in the early ‘90s.  This was the first ten billion-dollar storm.  So, it only took twelve, thirteen years to go from the first ten billion-dollar storm to the first hundred billion-dollar storm.  And what happened to accelerate the cost of these storms so quickly?  One is coastal building of expensive properties in places where we have seen sea level rise over the past sixty years, the same thing that contributed to Sandy, and second, a greater expectation that the federal government will step in here.  It’s a lot of political horse trading going on here, that even though some elected officials may be ideologically against a big government role in theory, when it came to Hurricane Katrina, both Democrats and Republicans voted for this huge relief package because they want the same for their states.  And you saw that in New York after Hurricane Sandy, the people who did vote against the Hurricane Sandy relief, the same representatives in Texas who later obviously wanted their own big relief package.  So, over time it becomes more like an entitlement program.  Nobody is really against flood relief, just like no one is really against Social Security and Medicare because everyone expects to benefit from these programs, but in this area it’s not very healthy because it is encouraging a lot of bad building, bad development, without thinking about the repercussions and without having a proper cost for that built into the cost of the property.

Brian Anderson: Some reforms are implicit in your comments.  But maybe you could spell out what we could do to more rationally manage this growing cost.

Nicole Gelinas: Well, first of all, I think the federal role should be more focused on infrastructure building and maintenance, not on rebuilding a person’s house after a storm had hit.  It’s not that the federal government has no role.  It does and should have a role, but it should be more toward building the infrastructure that sends the signal to the marketplace where should we build or not.  For example, if you build levees and flood walls to protect particular areas of a city or a region, developers know we can build in these areas and be protected against a flood.  Outside of those areas there shouldn’t be development, or it should be clearly at the risk of the people who buy or live in those areas.  Although even that is problematic because once a storm happens it is very hard to tell people, hey, you signed up to not be protected.  So, it is better to have certain natural flood plains where you don’t build.  You know, for example, Houston allowing ten thousand houses to be built directly into a flood reservoir and now all of those people need federal help to rebuild.  So, don’t do that is one suggestion.  And, for some more detailed suggestions, states should have to take on more of the responsibility for relief and rebuilding payments after a storm.  This should go into the state’s credit rating, or the city’s credit rating, if they are at great risk of a storm and they haven’t built up a reserve to help their people with, of course, some outside logistical help, then that should be considered and are they fiscally responsible.  And very simple changes to the federal Flood Insurance Program.  I mean, it shouldn’t protect second homes.  You know, 19% of the home Flood Insurance Program is going to people’s second homes.  And gradually the premiums should rise so that they are competitive with what a market rate premium should be and then at that point you could phase out the program.

Brian Anderson: The humanitarian tragedy we’ve seen in Puerto Rico after the devastating storm that hit it last year suggests that there are other areas where perhaps disaster relief could be improved.  What has gone wrong there in terms of rebuilding?

Nicole Gelinas: Well, Puerto Rico was always going to be a unique and difficult situation in that obviously it is not on the American mainland.  So you can’t, you know, with Florida, Texas, Louisiana, you have convoys of trucks going down with relief supplies, convoys of electricity workers and so forth, going down getting immediate relief and recovery started within hours of the storm being over.  It’s expensive and difficult to do, but it is not as hard as having to bring things only by ship and only by airplane.  And so with the electricity issues you have mountainous areas, you have rural areas.  Even if the government of Puerto Rico had been working well this would have been a challenge.  But there were other problems that are unique to this.  The government of Puerto Rico never called in relief from out-of-state electrical companies like is normal after a storm.  After Katrina a lot of power companies from the rest of the country went down, the same with Hurricane Sandy.  They didn’t do that.  They pursued this strange contract with a fly-by-night firm that is still not really sorted out, but they didn’t really follow normal procedure that has been shown to work in the past.

Brian Anderson: Don’t forget to check out Nicole Gelinas’s work on our website,  You can follow her on Twitter, @NicoleGelinas.  We would also love to hear your comments about today’s episode on Twitter, @CityJournal with the #10Blocks.  Lastly, if you like our show and want to hear more, please leave ratings and reviews on iTunes.  Thanks for listening.  And thanks, Nicole, as always, for joining us.

Nicole Gelinas: Thank you Brian.

Photo: annestahl/iStock

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