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Monday, Dec 22, 2014

Federal Disaster Aid Is 'Stealth Entitlement,' Economists Argue

September 1, 2011|6:06 pm

Federal government spending for disaster aid has increased significantly over the past several decades. Much of this aid generally does not appear in congressional budgets, making it a “stealth entitlement,” according to George Zanjani, associate professor of Risk Management and Insurance at Georgia State University.

Zanjani sat down with The Christian Post for an in-depth discussion on insurance and federal disaster issues.

Zanjani has conducted research, along with his co-authors, J. David Cummins, professor emeritus of Insurance and Risk Management at the University of Pennsylvania and Michael Suher, graduate student at Brown University, on federal disaster aid between 1989 and 2006.

Their research found that, on average, the federal government spends about $20 billion per year on disaster relief, and Congress budgets about $1 billion per year for disaster relief, which goes to the Federal Emergency Management Agency (FEMA).

To make up the difference, Congress will generally pass an “emergency spending bill” after the disaster occurs. Since emergency spending bills do not appear in congressional budgets, it represents a future expense that is unaccounted for.

Zanjani's research indicates that, at current levels of spending for disaster relief, and assuming future disasters occur with about the same frequency and severity they have in the past, the federal government can expect to spend anywhere from $10 billion to $24 billion per year on disaster aid. If Congress continues to fund disaster aid at about $1 billion per year, disaster aid funding would represent an unfunded liability of about $90 billion to $240 billion over the next decade.

Disaster aid is “stealth” in two ways, according to Zanjani. It is stealth in the sense that it is an “unofficial” “off-books entitlement,” and in the sense that it is “creeping.” “It's getting bigger and bigger over time. With each passing catastrophe we get more and more generous in what we give out to the effected communities,” Zanjani said.

This may be due to a “ratcheting up” effect that others have observed, according to Zanjani, where government officials argue that they deserve at least as much aid as the amount that was given in the previous disaster.

The current controversy over funding for Hurricane Irene relief illustrates the difficulty of fiscal restraint during times of natural disaster.

After Hurricane Irene hit the Atlantic coast, House Majority Leader Eric Cantor (R-Va.) said that any additional disaster aid funding would have to be offset with spending cuts from other parts of the federal budget.

Many have been sharply critical of Cantor. New Jersey Governor Chris Christie (R) told The Wall Street Journal, “Our people are suffering now, and they need support now, and [Congress] can all go down there and get back to work and figure out budget cuts later.”

Virginia Governor Bob McDonnell (R) echoed that sentiment: “I don’t think it’s the time to get into that debate.”

Christie and McDonnell's view has been the typical view of Congress during times of disaster. Members of Congress say they will pay for the disaster aid because people are suffering and they will worry about how to pay for it later.

The problem is, however, that Congress never returns to the issue later to decide how to pay for it. Congress does not, for instance, decide later to raise revenue or cut spending to pay for it. Instead, Congress adds to the federal debt and leaves it to future generations to worry about how to pay for it.

Zanjani says that he has “more than a little sympathy for Cantor's position,” in at least one sense.

“This has been a giveaway that has been off the books, and no one is paying attention to it. We're not currently budgeting anywhere near an amount that is appropriate.”

Ideally, though, Zanjani would prefer to see the discussion of funding for disaster aid to occur through the normal budgeting process instead of after a disaster. “It's difficult to make budget balancing arguments when people are standing on their rooftops or digging out from underneath rubble.”

Using estimates of how much future disaster aid will cost, it’s possible Congress could do a better job of fully funding disaster aid.

An alternative strategy would be for Congress to limit how disaster aid is spent. Matt Mayer, a visiting fellow at The Heritage Foundation, prefers this strategy.

In an interview with The Christian Post, Mayer said, “the reality is, we've got to get FEMA out of the business of routine disasters that it's been involved in over the last 20 years, and if we do that, FEMA will have plenty of funds and resources to deal with catastrophic events like hurricanes and major earthquakes.”

Zanjani admits there is a concern among some that increasing the amount of money spent on disaster relief would just lead to more money being given out. When a big disaster strikes, there would still be a shortage of funds and Congress would again need to pass an emergency-spending bill.

“I can imagine ways in which the more sensible budgeting I'm describing could lead to even greater amounts of waste in spending,” Zanjani said. “Giving FEMA a bigger war chest is not necessarily the answer.

“Yet, this has to be balanced against this delusional game that we're playing at budgeting time when we give [FEMA] this puny allocation and then treat these supplemental appropriations, which are substantial, as unanticipated expenditures and keeping them out of the budget calculations entirely.”

Zanjani said that he does not know if any members of Congress who sit on the appropriations committees are aware of his research, but someone from the Congressional Budget Office has been in touch and shares his concerns about disaster aid budgeting.

Contact: napp.nazworth@christianpost.com
Source URL : http://www.christianpost.com/news/federal-disaster-aid-is-stealth-entitlement-economists-argue-54936/