How might the government more efficiently make funds available for victims of disasters?
As a software engineer, a mantra I abide is “never twice”.
Sometimes there is an event so unusual that there is no reason to expect it to recur, so we deal with it as an exceptional case. The terrorist attacks of September 11th are such an event. There’s no reason to institutionalize a response, because it’s unlikely to happen twice.
Sometimes events occur irregularly, but are certain to recur. Hurricanes, floods, wild fires, earthquakes, and all other manner of natural disasters fall into this category. They may not occur according to a predictable pattern, but we can predict some likelihood of each happening again. In fact, this is already done with the notion of 500 year floods and such.
Whenever a massive disaster occurs, one of the first responses is for congress to pass a disaster relief package. To my software engineering / process optimization mindset, this is a problem. Not only does it impose a delay when delay is most costly, but each of these packages is an opportunity for some congressional pet project to sneak through and divert funds when it has no business being part of the disaster relief effort.
That lead me to wonder can congress can pass a single law to replace all future disaster relief packages?
How Much Do Disasters Cost?
Fortunately, there is a lot of data about major natural disasters that the government already makes available [source]. As of October 6th, there were already 15 weather & climate disasters in America with each imposing a loss of at least $1,000,000,000 ($1 billion). We’ll use this as the threshold to say that each could potentially warrant a disaster relief package.
Since 1980 the United States has endured 218 such events, costing a total of $1,200,000,000,000 ($1.2 trillion is an under-estimate since the total costs of Hurricane Harvey, Irma, & Maria are not yet available). We could estimate this as being an average cost of $5,500,000,000 per disaster. Since this is an underestimate, we’ll round up to an even $6 billion dollars per disaster. I like round numbers.
From 1980 to 2017 the average per year is 5.5 disasters. However, due to climate change the number of these events has increased such that over the last 5 years we are now averaging 10.6 events per year. Let’s call it 11.
A Permanent Solution
FEMA already exists to manage disasters. It has a budget of $13 billion dollars per year to do this. Disaster relief funding is separate from FEMA.
Because we can make a reasonable estimate about the amount of disaster relief funding we’re likely to need for natural disasters, there’s no reason we could not simply increase FEMAs funding so that the organization has all of the resources we expect to need to manage disasters and fund relief efforts.
Using our average cost of $6 billion dollars per disaster and running average of 11 disasters per year, we could increase FEMA’s funding by $66 billion dollars to a total of $79 billion per year. In this way, we can budget for the cost of disasters and have the money readily available when a disaster takes place rather than needing to wait for congress to act. Moreover, provided sufficient oversight, the money made available for disaster relief won’t be tainted with congressional pet projects and special funding unrelated to the disaster.
Funding the Solution
The increased severity and quantity of disasters is driven, in part, from climate change. As a result, it would be logical to attach two provisions to how these additional funds will be raised.
- It should be funded by the causes of climate change to help reduce demand for what is propelling the disasters
- The tax rate on these funds should self adjust every year without congressional action
In 2016 the US burned 143 billion gallons of gasoline [source]. If we were to add a tax to gasoline to fund FEMA’s disaster recovery costs, this would currently come to an additional tax of $0.47 cents per gallon ($66,000,000,000 ÷ 143,000,000,000 = 0.47). That is a rather large tax on gasoline, but the cost of burning it is also very high (the rate of major disasters has doubled in 20 years). This tax is also not punitive. It simply forcing us to pay for some of the otherwise hidden costs of burning gasoline.
Every year the cost of disaster recovery efforts and the running average of disasters per year would be re-calculated. If the rate of disasters decreases due to action to fight climate change, the tax will decrease. If the rate increases due to inaction, the tax will increase.
Balancing the Fund
Because we’re talking about averages, some years there will be fewer disasters and funds will be unused whereas some years there will be more disasters and funds will be depleted.
Ideally those would balance out, but that won’t always be true.
If FEMA could borrow from the Federal government, then there should be no major concern about near-term funding shortfalls. The extra costs of ongoing disasters would simply increase the gasoline tax the next year and the funding would balance out.
In the case of excess funds because of a dip in the number of disasters, FEMA would hold this revenue and have the authority to invest them into low risk securities such as treasury or municipal bonds. This way money will be available when disaster does strike, and it will. However, the following year the rolling average would decrease and so would the gasoline tax. The funds would remain until called upon when the rate of natural disasters spikes once again.
The biggest problem is the humans managing billions of dollars. FEMA would have the power to make and break fortunes for many corporations involved in rebuilding. This would make it an attractive target for undue influence.
The best solution is a tremendous amount of visibility into FEMA’s bidding processes and potentially even having contingency bidding for disaster relief work for events that are likely. In this case the bidding process can be slow and transparent, and when disaster strikes the companies involved will already know their role and compensation plan, which would help FEMA get reconstruction underway faster and without allowing time pressures to become the guise for illicit processes that funnel money to companies (or friends) that should not receive it.
Can congress permanently solve the need to fund all future disaster relief efforts?
Yes, and it shouldn’t be too hard.