Most people support government aid to victims of natural disasters like Hurricane Katrina or the San Francisco earthquake. Most people don’t think such aid is warranted when hail knocks out windows or trees fall on a few roofs. Drawing the line between these two extremes isn’t easy.
Aiding those who suffer from disasters is a common function of government that goes back to the dawn of civilization. Spreading the risks of everyday life over a large group was one of the primary social functions of a tribe or clan. If you were part of the group, you knew that you or your family would get help when something bad happened.
As societies became more complex, government assumed some of the functions of kinship, including defense against outsiders and basic assistance to those who suffered ill fortune.
In general, such aid is not controversial. Many people dislike welfare programs. Others criticize payments to cotton farmers or anti-ballistic missile systems. Few oppose disaster relief.
Support is broadest when the damage comes from random events, “acts of God” unrelated to the behavior of the victims. An element of “there but for the grace of God go I” also boosts support. Tornados can hit more than half of the country and government aid to tornado victims is popular.
Until recent decades, government assistance was on a case-by-case basis. When dramatic and widely publicized disasters such as the Johnstown Flood or the San Francisco earthquake occurred, there was an outpouring of private charitable giving and broad support for government action. Those who suffered similar damage in less-publicized disasters got little.
Often, help varied depending on race and class. The epic 1927 flooding in the lower Mississippi valley affected millions. Whites got private and government help. Blacks got much less.
Political influence could play a role. Disasters that occurred in the districts of influential members of Congress brought forth a greater response. Members of ethnic groups that supported a particular local political machine got more aid than did other groups.
Over time, governments moved to standardize emergency aid measures and eligibility criteria. This improved fairness, but often hurt flexibility and responsiveness.
Drawing cutoff lines is always difficult. The current drought is an example. If farmers are in a county that suffers a loss of 30 percent or more of normal yields, they are eligible for miscellaneous federal and state assistance. Farmers across a county line may have equally severe damage, but if it rains on the other end of their county, they get no aid.
Political incentives remain present. The closer an election, the more energy elected officials put into seeking disaster aid. Many who campaign on the need to “starve the beast” of large government or who boast of their success in cutting spending are quick to claim credit for securing federal disaster funds.
Moral hazard is always a danger. Many argue that more government disaster aid is needed whenever private insurance is not available. That thinking, and the assistance programs that ensued, encouraged building on barrier islands and in flood plains. Instead of decreasing flood damage, it increased it.
Such perverse incentives can be pervasive. I lived in a rural county where the local electric cooperative began saving money for replacements as soon as the initial infrastructure was built. Knowing that electric poles rot after 30 or 40 years, the co-op replaced many each year.
Another cooperative nearby put less money into maintenance. Its rates were lower for years. When a severe March ice storm swept through, the second co-op sustained much more damage then the first. It got federal aid because its “need” was much greater. Members of the more prudent co-op wondered why they had paid higher rates for two decades.
However, such moral hazard problems often are overstated. It may be stupid to build below sea level in New Orleans or right on top of the San Andreas fault, but expectations of eventual federal help probably are not as big a factor as simple wishful thinking.
However well justified, it is difficult to administer disaster relief efficiently. There is great hoopla right now about securing disaster aid for farmers, but the actual aid is pretty trivial for most farms. The bureaucratic expense of surveying yields across counties and filling out paperwork calculating benefits for each farm is high, relative to the benefits farmers actually get.
Size matters. FEMA did OK in the 1993 flooding of Grand Forks, N.D., and after the 1992 tornado in my hometown of Chandler, Minn. It failed badly in New Orleans. Don’t count on it working smoothly after a mega-earthquake in California. But neither will private-sector institutions.
© 2007 Edward Lotterman
Chanarambie Consulting, Inc.