The Federal Emergency Management Agency (FEMA) approved a vast increase in funding to reconstruct the Rockaway Beach boardwalk last week, nearly doubling the budget from $270 million to $480 million. According to one report, "It was not clear what caused the price tag to jump," a phrase that could be attached to practically all government construction projects.
The boardwalk, destroyed during Hurricane Sandy in 2012, is being rebuilt to costlier standards that call for things like a higher elevation and a sand barrier. The influx of cash has, unsurprisingly, received high praise from politicians such as Chuck Schumer (D-N.Y.), who heavily lobbied for the mountain of taxpayer money to come to his state.
The initial Sandy emergency spending package passed in 2012 already came loaded with hundreds of millions of dollars in pork for things entirely unrelated to Sandy relief, in states as far away as Nevada and Alaska. Even in the affected states of New York and New Jersey, there were hundreds of millions in corporate welfare for non-relief initiatives. Now, authorities are revising up their estimates of how much it will cost to get coastal areas up and running again, calling for even more spending on Sandy relief.
A November Cato Institute policy analysis by Chris Edwards said that "federal disaster aid in recent years is almost treated as if a state has won the lottery. After Hurricane Sandy, politicians in the affected states announced grand ideas about how they wanted to spend the tens of billions of dollars of federal relief money." That study also made clear that states, rather than the federal government, were best-equipped to efficiently handle disaster relief efforts:
Excessive federal intervention threatens to undermine and crowd out more efficient state, local, and private disaster response efforts. Also, federal interventions usually come with top-down rules that stifle innovation and reduce the efficiency of state and local government services.
In addition to wasting tax dollars on non-disaster spending and dramatic budget increases for no apparent reason, FEMA's existence incentivizes construction and development in areas of the country prone to storm damage. In a free market, people can choose to live in disaster-prone locations, but they have to either self-insure against the threat of damage or pay higher insurance premiums to hedge those risks. Under our current system, on the other hand, people go in knowing their infrastructure will be rebuilt on the federal taxpayer's dime in the event of a natural disaster—so why not build in a hazardous location?
This moral hazard issue, in which individuals, governments, and corporations, knowing they will not be expected to bear the full cost of future losses, take risks they would not otherwise, was addressed by Gettysburg College professor Rutherford Platt in his book Disasters and Democracy. There, he states that it is actually "good politics for state and local governments to neglect their own disaster response capabilities in order to make it easier to qualify for a presidential [emergency] declaration."
Politicians rarely stop to wonder whether they should really be building and rebuilding in disaster-prone locations that require expensive safety precautions like those being added to the new Rockaway Beach boardwalk. They don't have to reconsider the wisdom of such projects, because in the event another hurricane hits, they know the region will simply receive another bailout from the rest of the country. After all, that's what FEMA exists to do.
Despite the influx of hundreds of millions of dollars to the Rockaway area, the government has actually managed to harm local residents in the aftermath of Sandy. Rockaway homeowners have been hampered by changing construction requirements imposed by the city's Buildings Department and FEMA. These new rules are slowing or preventing rebuilding for many residents, which in some cases has left them homeless more than two years after the fact.
"The most depressing thing since the storm is dealing with government," said one resident, who had to resubmit construction plans several times to comply with regulations and also had to re-file for a Small Business Administration loan that kept expiring due to the regulation-caused delays.
News about the increase in funding for Rockaway's boardwalk comes the same week FEMA agreed to increase funding to nearly 70 times the initial estimate for Moonachie, New Jersey's Borough Hall, bumping the taxpayer bill from $68,000 to over $4.5 million. Again, local politicians praised the vast increase in funding with no comment on the costs and future risk they're passing on to taxpayers nationwide.
UPDATE: According to a report from local news outlet DNAinfo, the 75 percent increase in funding for Rockaway Beach is supposed to go toward "park benches, light poles and ramps" in addition to the boardwalk itself. You can decide whether that sounds like $480 million well-spent.