Disasters Unlimited; J. Sommer

A lmost one thousand years ago in England a subtle lesson i.n the limits of public authority was offered by King Can ute who, when implored by fawning courtiers to demon strate his regal powers by commanding the ocean waves to halt their assault of the shores, waded into the surf, held up his hand in mock gesture, and permitted all to observe his royal drenching. Canute could not avoid the force of Nature. Today, government in trusion into these areas produces a severe loss of individual respon sibility and leads to the prospect of an all-powerful government at tentive to special interests. Public actions to forestall physical events or to provide relief an tedate Canute of course, stretching back to Sumerian days. Fires, floods, droughts, earthquakes, hurricanes, tidal waves, tornados and volcanic eruptions lead a list of natural disasters which has been ex tended in modern times to include technological hazards such as toxic wastes, nuclear reactors and other remotely plausible threats. In fact, the list is infinitely expandable, perhaps one day to include denture stains and psychological damage from viewing old reruns of "The Honeymooners." Anything is possible when individuals become con vinced that the shield of the State can, and rightfully should be de ployed to protect their life and property at all times, in all places of their choosing, and under any circumstance.

This belief in the function of the State as the proper intervenor in all events of calamitous consequence is promoted by a triangle of spe cial interests: 1) Citizens who are at risk or have just experienced a disaster try to reclaim some of their taxes in the form of payment for actual losses, or in the form of localized public investment such as dams or sea walls, to forestall future losses. 2) Politicians' 'recognize the wisdom of the people" and even exert leadership by "helping" constituents to recognize previously unforeseen threats. Congressional representatives thrive when they deliver public works thought to be hazard mitigating (and known to be vote generating). 3) Bureaucrats seek to expand the scope of their preparedness and the size of their budgets. Each party responds to the logic of incentives. This beneficial triangle is a benign system when viewed from the vantage of intent, but it has a tumorous quality in terms of consequences.

The systematic consequences of the humane urge to protect or assist people, and to be protected and assisted, requires vigorous national attention to illuminate the reasons why voluntary disaster assistance is superior to public liability of current and future Americans who are placed in debt for the protection of their countrymen. Such attention may, at the least, help to stem the tide of disaster creation. The logic of the argument may help to return us to a society wherein market calculations replace th,e beneficial triangles and where voluntary relief organizations may flourish. I n 1803 Congress gave the first disaster relief in the form of an . extension of time for discharging customhouse bonds of suffer ers from fire in Portsmouth, New Hampshire. It did the same for Norfolk, Virginia the next year. Over the intervening years Congress has increased the number and size of awards as well as in creasing the kinds of disastrous events which qualify. From the first award in 1803 to 1953 one hundred and fifty disasters were declared or one per year on average. I In 1953 Congress granted the President authority to declare disasters. Since then the Presidency has expanded its powers to intervene in both past and potential disasters to the degree that "acts of God" are recognized only after a declaration of disaster by the Chief Executive!

Of course, the number of disaster declarations, and the amount of the awards have risen dramatically since 1953, as may be seen in the table below: 135 Disaster Subsidy Zones Period 1803-1952 1953-1962 1963-1972 1973-1982 Federal Disaster Declarations 1803-1982 1 Average Number of Average Dollar Largest Award in Awards Per Year Amount of Award Period and Year 1 Not calculable $ 15,000,000 (1943) 14 $1,630,000 $100,400,000 (1954) 28 $5,100,000 $351,500,000 (1972) 40 $6,400,000 $190,000,000 (1979) Presidential perspicacity has "permitted" more disasters to be offi cially recognized and, in current dollars, the average awards have jumped from a little more than one-and-one-half million per disaster during the decade 1953-1962 to about six-and-one-half million per dis aster from 1973-1982. Disaster relief is extended to individual states upon application by the state. The largest awards during each period were for hurricane related damage: Maine in 1954, Pennsylvania in 1972, and Alabama in 1979. Of the many disasters declared, the most expensive have re sulted from hurricanes which have wrought havoc on the Atlantic and Gulf coasts. When the Federal awards to each state are summed after a traumatic event the outlay is staggering. Hurricane Agnes, for ex ample, evoked nearly half a billion dollars in Federal relief in five states in 1972, the greatest part of which, as is the case with most hurricanes, was damage caused by flooding. In fiscal 1985, the federal government spent about one third of a billion dollars for direct disaster relief and insurance-and there are many additional indirect outlays, 136 THE FREEMAN APRIL 1986 "Under a governmental system ofpublic support, 'disasters' are unlimited. "

not to mention those of state and local government. Federal flood insurance, for instance, is subsidized to the extent that it costs those who qualify, by virtue of owning property in an official hazard zone and enlisting in the program, only about one-third of what private insurance premiums would be. What we witness then is a cycle of destruction by traumatic natural events followed by a period of reconstruction underwritten by the pub lic treasury. At the time of tragedy it appears inhumane to us as in dividuals to cavil over assistance to those stricken, and most Ameri cans would choose to provide assistance to the injured and homeless. But we should expect the prudent use of that assistance, not rebuilding on the same hazard-prone sites under the protection of continued ar tificially low-risk premiums. That is exactly what happens with the use of public funds. Disaster subsidy zones are thereby created. The ob vious result is that real estate investors build where otherwise they would not because the risk inherent in their locational choice is spread to all the taxpayers. This is as true of lowland riverine areas as it is of barrier islands and adjacent coastal areas. Is it a proper function of government to subsidize these individual choices?

Disasters Unlimited I t is in this sense of induced or subsidized settlement in these disaster-prone zones that the Federal government uses our tax monies to place individuals at risk. This seems to be unethical, as well as inefficient in an economic sense. By using the general treasury to guarantee reduced financial loss due to natural disasters, government makes known hazardous locations more inviting. Fur thermore, it points to the inequity inherent in subsidizing the risks of some individuals while not recognizing those of others. Disaster sub sidies are often a redistribution of income from the less wealthy to those who can afford coastal resort condominiums and homes with hillside vistas. The vulnerability of these disaster subsidy zones is well documented. In 1900 Galveston was struck by a hurricane that killed 5,000 people. In 1983, Hurricane Alicia caused nearly $700 million damage to Gal veston and nearby areas. Today, with extensive Federal relief, the dev astated areas have been rebuilt and condominium developers are ad vertising views of the Gulf unblocked by sea walls! This history is repeated along our coasts.

Tornadoes, earthquakes and volcanic eruptions are also dramatic and costly, but they occur with less regularity to the same site. Despite the drama of these occurrences, after flood damage the next most costly natural event is shifting or expanding soil. 2 Boring! No tele vision covering of this natural disaster! Soil movement cracks foun dations and walls without raising any passion or pity, yet those who live in these soil-moving areas and suffer losses might wonder why they should subsidize ocean-view condominium owners while their own Why the PresidentSaid No I return without my approval House bill No. 10203, entitled "An act to enable the Commissioner of Agriculture to make a special distri bution of seeds in the drought-stricken counties of Texas, and mak ing an appropriation [of $10,000] therefor." It is represented that a long-continued and extensive drought has existed in certain portions of the State of Texas, resulting in a failure of crops and consequent distress and destitution.

Though there has been some difference in statements concerning the extent of the people's needs in the localities thus affected, there seems to be no doubt that there has existed a condition calling for relief; and I am willing to believe that, notwithstanding the aid already furnished, a donation of seed grain to the farmers located in this re gion, to enable them to put in new crops, would serve to avert a con tinuance or return of an unfortunate blight. And yet I feel obliged to withhold my approval of the plan, as pro posed by this bill, to indulge a benevolent and charitable sentiment through the appropriation of public funds for that purpose. I can find no warrant for such an appropriation in the Constitution, and I do not believe that the power and duty of the General Govern ment ought to be extended to the relief of individual suffering which is in no manner properly related to the public service or benefit. A prevalent tendency to disregard the limited mission of this power and duty should, I think, be steadily resisted, to the end that the lesson should be constantly enforced that though the people support the Government the Government should not support the people.

[Emphasis added.] The friendliness and charity of our countrymen can always be re lied upon to relieve their fellow-citizens in misfortune. This has been repeatedly and quite lately demonstrated. Federal aid in such cases encourages the expectation of paternal care on the part of the Gov ernment and weakens the sturdiness of our national character, while it prevents the indulgence among our people of that kindly sentiment and conduct which strengthens the bonds of a common brotherhood. - Grover Cleveland, February 16, 1887 "disaster" goes unrecognized. Why should their locational choice be regarded as qualitatively less worthy of protection than the choices of others? It is only a small step to recognize that any instance of change that is inconvenient is a risk and has potential to damage, therefore to be regarded a "disaster." Once providing disaster subsidies is accepted as a proper function of government, it is intellectually unassailable to expand the list of disasters to include such non-physical misfortunes as "damages" to border firms affected by devaluation of the Mexican peso, or to states impacted by Cuban refugee settlement. It is also attractive to the citizens, politicians, and disaster-bureaucrats who 137 DISASTERS UNLIMITED 138 THE FREEMAN APRIL 1986 Backout Strategies form the beneficial triangles identified earlier. Under a governmental system of public support, "disasters" are unlimited.

Government cannot shield each of us from any unforeseen event no matter how much personal freedom of action and decision is relin quished to the State. Yet there are those who argue that disaster pre paredness is a public good. On what basis then should individuals turn over to the State the authority to decide whose exposure to change shall be mitigated and whose shall not? There are sufficient offsetting public bads resulting from this process, as indicated throughout this article, to demand curtailment of these incentives before more bene ficial triangles come into being. R isk and change are part of the human condition; everyone seeks to reduce the former and to direct the latter. How this is achieved is an issue of moral philosophy as well as po litical economy. Clearly, maximum individual choice in location decisions, subject to complete responsibility for one's actions, is superior in terms of ethicality and efficiency to our present system of hazard subsidy. The market in private insurance informs one of the likely consequence of choice of place and deals efficiently with risk without its subsidy. Equally clear, in the presence of resources held jn common and territorial-based political representation, market signals are garbled. We know that we live in a contentious political economy, not a flexible market economy, and there are many in this country who profit by beneficial triangles which seek to mitigate the effects of change by distributing the associated costs to the public at large.

Special interest abuses are expected when government is expansive, so it is no surprise that disaster subsidies have increased in the second half of the twentieth century. We must forestall the development of new disaster subsidy zones and design backout strategies from those that exist. Gradually, we can move the system toward less costly and less threatening levels by adopt ing "sunset laws" which announce firm termination dates for the re moval of disaster subsidies. These may be subject to a steadily reducing schedule of possible payments or a variety of other stipulations, but the central feature is the certainty of the removal of public support. We can also declare that no geographical location shall be eligible for Federal disaster relief for the same kind of disaster more than once. The field is open for creative backout strategies. In the final analysis it is the responsibility of individuals to exercise judgment in action. Acceptance of this proposition will lead to private institutions to forestall disastrous events, or to mitigate their effects.

Clearly, there is much latitude for individuals to engage in collective action to help their fellows when they are stricken. Private organi zations do exist, and because their appeal is to conscience, not to Con gress, one can expect a wiser deployment of resources. At least, in a private arrangement we can expect to avoid a systematic increase in disasters. 0 1. United States of America. Congressional Rec ord. Volume 96, Part 9, August 7, 1950, Wash ington, DC. U.S. Government Printing Office, 1950, pp. 11900-11902; Ibid. 4/30/73, pp. H3166-H3170; Ibid. 9/5/73, pp. S15951-S15952; and Federal Emergency Management Agency. DMIS Report 2.4. "Disasters Declared Under Public Law 93-288, April 1, 1974 to July 19, 1985." 2. D. Earl Jones, Jr., and Wesley G. Holtz, "Expansive Soils-The Hidden Disaster," Civil Engineering (August, 1973), p. 49.

139 Summer Seminars 3 Week-long sessions at FEE For the 24th consecutive summer, FEE will conduct its noted seminars in the freedom philosophy and the economics of a free so ciety. Here, in the company of like-minded individuals, with experienced discussion leaders, and in a setting ideal for the calm exchange of ideas, is an opportunity for those who believe that the proper approach to eco nomic problems is through the study of in dividual human action. These seminars con tinue to attract individuals from all walks of life Who seek a better understanding of the principles of a free society and are interested in exploring ways of presenting the case more convincingly. Each seminar will consist of 40 hours of classroom lectures and discussions in eco nomics and government. In addition to the regular FEE staff, there will be a number of distinguished visiting lecturers. The FEE charge for a seminar-tuition, supplies, room and board-is $400. Fellow ships (including partial travel grants) will be made available. High school and college teachers or administrators are given special consideration.

Individuals, companies, and foundations interested in furthering this educational en terprise are invited to attend or otherwise in vestigate the program and to assist with the financing of the fellowship grants. First: Second: Third: June 15-21, 1986 July 13-19,1986 August 3-9,1986 The formal announcement, giving details of the seminars as well as information about fellowships, will be sent immediately on request. THE FOUNDATION FOR ECONOMIC EDUCATION Irvington-on-Hudson New York 10533 Attention: Summer Seminars 140 The RightTo Stagnate When force is used to maintainthe statusquo, basic rightsare violated. by Frank W. Bubb Frank w. Bubb is an attorney residing in Swarthmore, Pennsylvania. E very society operates explicitly or implicitly on some theory of rights, that is, a generally shared view of who can do what to whom under what circumstances. Most of us still pay lip service to the traditional American theory that each person has the right to "life, liberty and the pursuit of happiness" and to the free-market economics implied by that the ory-with some important qualifications. Now, however, the quali fications have become so pervasive in practice that we have backed into an entirely different theory of rights.