The Truth is Powerful
Are federal disaster policies making the harmful impacts of climate change even worse?
Over the last year, we have been studying how the physical impacts of climate change might affect the financial markets and Americans’ welfare. We were surprised to learn that even where municipalities know they are in harm’s way, they can readily borrow money for future infrastructure because the market knows that if climate-related disasters happen, the city or county will be bailed out. If true, this is a costly path. Not only will climate change hurt our welfare, but the practice of federal bailouts will amplify those dangers. We are already seeing warning signs. Natural disasters cost the United States $95 billion in 2020 , double the 2019 level, in part because the country saw a record number of Atlantic hurricanes. The Federal Emergency Management Agency (FEMA), on the front lines when disaster strikes, has plausibly become the nation’s most important administrative agency.
Effective disaster policy requires striking a balance. On the one hand, humanitarian responses are essential in a just society, and research shows those most affected by disasters have the least ability to absorb and rebound from shocks. When disaster strikes, government must stand ready to help. On the other hand, the act of helping can invite danger […]