Paying for Sandy

Back when he was still awesome, Rush Limbaugh use to say that the most dangerous place in America was between Chuck Schumer and a camera. And you just knew he was going to say something stupid about Hurricane Sandy:

Sen. Charles Schumer called the fallout from Hurricane Sandy a “national disaster” and called on a federal government to cover at least 90% of the costs.

“This is one of the biggest disasters to have ever struck this state and even this country,” Schumer said at an afternoon briefing with Gov. Cuomo. “The federal response has to measure that scope and be equal to that that scope.”

“We cannot cut corners. We cannot count nickels and dimes. This isn’t a New York disaster, a Connecticut disaster, a Jersey disaster. It is national disaster. It needs to be treated that way by every member of Congress, by all the members of the executive branch.”

But Mr. Schumer did say that any added money will be tacked onto the deficit, which already is expected to reach about $1 trillion in fiscal 2013. He rejected the suggestion that other programs should be cut in order to pay for any new budget needs, saying Democrats won that fight on previous emergency spending bills, too.

I have a very slight portion of agreement here in that the Feds should bear some of the pain for regional disasters that can overwhelm local and state governments. But the key word there is “some”. We are talking about some of the wealthier regions of the country. I don’t see why New York should not pick up the cost of, say, repairing the subway system or New Jersey should not pick up, say, the cost of fixing the electricity. There is not a part of this country that is not at risk of some natural disaster. Repairs, replacements, relief have to be part of the existing budget for state and local governments: a really rainy day fund. But … the Feds have picked up the tab for everything else and it would seem odd to suddenly change now.

That being said …

The idea that we should not cut other spending or raise taxes or make some kind budget room for disaster relief is ridiculous. This is precisely the kind of thinking that has gotten us $16 trillion in debt: never allowing for the inevitable “unexpected” expenses that find their way into the budget. Be it wars, “stimulus” or disaster relief, we just throw out the fiscal responsibility when the bill comes due. And then we wonder why we’re so far in debt.

Maybe you could do this if our finances were in good shape with the idea that we’d pay it off over the next year or two. But when we’re under a growing mountain of debt, every new expense has to be accommodated. That’s the whole idea behind PAYGO, no?

The research on bankruptcies has shown that most are the result of some catastrophe that hits a family: medical expense, job loss, etc. Bankruptcy is especially likely if the family has not squirreled away some money to anticipate a disaster. My wife and I only got our finances in order when we started to allow some budget room for unexpected expenses: car repairs, doctor bills, travel. I just found out a friend lost his job two months ago. But his family hasn’t suffered because they cut expenses and had a rainy day fund. I’m dubious of translating lessons about family budgets to the federal budget, but in this case I think it’s apt. Everyone has to budget for the unexpected.

Our federal budget does not, for obvious reasons, have a rainy day fund. But the reason we need to get the deficit under control is precisely to deal with unexpected huge expense that might hit us out of the blue (like a hurricane; or a war). And that means that, given the current budget situation, any disaster relief for Sandy has to be balanced by tax hikes or budgets cuts. We simply don’t have the flexibility, when we’re fighting over a few hundred million here and there, to say, “Oh yeah, here’s $50 billion. Don’t worry about it.” And we don’t have the leeway to keep thinking of the government as a bottomless piggy bank.

Spending Restraint

Nicely done, assholes:

On Friday afternoon, within half an hour of one another, both the House and Senate voted to reauthorize the nation’s federal transportation funding programs. They then immediately fled town, which is understandable because the legislation is atrocious.

For starters, the bill spends $6 billion bailing out college students by extending the artificially low 3.4 percent interest rate on some subsidized college student loans. The change will save the average student only $7 per month, and the rates will do nothing to drive down the cost of college.

The bill also reauthorizes the Highway Trust Fund, but at higher levels of spending than the related gas tax that is supposed to fund it. To pay the difference, members of Congress did not raise the gas tax — instead, they chose to raid private pensions and flood insurance policies.

What they did was cut employer contribuions to pensions so the money could be taxed and the increased insurance fees for both pensions and flood insurance. This is their version of paygo, raising both spending and taxes. I suppose it’s better than simply piling on more debt. But this isn’t exactly what we had in mind. Letting student loan rate rise, cutting highway spending and cutting flood insurance would have accomplished the same thing, only with much smaller government.

The Next Shutdown

As I blogged last week, we are facing another government shutdown. This time, the issue is disaster relief. The GOP wants to pay for it by cutting green car subsidies (known to sensible people the world over as corporate welfare). The Democrats are opposed, partly because they like the corporate welfare but mostly because they don’t want to set a “precedent” for offsetting disaster relief.

I really don’t follow that logic at all. Disaster relief counts toward the deficit just like everything else does. In fact, I would argue that a substantial part of our deficit has been created by a refusal to offset unexpected expenses like wars, recession relief and disaster relief. The entire reason for having PAYGO is to stop the bullshittery of Congress declaring a crisis and engaging in an orgy of unfunded spending. It’s not like the Democrats are in any kind of hurry to get the relief money out. If they were, they would’t be threatening a shutdown.

Offsetting disaster relief serves another purpose: forcing Congress to figure out how much relief is actually needed. We have gotten far too used to legislators just naming a figure and rushing the funds out the door, sometimes throwing in some pork for good measure. Does anyone expect spending discipline to be followed in a “We must pass it now! NOW NOW NOW!” situation? Force people to prioritize and we’ll get the relief we need … and only the relief we need.

It’s not like Congress is fumbling desperately for spending to cut. Here is a story from the Chicago Tribune about the explosion in farm income over the last few years:

They’re enjoying the fattest times in memory. The money pouring into Corn Belt bank accounts isn’t just setting a record. The latest government figures show farm income blowing past the previous high of $84.7 billion in 2004 to top $100 billion this year. Land values have soared and debt is being paid down aggressively.

There’s no end in sight to the boom times. A small crop this year and continued strong demand set the stage for another bonanza next year, and probably the year after that.

Depending on your accounting, we’re talking about $25 billion a year, at least, ten times the amount in dispute.

Then there’s this:

A shutdown wouldn’t be a good thing for the economy, but it wouldn’t be a fiasco on the scale of defaulting on the national debt. Similarly, a shutdown wouldn’t make any politicians in Washington look particularly good, but at this point, there might be more upside for the two parties in confrontation than there is in continued unsatisfying compromises.

That’s a particularly popular interpretation among Democrats, who worry that Republicans have become too accustomed to legislating through fiscal brinksmanship, and the only way to reset the budget process and end these constant threats of shutdowns and defaults is to let a shutdown actually happen and show Republicans what that means for them, both economically and politically. This shutdown, because it’s over relatively little money, and because Democrats feel comfortable saying “we shouldn’t be cutting jobs spending to pay for disaster aid” over and over again, offers a way to carry that strategy out in a relatively controlled fashion.

Remember when the Democrats were the party of grown-ups? When the GOP threatened shut-downs to cut spending, it was called reckless partisanship. Now it’s just “resetting the budget process”.