Fund fair Sandy repairs
I clicked on the live webcast of the U.S. Senate floor proceedings to find New Jersey Senator Robert Menendez pleading for Congress to take up H.R. 1, the Supplemental Appropriations Act that provides $60 billion in disaster funds for Hurricane Sandy. Unfortunately, Senator Menendez, in making his case for federal funding, was showing photographs of affluent Mantoloking, New Jersey. His advocacy shows why it is necessary for Congress to move slowly on the funding request to ensure that the spending gets to individuals and communities who really need assistance.
The proposed spending seems to fail to make distinctions between helping low income people who have no resources, and giving scarce resources to rebuild the summer homes of the wealthy. There was immense suffering in the aftermath of Sandy, but America is not rich enough to make the wealthy and the poor whole from the disaster. That is not the social compact that most Americans believe they have made as residents and citizens. How do we know exactly where the recovery monies will flow?
Mantoloking is a shore community with a year-round population of 296 (according to the 2010 Census) and a summertime population of approximately 5,000. Average income per person is $79,555, versus average income of $35,678 per person in New Jersey and U.S. average income of $27,915, according to the U.S. Census. In a time when the U.S. is asking for sacrifices from its citizens, funding repairs for second homes would seem the last thing Americans can afford. When President Obama sent his funding request to Capitol Hill, one of the parameters he outlined was (emphasis mine):
As a Nation, we have always worked together to assist those who have suffered losses from disasters, and lack adequate resources to rebuild their lives and communities. Assistance should be targeted primarily to low- and moderate- income individuals and families, and limited to repairing and rebuilding primary residences only.
Rushing $60 billion of funds to states might make Congress feel good, but it’s likely that it will be paid for with cuts in other areas of the budget such as reducing cost of living increases for Social Security.
So far, the federal government has spent about $2 billion in the 11 states affected by the storm.
The Congressional Budget Office estimates that only $9 billion of the $60.4 billion proposed would be spent over the next nine months. An additional $12 billion would be spent the following year. Republicans say the CBO’s estimate undercuts the urgency of the bill.
Others, though, are softening their stance. “We’d be wise to do offsets but this is truly an emergency,” Sen. Lindsey Graham, R-S.C., said. “I’d like to try to find offsets but at the end of the day this is a catastrophic event in a huge population center.”
How fast does the Sandy legislation spending happen? The Congressional Budget Office shows us:
Going more slowly on the federal appropriation provides time for other solutions to be proposed. For example, New York State Comptroller Thomas DiNapoli has proposed legislation to help local New York governments with storm costs. The legislation would give local governments impacted by Sandy the option of providing property tax relief to owners of properties that lost 50 percent or more of their value due to the storm. Property owners of heavily damaged properties could apply to have their assessment and tax liability reduced. Similar legislation was enacted in the aftermath of Hurricane Irene and Tropical Storm Lee.
The New York City Teachers Retirement System has pledged $1 billion via the Clinton Global Initiative for Sandy investments in infrastructure projects, including improvements to transportation, power, water, communications, and housing in New York City and throughout the tri-state area.
The best approach for Congress is to fund $20 billion of spending now (the first and second year of the request) and then take more time to thoroughly assess the needs for funding and explore other channels of funding. There is an excellent opportunity, for example, to create a national infrastructure bank to issue bonds to the Federal Reserve to fund bigger infrastructure projects that are needed to “mitigate” future damage. The Federal Reserve has bought over $2 trillion in U.S. Treasury and mortgage-backed securities in an effort to stimulate economic growth and plans to buy about $2 trillion more. “Sandy” bonds could generate a lot of employment and strengthen the tri-state area against future disasters, while having a more direct positive effect on the economic recovery.
Funding for Sandy is an opportunity for Congress to develop more fiscal prudence and thoroughly vet the government’s spending. If it discovered several years down the road that lower and middle-income Americans had helped to rebuild the summer homes of the wealthy, that will be very hard to explain.
Federal Reserve Bank of New York: What Are the Costs of Superstorm Sandy?
White House: Supplemental Hurricane Sandy Funding