The Infinite Credit Card Just Got More Infinite

Hurricane Sandy is giving us a chance to see whether there is anyone left other than the Manhattan Contrarian to dare to mention the issue that the Federal fisc is not infinite.

A little history.  In the nineteenth century, there were plenty of hurricanes, let alone other destructive storms and natural events, like earthquakes and tornadoes.  In that era, it never seems to have occurred to anyone that restoration of the pre-disaster situation was even a permitted function of the Federal government., let alone a good idea.

As just one example from the very end of that century, here is a brief history from the Texas Almanac of the response of Galveston, Texas to the devastating hurricane that literally wiped out the city in 1900.  At the time, Galveston was the fourth largest city in Texas, with a population of 37,789 in the 1900 census.  The storm of September 8 killed an estimated 6000 - 8000 people and destroyed the large majority of the buildings in the town.  To recover, the city formed a Central Relief Committee to collect donations, both monetary and in-kind. 

Donations poured in from cities around the United States and several foreign countries.

Money came from millionaires in New York, from black churches in Georgia, and from a little girl in Chicago, who sent 10 cents. Donations came from religious groups, labor and fraternal organizations and thousands of individuals. Relief funds were raised by an organ recital in Scranton, Pa., and by a baseball game in Anaconda, Mont. Money was sent by the German Turnverein of St. Louis, Mo., and the Rough and Ready Fire Company of Montrose, Pa. Sunday school classes sent their collections of pennies, nickels and dimes.

In all, donations exceeded $1.25 million. By far the most generous state was New York ($228,055), followed by Texas ($66,790), Illinois ($55,544), Massachusetts ($53,350) and Missouri ($52,116). Donations also arrived from foreign countries – among them, Canada, Mexico, France, Germany, England and South Africa.

Missing from that list:  the Federal government.  The State of Texas also did not assume responsibility for replacing people's lost private property.

Galveston then undertook a project to protect the city by building a gigantic sea wall and also the elevation of all buildings onto stilts.  Who paid for that?

The county agreed to pay for the seawall through a bond issue. Initially reluctant, the Texas Legislature finally agreed to a combination of tax abatement and sales of bonds to finance the grade elevation.

No mention that the Federal government paid a dime.

Fast forward to the modern era, where Federal contributions to disaster relief started as modest grants and gradually escalated.  By the time of Katrina in New Orleans in 2005, all constraints had been lost.  According to this article from USA Today a year after the storm, the Federal government had spent $122 billion, and that wasn't necessarily the end.

And now Sandy.  We know from Katrina that if you just demand loud enough the Federal government will pay for everything you can think of.  In fact, now is the time to make your wish list of anything you would like, because if you can come up with even the slightest connection to the hurricane, you can get the Feds to pay, and probably double, because the last thing they will want to do is to be seen cross-examining some victim.

From Crain's New York Business today, we have Governor Andrew Cuomo of New York putting forth his demand for Federal aid:  $40 billion.  "The governor said their estimates were conservative and may rise as the cost of recovery from Sandy continues to be tabulated."  And don't forget New Jersey.  Governor Christie there issued a number on Friday of $29.4 billion as what he will be seeking in Federal disaster aid.  Something tells me that that number is going to jump dramatically when he realizes that he has been topped in the bidding by New York.

And we thought it was a lot of money when the Federal government handed out a $20 billion blank check to New York for recovery from 9/11, plus the right to issue some tax exempt "Liberty Bonds" in excess of normal limits.  That money paid for such desperately-needed projects as a new $3 billion (!) station for the PATH subway to New Jersey, and the financing of new headquarters towers for Goldman Sachs and Bank of America.

So on Sandy, will the Obama administration or the Congress actually push back?  I'm dubious.  Is there anyone but me who thinks that this just can't continue?