Sandy Cleanup Could Consume This Year's Fiscal Cliff Revenue

Among the many lessons Superstorm Sandy offers is how fragile the state of the US economy is in the face of enormous storms, which are predicted to occur with greater frequency and force.

The $80 billion needed to recover from Sandy – just one natural disaster – blows a hole through the fiscal cliff negotiations. Standing firm on raising taxes on the top 2% would generate $80 billion a year, so all the funds from the first year wouldn’t even make it into the general treasury. They would be spent to help New York and New Jersey repair the damage from Sandy and install protective measures for the future.

Therefore, President Obama asked Congress to approve less than the governors of NY and NJ asked for. He requested $60.4 billion in emergency relief funds, and that’s for all the Northeast and Mid-Atlantic states that need help.

Will Congress approve those funds?

"This is going to be a tough fight in the Congress given the fiscal cliff, and some members have not been friendly to disaster relief," say senators from New York and New Jersey in a written statement.

What happens with future extreme weather events triggered by climate change? 

Under extreme pressure to cut spending to reduce the deficit by Republicans, these storms will force more spending, not less. Will these funds be made available or will Republicans require cuts elsewhere to pay for disaster relief? At what point are there no more cuts to be made?

Extreme Weather is the New Normal 

There will be plenty of projects vying for those funds.

All over the region, wastewater treatment plants are crippled, spewing hundreds of millions of gallons of raw sewage into New York and New Jersey waterways. The pricetag to repair that infrastructure is estimated at $1.1 billion in New York alone.

The focus is not only on repairs but on making this infrastructure more ready for a future reshaped by climate change.

"You’re looking at significant expenditures of money to make the plants more secure," John Cameron, a wastewater engineering specialist, told The New York Times. "There is no Band-Aid for this. This is the new normal."

Sandy’s devastation alone should be a huge wake-up call, but it was actually just one of 19 named storms in this year’s above-average Atlantic hurricane season.

By the time it was over, Sandy wreaked damage on east coast all the way up to to Nova Scotia and west to Lake Michigan, covering 1,200 miles. 

New Approach to Disaster Planning Necessary

The decisions about how to handle the Sandy clean-up – and who should fund it – are likely to reshape future US disaster relief policy at the federal and state level.

In late November, the Senate Environment and Public Works Committee debated this issue, with Democrats underscoring the need to plan more aggressively for the future impacts of climate change.

"More frequent extreme weather events have become a reality as our climate continues to change. We have to build infrastructure need to protect our people, our communities and our economy," said Barbara Boxer (D-CA), committee chair, woman. 

Should federal funds be used to rebuild homes or shorelines that have been battered repeatedly in the past? Beach protection programs in New Jersey, for example, have cost taxpayers $475 million since 1988.

"We’ve rebuilt in places that we shouldn’t have built and now those places are becoming even more hazardous and more expensive to stay in," Peter Kasabach, executive director of New Jersey Future, told the Associated Press. "As we grow and develop, we should make sure we don’t continue to invest in those places."

Who Will Pay the Bill?

Private insurance companies are backing away from extreme-weather-threatened regions and in the end, taxpayers may be saddled with more of the responsiblity for natural disaster cleanup.

Congress "needs to look at where the federal government is being asked to pick up markets the insurance companies no longer want to be in, and ask if that’s the right policy," says Mindy Lubber, Executive Director of Ceres, which issued a report on the topic.

The insurance industry has its own financial troubles. "Taken to their logical conclusions, these trends could ultimately undermine our state, regional and national ability to rebound from the shocks of natural disasters."

99 disasters in 2011 qualified for FEMA aid (46 so far in 2012). Underwriting losses from extreme weather events last year added up to $34 billion, according to Ceres’s analysis.

The $20 billion in aid related to this summer’s drought was mostly picked up by federal crop insurance.

“Insurance is the first line of defense against extreme weather losses, but climate change is a game-changer for the models that insurers have long relied on,” says Washington State Insurance Commissioner Mike Kreidler, who wrote the report foreword and endorsed its key recommendations. “Companies will need to adapt if insurance is to remain available and affordable.”

Here’s Ceres’ report, "Stormy Future for US Property and Casualty Insurers: The Growing Costs and Risks of Extreme Weather Events‘: 

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