Nothing except war tears apart the seams of civilization like a natural disaster. A recent study published in the New England Journal of Medicine showed that 4,645 people died in Puerto Rico last year because of Hurricane Maria, about 20 times as many as the official government count. The authors, from Harvard University, conducted a household survey that included indirect deaths, such as someone being cut off from access to medicine, in addition to direct deaths like being struck by a tree limb. The study drives home the vital safety purpose of infrastructure resilience. ENR’s cover story (6/11 p. 10) showed that Texas and Puerto Rico are particularly unprepared for the next hurricane. The solution is to fix the economic incentives involved.
Congress once gave favorable tax exemptions to companies that operated in Puerto Rico—a U.S. territory—but the exemptions gradually expired, and by the time they finally ended in 2006, many companies had already left. Congress also gave tax exemptions for the island’s municipal bonds, but the borrowing went too far. And with Wall Street as the facilitator, Puerto Rico borrowed extensively. The result now is a complex bankruptcy involving several Puerto Rican spending authorities and government departments. It is a terrible situation in which to rebuild.
States face their own challenges involving incentives. The Trump administration’s proposed infrastructure plan, notably, would put a greater burden on states to pay for what they build. But state and local governments have been scaling back their spending on capital projects as a percentage of gross domestic project. Spending fell to 1.95% of GDP in 2014, from 2.4% in the early 2000s. Instead of using tax breaks to spur economic development, says the Center on Budget and Policy Priorities, states would do better by investing in infrastructure.
The federal government’s role in infrastructure funding and disaster relief has been a fixture of federal law, but it can create self-defeating incentives. One is in the 30-year-old Stafford Act. The law requires the federal government to provide three out of every four dollars used for disaster relief, and, predictably, the number of federal disaster declarations sought by states and funded by the federal government in recent years has grown to 130 or so, from about 30 a year in 1988. At the same time, the Stafford Act’s Section 404 requires that a region has to be hit hard by a disaster before it can receive a large amount of mitigation funding. As a result, hundreds of millions of dollars that could be spent before disaster strikes instead go to post-disaster mitigation.
There are glimmers of hope. The House of Representatives has adopted a measure that would establish a national disaster-mitigation fund and allow, but not require, the president to set aside 6% of the money spent on recovery for pre-disaster mitigation. The Senate should adopt this measure without delay—or inspiration from another disaster. It could start a new, smarter, “build back better” approach instead of the tragic cycle that now exists.