I’ve heard chatter about how, perversely, the flood disaster here in Rhode Island could turn out to be some sort of blessing. Why? Because the Federal Disaster Area tag brings with it Federal dollars that can be used to rebuild infrastructure damaged in the storm. And whereas Bastiat’s parable of the Broken Window certainly applies to those businesses damaged by the flood (money they could have spent elsewhere is going towards just getting back to normal), does it apply to RI government?
On a macroeconomic scale, yes it does. Federal dollars are still our dollars, though filtered through Washington. That is money that could be spent elsewhere if there was no disaster. So, whether you agree or disagree with the other avenues of spending–ie; health care, military, etc.–disaster relief takes money away from other areas.
On the other hand, if we’ve already sent the moola to D.C., what the heck is wrong with getting it back because we need it, right? In fact, isn’t disaster relief amongst one of the core functions of a government anyway? I would say yes and to heck with Bastiat.
But then there is this: RI government has done an awful job at one of its supposedly central functions of maintaining infrastructure. The budgetary crunch wasn’t going to alleviate that any time soon and, at best, we would be subject to the same routine as past years such as voting on “transportation bonds” apart from the normal budget or cutting out school building improvements. But then we get the rains of March and the resulting disaster, which leads to the promise of a Federal bailout of a different sort.
My fear is that the General Assembly will manage to turn disaster aid–just like last year’s stimulus money–into another short-term, one-time “fix” by moving money around and using federal dollars to replace state spending (like they did with education stimulus dollars) instead of as a supplement to it. So questionable programs favored by those in the General Assembly will be maintained and Federal dollars will be used to cover the basic areas that State government should be doing anyway. Another one time fix that will allow the GA to kick the can down the road again.