It is easy to deride recent claims by certain economists that the federal government has no business offering aid to the victims of last month’s Midwestern tornado outbreak. As pictures of destroyed homes and devastated families flood the media, it is hard to imagine a person who is unwilling to offer whatever government aid is available.
But while federal aid seems like the nice thing to do, it does not necessarily work.
Economists recognize a social phenomenon known as “moral hazard”. This occurs when people are incentivized to take risks they would not otherwise take because they do not expect to bear the cost of failure.
Disaster aid is a frequent culprit. By essentially insuring residents of tornado-prone areas against damage to their property, this sort of government handout encourages unsafe and fiscally-irresponsible behavior by individuals. They face less financial risk although they build in dangerous geographical regions. Long-term, this leads to loss of capital, production, and even life, not to mention adding to the nation’s monstrous debt.
This is not to say that private donations are harmful. Only the most heartless of people will take unnecessary risks while banking on their neighbor’s good will to bail them out. And only foolish people will repeatedly support those who do so.
It is when one’s benefactor is as impersonal as a Federal Emergency Management Agency bureaucrat that the perverse incentive to be reckless with life and property is created.
Among others, Congressman Ron Paul tried to explain this to several critics over the past few weeks. Unfortunately, many cannot see past their understandable knee-jerk sympathy for the residents of the affected regions–in an era where the doling out of taxpayer dollars has become so common.
Now whether you agree with sticking to free market principles is another question. It is common to say that in times of dire need, government may transgress its usual bounds and take extraordinary measures to aid helpless citizens. The recent tornadoes would certainly qualify as such a time.
But what critics of federal disaster aid fear is what we all see in history books: The lack of restraint in handing out tax-payer dollars to needy citizens only leads to the sort of cradle-to-grave welfare state we have today. Indeed, many of the entitlement parasites that drain federal revenues today have their origins in monetary aid to poverty-stricken citizens in the middle of the Great Depression.
Certainly those who oppose federal aid for affected regions would find it in themselves to donate to the victims, as private charity is their proposed solution to disaster relief. But using the power of the state to forcibly extract donations from the American taxpayers’ exhausted fund only contributes to the progressive socialization of the economy.
Government should not take money from those living in areas where tornadoes are rare in order to gift those living in Tornado Alley. Residents of these Midwestern states are well aware of the risks they undertake. This sort of redistribution is unjust and economically unwise.
(Think of the message such aid would send to those who deliberately moved away from tornado-prone areas to protect their families and assets from disasters such as these!)