China’s Achilles Heal

The media as well as the President seems to be obsessed with China’s subsidizing exports and the economic risks it poses. While the trade imbalance caused by China’s export policy is serious, focusing mainly on it and threatening more tariffs goes down the wrong road.

China’s economic strategy is mercantilism which has proven over centuries to be a failed economic model. As far back as the 18th century when Adam Smith wrote The Wealth of Nations, he demonstrated that labor productivity and free trade were superior to the protectionism that is embedded in mercantilist practices. Centrally planned economies have a superficial appeal to those who believe in top down control but inevitably it is the road to ruin because of misallocated resources and misguided incentives.

China is no exception. It’s economy has been slowing for at least the past year. Friday’s market sell off was driven by weak data on industrial output and retail sales., China had earlier reported a slowdown in trade and economic growth but there is now suspicion that the slowdown has deepened. Time will tell whether that is a consequence of mercantilism.

It is consistent with the inevitable effect of using government directed economic investment to promote industrial growth for export which misallocates resources. In the long run, investing in innovation, technology, and productivity is superior to investing to promote export growth. That is history’s lesson. In today’s globalized world, protectionism keeps firms from adapting to the new market conditions. China recognizes this which is why it engages in forced technology transfers and mandatory joint ventures. Eventually, China will pay a price for ignoring the law of comparative advantage.

Engaging in a trade war with China and focusing on tariffs doesn’t get to the heart of the trade challenge. The Trump Administration’s tariffs approach simply imposes a tax on consumers and has harmed exports. If China wants to give our consumers lower prices, let’s say thank you while addressing the real problems that also include currency manipulation.

Instead of persistent attacks on our allies, the President should start trying to build an economic coalition of our trading partners to challenge China by filing WTO complaints and taking collective actions that will allow markets to drive global trade.

Politicians Eventually Get It

The media has given a lot of coverage to the riots in France over the proposed increase in fuel taxes—a carbon tax. It has been pointed out that “ Macron is hardly alone in his frustration. Leaders in the United States, Canada, Australia and elsewhere have found their carbon pricing efforts running into fierce opposition.”

This most recent rebuff of a carbon tax should send a message to the delegates who are meeting in Poland for the annual Conference of the Parties to discuss climate change and make grand pronouncements about the end of the world and what we must urgently do to avoid it. Begin with recognizing that globalism is out of favor and not just in the US.

Delegates and other proponents would do well to go beyond the recent defeats of carbon tax proposals. If they look back over the past 35 years of so, they will see that there is consistent resistance to taxes on fuels no matter what they are intended to achieve or how the revenue produced is used. There has been consistent opposition to increasing the federal gasoline tax even though the Highway Trust Fund desperately needs more funding.

In 1983 the Greenspan Commission on Social Security recommended a 50 cent per gallon increase in the gasoline tax to help fund social security. The reaction was swift and decisive. Opposition was broad and deep. Not only did motorists and the oil and auto industries oppose it but groups like the Coalition for the Homeless and groups running shelters also did. A large percentage of the homeless work and need their cars to get to jobs and shelters operate vans to pick up people to take them to shelters.

A decade later, President Bill Clinton proposed his infamous BTU tax on fuels as part of his first budget. it would have raised $70 billion over five years while increasing gasoline prices less than 10 cents a gallon. Unfortunately for the President, it was clear that the BTU tax was really aimed at petroleum based fuels because coal was given a break to get Senator Byrd’s support. In less than 3 months, the President surrendered because opposition in the Senate was overwhelming.

Since then, Al Gore, climate change advocates, and their supporters in Congress have floated various forms of a carbon tax and each one has landed with a thud in spite of broad support from environmentalists and the economics profession. While a carbon tax is intellectually elegant to economists it has proven to be a political case of a deadly virus. The most recent incarnation is the Baker-Schutz plan that is being flacked by a group called the Climate Leadership Council. In spite of a promise to rebate the cost to citizens with monthly checks to everyone with a social security number, it has not gained traction in Congress.

The reason may be that a majority in Congress recall a variation of Lord Melbourne’s observation, “What all the wise men promised has not happened, and what all the damned fools said would happen has come to pass.”

Climate Nonsense

The USGCRP has just released another report that has been trumpeted by the mainstream media as showing that increased risk and peril are upon us. According to report, “The Climate Science Special Report (CSSR) … provides a detailed analysis of how climate change is affecting the physical earth system across the United States.”

The report is long on a scary narrative but short on clear supporting factual data. It claims the “Earth’s climate is now changing faster than at any point in the history of modern civilization, primarily as a result of human activities. The impacts of global climate change are already being felt in the United States and are projected to intensify in the future.”

If we are to believe this narrative, temperatures are climbing at an unprecedented rate, hurricanes are becoming more severe, and sea level rise is increasing and represents a greater threat to coastal areas–all of which represent an unprecedented risk. Dr. Roy Spencer, one of the developers of our satellite measurement system, regularly publishes a global temperature update. The following chart shows that average temperatures for the past two decades are not rising. The evidence of the post 1998 pause is clearly evident.

There is also a contention that hurricanes are increasing in intensity and frequency. NOAA’s Hurricane Data Center publishes hurricane data as far back as 1850. These data completely contradict the report’s assertions. Looking at the actual data brings to mind, Groucho Marx’s question, “are you going to believe your lying eyes or what I tell you.” The claim is made that Hurricane Michael is an indicator of what to expect in the future because of the warming waters in the Gulf of Mexico. But here again, the data contradict the narrative. The Gulf’s temperature at the time of Michael was not especially warm nor unusual. The average Gulf temperature can vary by + or – 5 to 7 degrees in the September to October time period. Roy Spencer also recently pointed out that 7 of the warmest Gulf years since 1860 took place before 1970.

With so much coastal development, there is legitimate concern about the rise in sea level. The report claims that since 1993 sea level has been rising at twice the 0.05 inch per year during the 20th century. But this assertion is contradicted by Figure 3-14 in the IPCC’s recent AR-5 report


Left unsaid are some embarrassing facts. Sea level has been rising for the past 16,000 years, the end of the last ice age. Every reputable oceanographer admits that it will continue to rise until the next one. The impact of human caused warming is on top of the natural rise that has been taking place. While advocates provide what appear to be precise measurements of sea level rise, they are just guessing because we lacked reasonably precise measurements before 1993. Even though satellite measurements are more precise they still require adjustments for atmospheric water vapor, orbits tides, and wave height biases, among other factors that can impact their accuracy. There is also the effect of subsidence.

The Special Report calls for urgent action to avoid the serious consequences of climate change and the action called for is the reduction in CO2 emissions. Unfortunately for the authors, they conveniently overlooked the fact that US CO2 emissions peaked in 2007 and have been on a downward trajectory since then. The reduction in emissions is even more impressive given the fact that population has grown 9% and the economy more than 40%. The USGCRP would better serve the interests of the nation if it focused on reducing important uncertainties in our understanding of the climate system and in improving both data quality and the models that use the data.

A Bootleggers Reward

It is well known in Richmond Virginia that Dominion Energy is the state’s leading bootlegger. This was once again demonstrated in a recent order from the State Corporation Commission allowing it to build two offshore wind turbines in spite of the Project “As a purely factual matter (the project) would not be deemed prudent.”

According to Professor Bruce Yandle—the originator of the Bootlegger and Baptist theory of public choice—a bootlegger is a “public interest group that can speak from the moral high ground when endorsing new rules and restrictions.” A bootlegger pursues economic gain by embracing regulations and laws that appear to serve the public interest.

The Virginia legislature passed a bill, signed by the governor, setting a state objective of generating 5000 megawatts of solar and wind power by 2028. This was championed by environmental advocates as a way to respond to climate change by suppressing coal and natural gas in the generation of electrical power. This legislation has become a $300 million gift to Dominion Energy that will be paid by Dominion’s customers.

Dominion claims that this is a “demonstration project,” a characterization that can be used to justify its high cost. According to the State Corporation Commission, the two turbines to be built will produce electrical power at a cost of 78 cents per kilowatt hour. This compares with 9.4 for on shore wind power and about 20 times what electrical power can be bought on the open market. The Commission also points out that other utility companies have signed agreements with outside developers instead of undertaking an engineering project that places all of the risks on its customers.
Of course, if Dominion signed an agreement to purchase energy, it wouldn’t be able to add $300 million to its rate base and earn a guaranteed profit. The only thing that this “demonstration project” will demonstrate is the corruption of monopoly power and the validity of the Bootlegger and Baptist theory. Dominion is doing a remarkable job of representing the interests of its shareholders but who is representing the interests of its rate payers? It certainly isn’t the General Assembly that has legalized pickpocketing.

It is accepted that legislation involves deal making that ends up redistributing tax payer dollars but in this instance, Dominion is showing unbridled greed.

The Carbon Tax Scam

Anyone who questions the validity of Bruce Yandle’s Bootlegger and Baptist theory of Public Choice needs to look no further than the Climate Leadership Council and its carbon dividend proposal which is now be flacked by Americans for Carbon Dividends—AFCD—which is co-chaired by former Senators John Breaux and Trent Lott.

The carbon dividend proposal, designed by James Baker and George Shultz, would impose a carbon tax—they call it a fee– on all fossil fuels and then rebate the revenue on an equally to all Americans on a monthly basis. The program would be administered by the Social Security System. The implementation of the carbon tax would lead to the phasing out of regulations that are intended to reduce carbon dioxide emissions.

This proposal is supported by major corporations and distinguished Americans such as Ben Bernanke, Martin Feldstein, and of course, James Baker and George Shultz. On the surface the proposal appears quite reasonable. It is not. To quote, erroneously, Yogi Berra, “In theory, theory and practice are the same. In practice, they are not.”

The flaws in the proposal are many. To begin with the carbon tax is based on an assessment of the damages caused by using fossil fuels—the Social Cost of Carbon. Damages are derived from complex Integrated Assessment Models –IAM. MIT’s Robert Pindyck said “IAM-based analyses of climate policy create a perception of knowledge and precision that is illusory, and can fool policy-makers into thinking that the forecasts the models generate have some kind of scientific legitimacy.” He also said that “calling these models close to useless is being generous. “The reason for such harsh criticism is that many of the parameters and functional forms contained in models are arbitrary. The damage function tied to the relationship between temperature increases and GDP is based on climate sensitivity which we know very little about. The IPCC sensitivity estimated range varies by a factor of three.

So, why do economists and corporations support something derived by piling assumptions on top of assumptions? Economists rightly believe that a market based solution to climate change is preferable to command and control regulations, even if damages are uncertain and the size of a carbon tax is as well. CO2 emissions are seen as a bad, so taxing them is good and the tax will stimulate innovation. In the case of corporations, they realize that Congress will not enact a clean and simple tax and legislation to eliminate CO2 regulations. Politics will shape the size of the tax and its implementing legislation. Corporations want to “be at the table” as legislation is drafted and also get the PR benefits of supporting action to solve the climate change problem. Having two former senior senators leading the advocacy campaign will provide the “seat at the table”.

The carbon dividends scheme is a perfect example of the Bootlegger and Baptist theory. The whole thing is a scam!

Sea Level Rise: A Little Perspective

According to the recently released Climate Change Research Program report–CSSR—“ global average sea level has risen by about 7–8 inches since 1900. … Human-caused climate change has made a substantial contribution to this rise since 1900, contributing to a rate of rise that is greater than during any preceding century in at least 2,800 years. ….Global average sea levels are expected to continue to rise—by at least several inches in the next 15 years and by 1–4 feet by 2100. A rise of as much as 8 feet by 2100 cannot be ruled out. “

This assessment is consistent with the conclusion of the most recent IPCC report: “Over the period 1901 to 2010, global mean sea level rose by 0.19 [0.17 to 0.21] m. (7+inches) The rate of sea level rise since the mid-19th century has been larger than the mean rate during the previous two millennia.”

These conclusions are both definitive and scary. They bring to mind pictures that have been published of the Washington Monument and New York City being seriously flooded. But such certitude goes well beyond what we know.

Raising a cautionary warning often results in being labeled a skeptic who is a tool of the fossil fuel industry. While that is a diversionary tactic, that reality makes it important to support caution with sources who are not viewed as skeptics and who are above reproach.

One such source is Professor Carl Wunsch, recognized as one of the world’s leading oceanographers. He is on the MIT and Harvard faculties In a briefing to EPA, he made a number of points that undermine expressions of certitude. “Sea level has been rising for about 16,000 years. In the last interglacial (period) it appears to have been a few meters higher than today.” According to Wunsch, sea level measurements have to be divided into two periods—before and after 1992 when satellite altimeters became the measurement technique of choice. Before 1992, attempts to determine average sea level changes relied on tide gauges and changes in temperature and salinity. But these attempts have been controversial because of the distribution of measurements, calibration of the devices, and interpretation of density changes.

While altimetry is the most accurate way to measure sea level changes, it is not without its own challenges. These include atmospheric factors, orbits, tides, and rotation wobble among others. Correcting these requires a high degree of accuracy to avoid interpretive errors.

Given the array of measurement challenges mentioned by Wunsch, he cautioned, “Global mean sea level is almost surely rising. Historical data are not adequate to compute accurate global averages. No mathematical trick compensates for missing data. Present multidecadal estimates of global averages have an element of fantasy about them.”

Last year, NOAA published a paper on sea level rise–NOAA—that contained a range for sea level rise in 2100 that went from a low of less than .5 meters to 2.5 meters. The importance of the NOAA estimate is that it demonstrates how complicated understanding of the ocean is and the uncertainties involved in predicting future sea levels. A major uncertainty is ice sheet melts. Perhaps the best example of that uncertainty is the variability that the IPCC puts around ice sheet melt in Antarctica. The error bars show that the ice sheet could grow as well as lose mass. In addition to melt, climate conditions like El Nino can cause a rise in levels at shorelines for months at a time and subsidence can also cause a higher sea level where it occurs

There are two lessons to be drawn that apply to more than sea level rise. First, projections about the distant future should be made with a great deal of humility. Second, when someone make a specific projection with great certitude, you can be certain that they are trying to persuade; not educate.

The Big Payoff?

Is it merely coincidental that subsequent to the confirmation of Brett Kavanaugh President Trump is trying to reward Senator Grassley, Judiciary Committee Chair, for his steadfast support in shepherding the nomination through the Senate Process? Of course, Iowa also is an important state in the mid-terms and President Trump had to do something to undo the damage to commodity prices caused by his tariffs. Corn prices, which have been falling for the last five years, have plunged in response to the trade war caused by the Trump tariffs.
President Trump’s response has been to direct EPA to move ahead with a rule making so that ethanol in gasoline can be increased from 10% to 15% . How this is to be achieved is a mystery as even the Obama EPA concluded that it did not have the authority to lift the 10% cap. That is a good thing because gasoline with 15% would void auto warranties, further damage two cycle engines, and force service stations to incur large costs to install additional tanks.

If it is true, that (sometimes) no good deed goes unpunished, then it is equally true that no bad policy goes unrewarded. The ethanol mandate is a relic of a backroom deal in 1990 to gain farm state support for the 1990 revision to the Clean Air Act. To hide the deal, democrats led by Henry Waxman wrote a formula for reformulated gasoline into law. Politicians pretending to be chemical engineers is all anyone needs to know beyond the fact that prior to passing the Clean Air Act Amendments, the oil and auto industries informed Congress that they could meet proposed tailpipe emission standards without being told how to make gasoline.

Mandating ethanol by way of an oxygenate requirement was not enough for the greedy, so in 2007 President George W. Bush signed legislation that mandated the use of increasing volumes of ethanol. That was predicated on the assumptions that gasoline consumption would continually increase and that corn based ethanol would be replaced with cellulosic ethanol made from switchgrass and wood chips. Within a year, gasoline consumption plateaued and the cellulosic industry never got off the ground. Since 2008, gasoline consumption has only increased 4% while ethanol production has increased 71%. That helps to explain why the President wants to force E-15 into the market place.

After Congress increased the mandate for ethanol blending, EPA created a compliance mechanism—Renewable Identification Numbers (RIN)—to track ethanol blending. RINs can be traded or sold which created another market for traders to get richer. Refiners that do not have a ready source of ethanol have been victims of the RIN market, some incurring costs that exceed their revenue.
Advocates claim that critics aren’t looking at the whole picture. They claim that ethanol cleans the air, reduces oil imports, and results in less CO2 emissions. Their claims are just so much hot air. Back in 1990, there was a fear of our dependence on imported oil which reached a high of 60% of our consumption. Today, without any new Congressional magic, imports are less than 20% .
Since ethanol has a much lower energy density than crude oil, using ethanol in gasoline results in a mileage penalty, so more gasoline ends up being consumed.. The problems with ethanol are far broader than a loss of mileage, not reducing imports nor improving air quality or reducing CO2 emissions.
Incentives to increase corn production have increased the conflict between production for food and production for fuel. 40 percent of the nation’s corn crop is used to produce ethanol, removing it from use as animal feed and food products. As a result, consumers pay more for food products, including milk, cheese, beef, poultry, pork, and cereal. What’s more, the ethanol quota diverts valuable cropland away from other agricultural uses. The damage done to motors and the cost that would be incurred by service stations have no useful benefits and hence, are pure waste.
But ethanol is a more powerful lobby than it was decades ago. In response to the government’s mandates to force more ethanol into gasoline ethanol plant builds have increased. It takes a lot of resources to keep them operating. So, corn farmers and ethanol plant owners are willing to spend a lot of money to maintain mandates that enrich them while picking the pockets of consumers, These are Bootleggers at their worst.

A Geopolitical Rubik’s Cube

The brutal murder of Jamal Khashoggi has laid bare once again the problem we face in dealing with the complex Middle East problem where everything seems to be connected to everything else, few if any leaders who share our values, and there are only “least bad” options. In choosing our relationships with these nations, we are equally constrained. it is much like having to choose among Mafia dons. Faced with such a choice, the Godfather, Don Corleone, doesn’t look all that bad.

In responding to the Khashoggi assassination, we are faced with finding a set of actions that doesn’t make the problem worse, while also not compromising our basic values. The answer cannot be an empty set.

As more evidence is leaked and reported, there is less doubt that Mohammed bin Salman (MBS)ordered the assassination. In spite of a charm offensive to paint him as a visionary who will transform Saudi Arabia and by extension reshape the Middle East, he is a tyrannical autocrat who, like our President, has little self-restraint and seems incapable of seeing beyond the here and now. Consequences — both long-term and short — do not enter into his calculus.

So how should we respond? We clearly do not want our response to have the effect of a tilt that strengthens Iran’s hand or gives Russia even more influence in the region. Nor should we risk further destabilizing Saudi Arabia and the economic impact of its vast oil reserves. Similarly, Saudi Arabia can’t afford to dismiss our concerns. President Trump is concerned about losing our military sales and weakening our support of Saudi Arabia’s opposition to the ruling regime in Iran. The Saudis cannot easily walk away from their ties to our weapons systems. Their military capabilities are built and dependent upon US weapons systems and technology.

The current situation is analogous to two scorpions in a bottle who have to find a way to avoid stinging each other.

The range of options might be greater if there was a united allied response. But our allies have been unusually silent, perhaps reflecting a reaction to their treatment by President Trump and their desire to maintain their current relationships with Middle East countries. Whether or not allies individually or collectively act to sanction Saudi Arabia, the US cannot afford to blink. Our slow response to Putin-directed assassinations in foreign countries may have contributed to MBS believing that there would not be a strong response to the Khashoggi assassination.

The assassination clearly has to be treated as crossing a red line. Congress needs to act if the President won’t. And hard as it will be, we need to find a way to get our allies to join us because it will be in their own self-interest to do so.

Whether MBS remains the de facto ruler in Saudi Arabia is probably being debated and contemplated within the House of Saud and by the many enemies he has already made. Independent of the outcome, the long-term strategic outlook for the Middle East remains ominous; hence it requires a robust strategy built on the reasons why the US and our allies have to remain engaged.

Remaining engaged doesn’t mean ignoring actions that violate civil society norms. We have seen the consequences of indifference in Syria.

In addition to whatever actions are taken by the President and Congress and hopefully in conjunction with our allies, consideration should be given to actions that will lessen the choke hold of Middle East oil. One option would be to impose a targeted liquid fuel tax. That would give a boost to the global decarbonization that is already underway. Although the world is not going to walk away from oil-based fuels anytime soon, we can do more to further reduce our dependence on oil imports from unstable regions–and so can our allies.

A liquid fuel tax, sized to reflect a risk premium, could reduce import demand and further reduce CO2 emissions by stimulating new technology. The proceeds could be used to provide much-needed funds for our highway system. We also need to work with our allies to make sure that the IEA plans for addressing an oil shortfall are up to date and can be quickly implemented.

The IPCC Unhinged

The most recent IPCC Summary for Policy Makers with its dire predictions for the next decade and beyond suggest that there is a stronger basis for its predictions of catastrophic consequences and actions to avoid them. The only thing that seems to be new is the fact that major signatories to the Paris Accords are either ignoring their obligations or are finding them unrealistic.

The IPCC implies that the global climate situation has gotten worse but It hasn’t. Roy Spencer regularly publishes global satellite temperature measurements. This is the latest.


As Spencer points out, “The linear temperature trend of the global average lower tropospheric temperature anomalies from January 1979 through September 2018 remains at +0.13 C/decade.” In spite of continuing increases in atmospheric CO2 concentrations, there has been no matching increase in global temperatures.

These data are consistent with the lower estimates of climate sensitivity—the amount of warming from a doubling of CO2. The IPCC in its most recent Scientific Assessment Report estimated that climate sensitivity was between 1.5 degrees C and 4.5 degrees C. A 2018 study by climate scientists Judith Curry and Nic Lewis, published in the August edition of Journal of Climate, estimates climate sensitivity to be 1.2 degrees C. In addition, work by Dick Lindzen—Constraining Possibilities Versus Signal Detection, NAS Press–showed that the relationship between Co2 and warming is logarithmic and given the likely sensitivity, it would take over a century for increased CO2 to increase temperatures by another 1 degree C.

The IPCC proposed actions are so severe—electrifying all on-road transportation, pulling CO2 from the atmosphere, and employing carbon capture technology which is unproven—that it is hard to take them seriously. EU nations, the drivers of the Paris Accords, are not being aggressive and Germany has concluded that its 2020 target is unachievable. Angela Merkel has now become doubtful about the more aggressive targets since European nations are struggling to meet existing ones.

According to a New York Times Magazine article–NYT Mag—the actions to achieve the Paris accords are fantasy. And, the IPCC predictions follow on 30 years of failed predictions. A little over 10 years ago, Al Gore and Jim Hansen predicted that we only had 10 to take IPCC like actions. As Pat Michaels wrote this past June, “… it’s time to acknowledge that the rapid warming he ( Hansen) predicted isn’t happening. … policy makers should adopt the more modest forecasts that are consistent with observed temperatures. That would be a lukewarm policy, consistent with a lukewarming planet.

All of this leads to a conclusion that the IPCC report is an attempt to regain relevance and continue the lifestyle its members have become accustomed to.

Follow The Dutch

Although we enjoyed a long stretch where no major hurricane made land fall, the last few years have been different and the storms have caused a great deal of damage, including serious flooding. By contrast, It has been over 60 years since the Netherlands had any serious flooding from either hurricanes or major North Sea storms, even though the Netherlands is mostly below sea level.

The difference is that the Dutch accept the reality of storms and the flooding that they can cause and have developed an aggressive program of mitigation and adaptation. By contrast, we tend to rebuild and tinker at the margins with actions like modifying building codes, erecting barriers, managing flood plains, and the National Flood Insurance Program. Whatever the merits of these and other actions, they have not been sufficient to effectively mitigate flood and hurricane damage.

The damage from floods and hurricanes runs into the tens of billions of dollars each year. According to the National Climatic Data Center floods and hurricanes between 2010 and 2015 cost the nation $34 billion. And in the last three years the costs have run into the hundreds of billions of dollars.

The National flood insurance reimburses owners who then rebuild in the same places, ensuring future damages unless risk mitigation steps have been taken as part of the rebuilding. Looking back over the past decade, it seems clear that the Federal and state governments are in a vicious cycle working at the margins, incurring losses, and providing insurance reimbursements so that rebuilding can take place.

If the definition of insanity is doing the same things over and over and expecting a different result, then our approach to addressing hurricane and flood risks is insane. It is time to reassess our approach to dealing with hurricanes and floods and the extent to which adopting the Dutch approach, which would be expensive, would reduce future damages. The Dutch create artificial sand dunes in coastal areas, some of which are large enough to house parking garages underneath. They have constructed dikes, dams, and floodgates to protect against water surges, along with a system of drainage ditches, canals, and pumping stations. There should be a serious study of what Dutch techniques will work in which areas and then a federal-state plan to implement them.

Beyond that, the National Flood Insurance Program should be abolished. States are more than capable of designing flood insurance programs to deal with their specific risks. And, there should be no flood insurance subsidies that shelter some from bearing the full costs of risks where they build. If owners of coastal property had to take the full cost of insurance into account in making their construction decisions, there would likely be fewer houses built so close to shorelines.

There also should be another careful review of FEMA and its mission. FEMA like most bureaucracies seeks larger budgets, more people and more power. Responding to disasters will generate more of those than focusing more on prevention and mitigation. There should be a robust research program on ways to mitigate flood and hurricane damage and related engineering data that states could use to develop state specific programs. Currently, FEMA’s strategic plan has risk management and mitigation as a high priority but it is not clear what FEMA does beyond information sharing that involves forward looking engineering research and drawing on the Netherlands experience to develop best practices for states to implement. There is nothing in the FEMA budget that does that.