Wildfire smoke pouring in from Canada is a frightening real-time example of the impacts of climate change.  It is also an apt metaphor for how the mounting costs of climate change are being quietly paid by American Taxpayers.  Host Steve Ellis and TCS Vice President Autumn Hanna are joined by Bob Keefe and Sandra Purohit with the national, nonpartisan group E2 to breakdown the findings in the new TCS Climate Report: “Paying the Price: Taxpayers Footing the Bill for Increasing Costs of Climate Change.” 

Episode 47: Transcript

Steve Ellis:

Welcome to all American taxpayers seeking common sense. You’ve made it to the right place. For over 25 years, TCS, that’s Taxpayers for Common Sense, has served as an independent, nonpartisan Budget Watchdog group based in Washington, DC. We believe in fiscal policy for America that is based on facts. We believe in transparency and accountability because no matter where you are in the political spectrum, no one wants to see their tax dollars wasted.

It’s June 2023, the US debt limit has been suspended. The threat of a US default is over, for now. With bipartisan agreement on top line budget numbers for FY 2024, you might think that our view of the nation’s fiscal picture is getting clearer. But alas, if you live on the East coast of the United States, your view of just about everything right now is decidedly not clearer. Look out the window. That haze you can’t really see through? That’s smoke. And guess what? There’s fire, literally and metaphorically. While the very real wildfire smoke pouring in from Canada right now is a frightening real-time example of the impacts of climate change, it is also an apt metaphor for how the mounting costs of climate change are being quietly paid by American taxpayers. Joining me now to help clear the air and provide details to the new TCS climate report, Paying the Price, Taxpayers Footing the Bill for increasing costs of climate change is TCS Vice President Autumn Hanna.

Autumn Hanna:

Good to be here, Steve.

Steve Ellis:

And we have two very special guests joining us from E2, a national nonpartisan group of business leaders, investors, and others who advocate for smart policies that are good for the economy and good for the environment. Bob Keefe is E2’s executive director, and Sandra Purohit is E2’s Director of Federal Advocacy. Bob and Sandra, thank you both for joining the podcast. Looking forward to hearing your insights.

Bob Keefe:

Thank you, Steve. It’s so great to be here.

Sandra Purohit:

Really looking forward to the conversation. Thanks, Steve.

Steve Ellis:

Thank you. Autumn, let’s start with you. Our new report reveals that over the last five years, federal taxpayers spent more on disasters than the combined, and I’ll say that again, combined fiscal year 2022 budgets of the Departments of Education, Energy, Homeland Security, Justice, State, Transportation, and the Environmental Protection Agency.

Autumn Hanna:

Steve, the impacts of climate change are no longer a distant concern. They’re pressing fiscal reality and it’s taking its toll in our pocketbooks. Our report unequivocally demonstrates that taxpayers are paying a rapidly growing price from climate change. The average annual climate disaster costs already exceed most federal agency budgets.

Steve Ellis:

So imagine that. I mean, it sounds like we might need a Secretary of Disaster.

Autumn Hanna:

We might. Steve, the findings detailed in the report show that taxpayers have shouldered an average annual cost of more than $60 billion over the last five years tackling climate impacts, and those numbers are going up. That’s a 35% increase over the average from the previous five years. And those numbers aren’t even the full picture because the federal government, particularly Department of Defense, does not account for all of its climate related costs.

Steve Ellis:

But still, I mean, a 35% increase in the five-year average is pretty staggering. And you’re saying it would be worse for taxpayers if the federal government made all the data available. So Autumn, what are some of the main areas of this spending growth?

Autumn Hanna:

This won’t be a surprise to you or Bob and Sandra, but disasters and disaster spending has skyrocketed. In the 1960s, there were 200 major disaster declarations, and that number has tripled to 600 in the first decade of this century. That has put severe pressure on things like the National Flood Insurance Program that has borrowed $14 billion from taxpayers over the last decade. But instead of adopting reforms to improve the program and send the right risk signal to homeowners, Congress has forgiven that debt.

Steve Ellis:

Well, Budget Watchdog AF listeners know all about flood insurance, but what else did paying the price find?

Autumn Hanna:

Well, you had floods, but then you also have things like wildfire which continue to grow. So those disasters are on the rise, and we saw that this week with the unprecedented fires in Canada and them coming much earlier in the fire season. Those fires impacted air quality up and down the East Coast. According to NOAA, the number of billion dollar wildfire events has doubled from an average of 0.4 per year in the 1990s with an annual cost of 1.3 billion to 0.8 per year over the last 10 years with an annual cost of $9.7 billion. But there’s good news and some light at the end of this tunnel. Billions of dollars of federal money has been directed to wildfire through the infrastructure bill, and we can spend that money in ways that reduce the costs and harms of wildfire. We dig into the wildfire issue in our new report Clearing the Smoke, which is something we’ve discussed on the podcast.

Steve Ellis:

Right. Back in April, podcast 43 if I’m not mistaken.

You’re listening to Budget Watchdog All Federal, the podcast dedicated to making sense of the budget, spending, and tax issues facing the nation. I’m your host, TCS President Steve Ellis, and we continue now with Bob Keefe and Sandra Purohit hit from the National Nonpartisan Group, E2.

Bob, E2 released an important report last October entitled Billion Dollar Losses, Trillion Dollar Threats: The Cost of Climate Change. That’s a great title. But beyond the title, please tell us all about the report, how the escalating costs of climate change are also escalating, the economic opportunities.

Bob Keefe:

Well, the bottom line of that report and what we’re seeing every day, quite literally as you point out in the skies over the East Coast at least, is that climate change is no longer just an environmental issue. It’s no longer just a health issue. It’s no longer just a social justice issue. Of course, it is all of those things and more, but it’s also an economic issue. And quite frankly, it’s battering our economy. Autumn talked a little bit about some of the NOAA disaster reports, and what we did in our report is essentially take those and break them down by disasters. We broke them down by county, we broke them down by states.

What we know is that there’s no place in America that is escaping these climate disasters. In the past five years alone, we’ve seen $765 billion in climate related disasters, 170 billion last year alone. Wildfires in the West that are more common obviously than the ones that we’re experiencing now from Canada. Drought and flooding in our nations heartlands and so many hurricanes of course, Steve, a couple years ago that we ran out of names for them. As taxpayers report shows, every single one of us is paying to clean this up.

But what we’re also paying for are the additional costs beyond just cleaning up the messes. We’re paying higher insurance rates up 50% or so in the past decade. Some places just this week, two of the biggest insurance companies in the country, State Farm and Allstate said they’re not going to insure homes in California anymore. That’s a huge deal. Look at lost wages when businesses get wiped out by hurricanes or wildfires or if the smoke’s too thick for construction workers to get on the job site. We’re paying it in higher grocery bills when crops wither or when livestock dies from extreme heat or flooding as we’ve seen in the past few years. So the costs add up. That was the point of our report. It is beyond just the cost of cleaning up after these disasters, it’s the cost of living in a world that’s quickly being changed by climate.

Steve Ellis:

Wow, that was a lot there, Bob. So let’s unpack that a bit. I certainly remember they go into the Greek alphabet once they run out of names-

Bob Keefe:

That’s right.

Steve Ellis:

… for hurricanes. And actually, we just had tropical storm Arlene form just a couple days after hurricane season started, and so it’s beginning earlier and earlier too.

Bob Keefe:

Well, that’s right. And as you mentioned, when Arlene formed, the Gulf of Mexico had sent flood watch warnings up all the way to the east coast of the United States and the east coast of Florida, which as you may remember just a couple months ago was suffering from record flooding that shut down airports and caused billions of dollars worth of damage right in the middle of spring break in Fort Lauderdale. It’s not exactly good for the economy.

Steve Ellis:

No, no, that’s certainly the case. That’s certainly the case. So how have the losses… And this is one of the things I remember from your report. I was looking at the changes since 1980, and you’d mentioned that you’d use the NOAA data. How have the losses from weather and climate disasters in the United States changed since 1980 and what are some of the factors in that increase?

Sandra Purohit:

Since 1980, we’ve had more than 350 climate related disasters that have each cost us a billion dollars or more, and sometimes much more. If you add up all the major climate related disasters since then, we’ve got $2.5 trillion that have been sucked out of our economy. That’s a lot. What the report shows, what your report shows, as we’ve mentioned, is that this is getting worse. Over a 40-year period, a-third of the disasters have occurred in the last five years. That kind of gives you a sense of how much this is escalating and how rapidly this is becoming worse.

The five years between 2017 and 2021, America experienced four of the most expensive wildfires, two of its three most expensive hurricanes, and its most expensive winter storm. So you can see how things are coming faster and they’re getting bigger. They’re becoming more impactful in their costs. But you don’t even need to look at the numbers to see what’s happening. You can look out the window, so whether it’s fires destroying [inaudible 00:09:24] or air quality in Colorado or here on the East coast making air unbreathable or it’s hurricanes in Florida, or winter storms in Texas, things that we didn’t think we were really going to have to anticipate they’re happening.

Steve Ellis:

Sandra, I know that in your report also look beyond just the billion dollar disasters, the ones that really capture the public’s attention. So how does some of the smaller disasters, heat waves and ongoing business disruptions contribute to the overall economic turmoil beyond which is captured just by these billion dollar disasters? I mean, we’ve talked a little bit about the wildfires and the smoke. I mean, so everyone in the East Coast is experiencing some of the worst air quality in recorded history because of the wildfires all the way up in Canada. Can you give us a sense of how these events really impact taxpayers in the economy?

Sandra Purohit:

Sure. So two pieces to that. First, in terms of the smaller disasters, you’re right, a lot of attention is paid when there are lots of photographs of something dramatic happening. But things like drought, prolonged drought is putting farmers out of business, and it’s also driving up food costs for everybody else. If you look at something like rising temperatures, another one that’s a slow roll, but about 32 million Americans go to work each day outdoors. And everybody from construction workers to farmers, when it’s too hot, they can’t work or they get sick working or they’re able to work less. And it’s getting hotter every year. So as we detail in the report, extreme heat is expected to threaten some 39 billion in annual earnings by 2050.

So these things are really compounding. Those slow heat waves can make a big impact. In terms of what’s going on now, we’ve talked about the health impacts and how we’re all breathing. That’s the most noticeable. We don’t know yet what the financial tally of that will be other than likely substantial. But we unfortunately do know just from COVID what happens to the economy when everyone stays indoors, right? It’s not that broad as it was with COVID, but we are already seeing sporting events being canceled. All of Broadway is shut down. These are the types of things that also impact local restaurants and bars, Uber drivers, taxis. I think the ripple effects are big, especially for small businesses. It’s not completely new across the US. As a whole, workers lost 125 billion a year just because of wildfire smoke. So that’s about 2% of all labor income. So again, if you just look at the current condition that we’re talking about, the impact is financially significant.

Bob Keefe:

Who would’ve thought, Steve, that New York would’ve had to worry about wildfires? But the smoke is so bad in New York that people can’t go to work. They’re shutting down Broadway, they can’t play baseball games. I mean, it’s easy to think about the economic cost of climate change when we see a hurricane plow through a neighborhood or homes unfortunately go up in smoke in the west or elsewhere, but it is these secondary almost impacts that we sometimes lose track of. But those secondary impacts are hitting us right in the pocketbooks. And from a taxpayer perspective, yes, it’s the cleanup.

But think of also what’s happening with the wildfires in Canada right now. President Biden just sent, I think, 600 federal firefighters to help in that, help fight those fires in Canada because of the economic impacts and the health impacts from the smoke here in the United States. We’ve got to pay for that. Look at what’s happening with our military base, places like Norfolk, Virginia, or several years ago when we had three back to back major military bases in Florida, in Nebraska, in North Carolina, all got hit by major storms. It cost billions of dollars worth of damage to the Defense Department to clean that mess up, and by the way, put our nation at harm because there were instances where we couldn’t get our fighting men and women to their ships or to their planes in a case of emergency. Those are costs that add up.

Steve Ellis:

Absolutely. Hurricane Michael was one of those hurricanes you’re talking about that basically trashed Tyndall Air Force Base in the Florida Panhandle. Every single building was damaged or destroyed on that base. 99% of the facilities were knocked out, and they’re still not going to be back to 100% operating capacity until 2026 is what the estimate is. And so those are big impacts, and those are things too, where you’re mentioning, Bob, about the federal government spending money on response, but some of it is about mitigating impacts. And so certainly for these military installations, they’re having to spend money. And this is what one of the things that we highlight in our report and Autumn mentioned as well, is that DOD is not very… Some of it may be national security related, but DOD is not coming clean in some ways about how much money is having to be spent on this.

Part of why we wanted to do this report, and I know why you wanted to do yours as well, is some people can understand we’re already paying the price. I mean, that’s why we titled our report that. The taxpayers are already paying the price, and so we got to deal with climate change. It’s coming to us whether you like it or not and whether you believe it or not.

Bob Keefe:

As mentioned in our report from a couple of years ago, if you look across county by county, the number of counties that have been impacted by climate related disasters, it’s overwhelmingly the majority of the United States in one way or another. The Washington Post had a story you may remember a couple years ago, Steve, that said, I think, 40% of all Americans have been impacted by climate disasters in 2021 alone. Again, who would’ve thought that New York City would’ve been worried about wildfires or that a winter freeze, and by God, Texas would shut the entire economy down, keep the lights off and kill people?

I’m reminded of what happened in Oregon a couple years ago when they had record heat over 100 degrees for almost a week up to 115 degrees. I happen to have a daughter that goes to school in Portland. But Portland wasn’t built for that. Portland’s businesses weren’t built for that. We have an E2 member up there that’s in the food business who had to basically shut his factories down because it was too hot for the workers to go to work in them because Portland never has seen the types of temperatures that it saw back then, or it was in Oregon actually. And then when they finally got their product on the trucks, they had an issue getting them to the stores because there were so many wildfires that they had to divert their routes. So we don’t think of Portland as being one of the hottest places in America or Oregon. We don’t think of New York being hit by wildfire smoke, and we don’t think of Texas as having freeze issues, but this is what it looks like, unfortunately.

Steve Ellis:

So Sandra, Bob talked about how it’s hitting everybody in some form, but one of the things that you talked about, and we also touched on as well, is the disproportionate impacts of climate change on low income communities, communities of color, historically underserved populations. Can you address that?

Sandra Purohit:

For sure. The research is very clear on this. They found that future flooding is much more likely to occur in low income neighborhoods, communities of color, places with a disproportionate share of industrial pollution. So the folks that are already disadvantaged are looking at a greater hit. Historically, redlined communities or those disproportionately impacted by financial disparities, they are still proportionately home to people of color and much more likely to be in heat islands today. So they’re increasing risks for these populations as temperature rises. What that really means is that the most disadvantaged communities are likely to be hit hardest. It’s also true that it’s can be much harder for those same communities, those same households, to recover when flooding hits or when a wildfire hits. If you think about that, it makes sense, right? You may have a less expensive home than say a wealthier community, but it may actually be more difficult for you to recover financially than it would be for the person with a more expensive home just because of the economic situation that you’re in to begin with because of poverty.

So it’s not just that they’re in a higher risk, it’s that it’s harder for them to get back on their feet when disaster strikes. It’s also true that because of the higher risk, these are the same communities that are facing elevated insurance premiums and/or difficulty finding insurance. And that can lead to an underinsurance, which just really builds on the problem. When a disaster hits, you don’t have the insurance you need to help you get up back on your feet. So these really are compounding problems and something we do need to tackle. There is a disproportionate risk, a disproportionate cost in these communities.

Steve Ellis:

Absolutely. To underscore some of your points there, Sandra, a lot of these communities developed in flip planes because that was the only place they were allowed to live. And so they are at a higher risk just because of some of previous policies, previous actions. And then also just in the fact that people who were moving more and more out into the wildland urban interface, a lot of places, it’s because that’s where they can afford to live and their jobs may be far away, so they’re more at risk. And then to your point, it’s that not only may a disaster destroy their home, it may destroy their place of business where they actually work, their means to get to business and things like that. So it has a disproportionate impact. You’re absolutely right. Absolutely right. And it’s a very important point.

Sandra Purohit:

I would also add though that there’s a flip side to that. As we start to address emissions and invest in clean energy, we can also help those communities in a new way. So the same communities are often paying a disproportionate amount for energy because their whole homes are older or less efficient. So when we can provide things like improved efficiency, we can make those homes more resilient, more comfortable, but also save those people money. And investments like that, that that small amount of money can make the difference If something does happen as to whether or not a person can pay to fix and repair a situation or not,

Bob Keefe:

Steve, by investing in solutions to reduce carbon pollution, which is driving and exacerbating these climate disasters, we can actually create a lot of jobs. We can drive a lot of growth. And frankly, we are doing that right now. E2 for the past year now has been tracking clean energy project announcements around the country since the Inflation Reduction Act was signed into the law back in August. That was the most important climate and clean energy policy in the history of the planet. And as a result here in America, we’re already seeing the biggest economic boom we’ve seen in generations at least. We’ve tracked at E2 nearly 200 clean energy project announcements, $80 billion worth of private industry investment. 70,000 or so jobs already announced. And that’s just in the past nine months.

Look around at what’s happening now. Every single automaker is now shifting to electric vehicles, producing electric vehicles. We’re building a battery market in this country for the first time from scratch. This is a business that’s dominated by foreign countries. We’ve had several major solar panel manufacturing plants now under construction in places like Ohio, in Alabama, in Georgia. And we’re cutting our power bills. Sandra mentioned how do you help some of these disadvantaged communities. One way is by reducing their electricity bills. How do you do that? You do that through energy efficiency and through the slate of tax credits and investments. Through the Inflation Reduction Act and other policies, we’re going to get some help for folks to upgrade their homes and save a little bit on their power bill every month.

Sandra Purohit:

It allows both the individuals and the country to have more energy independence. For the first time in the US, we’re making those investments at a big enough scale to make a dent in emissions and also making a huge dent in economic progress. So there is definitely a silver lining, and it’s the same tools that we need to fight emissions that will drive our economy going forward. And that’s a real win-win.

Steve Ellis:

That’s great to hear. Autumn, let me pivot to you to just kind of get a little sense from you about how the interrelation of paying the price and the E2 report.

Autumn Hanna:

Yeah, I mean, I think that as we’ve heard, the two reports really reinforce each other. I mean, taxpayer costs and economic cost go hand in hand. I think this is especially true in our other cost sections of the report, those areas that are even less quantifiable than other areas in the report including agriculture, transportation, infrastructure. But those are areas where we know the costs are very real. As everyone found out when the real estate bubble burst in 2008, the federal government indirectly, and in some cases directly, backs mortgages, about $614 billion worth. So combine that with an estimate of 35 million homes, about a-third of the housing stock that are at high risk of natural disaster, and you can see how that could devastate the economy. Something that we’ve heard earlier about what Sandra saying too, these are houses at risk, but there are things that we can do to help lessen that risk and lessen the taxpayer costs associated with them. So this is a real area where you can see the link between the economic costs and the taxpayer costs.

Steve Ellis:

Yeah, there definitely is this whole hidden… Or not hidden, but not right in front of you, dollar signs cost associated with climate change that we haven’t been able to fully unravel, but we know is very real and very present.

Sandra Purohit:

Another great parallel in the two reports is the impact on agriculture. So from the government standpoint, as your report shows really well, the cost of things like crop insurance are going up, part of the premium that the government pays as well as the disaster supplementals, what they pay when the disaster hits, when the crop insurance isn’t enough. And certainly from a farmer, from a business standpoint of the farmer, they’re seeing crops being devastated in income loss. We’re all seeing food prices go up as a result of all of that. And so I think you really do see in some ways what the taxpayer is paying more on is a symbol of what’s happening in the larger economy. People are paying as taxpayers, but also as consumers, as business owners.

Steve Ellis:

Thank you for that, Sandra. Yeah, Bob, I will-

Bob Keefe:

I really like how you hit on the crop insurance issue as well, Autumn. The USDA came out with a report a couple years ago that said, “If we don’t do something about greenhouse gases, the cost of the federal crop insurance program is going to increase by about 37% over the next few decades.” Stanford University had a study that showed between 1991 and 2017 drought and long-term warming has added something like $27 billion to losses from crops covered by the crop insurance program. And yes, farmers pay a premium for that, but guess what? Every single taxpayer pays into that as well.

Steve Ellis:

Yeah, about 60% of the premium is paid by the federal taxpayer. And then there’s even more shallow loss coverage. And then as Sandra mentioned, even though there’s insurance, there’s still ad hoc disaster assistance that goes. And so we’re paying on the front end and the back end. And so it’s certainly an area where cost’s estimated to really significantly increase and have been increasing. And so that’s certainly a major area of concern. You all at E2 have explored many ways we can make addressing climate change a win for the economy, and by extension, of win for taxpayers. Is there anything else that you want Budget Watchdog AF listeners to know?

Bob Keefe:

I would say just that it’s not all gloom and doom, right? I mean, this is an opportunity now to do something about a disaster that’s slowly, sometimes more quickly than others, unrolling before our very eyes. The way you react to a disaster is not to run around your hair’s on fire even if your hair is on fire perhaps, it’s actually to do something about it. The good news is we’re finally getting the policies in place in this country, both at the federal level and the state level that’s sending the market signal for businesses to invest, to create jobs, and to drive growth in clean energy, which is reducing those carbon emissions, and in doing so, hopefully reducing the cost of these climate disasters that we’ve been talking about. So I’m actually relatively optimistic, more optimistic than I have been in a long time despite what the skies look like over the east coast right now, because we’re finally, finally starting to take action about this in America because it’s becoming a pocketbook issue.

Steve Ellis:

Absolutely. Absolutely. And to your point too, that every disaster is an opportunity, a tragic opportunity, but our opportunity nonetheless, to remake ourselves, our communities to be less vulnerable in the future. What we like to say is every dollar that we spend in disaster should pre respond to future disasters because we know these areas are, by definition, vulnerable because it’s already happened. And so we can do things that’ll remake these communities in a better and less vulnerable way that also helps tackle the issue of climate. And so I share your optimism in that respect as well. So there you have it Budget Watchdog AF listeners, Executive Director of E2, Bob Keefe, and Sandra Purohit, the director of E2’s Federal Advocacy. Thank you both for joining Autumn and me on the Budget Watchdog AF Podcast.

Bob Keefe:

Steve, it was great to be with you. I really appreciate the opportunity.

Sandra Purohit:

Great conversation. Thanks so much.

Autumn Hanna:

Yes, thanks to everyone for being here and joining us today.

Steve Ellis:

Well, there you have it, podcast listeners. Taxpayers cannot escape inflation when it comes to the cost of climate change. This is the frequency, market on your dial. Subscribe and share. And know this, Taxpayers for Common Sense has your back America. We read the bills, monitor the earmarks, and highlight those wasteful programs that poorly spent our money and shift long-term risk to taxpayers. We’ll be back with a new episode soon, and I hope you’ll meet us right here to learn more.