It’s important that we begin the long overdue process of reforming the way the federal government responds to catastrophic disasters. 

Too often, federal disaster relief has been reactive, bureaucratic, and arbitrary. Billions of dollars are spent, and sometimes wasted, with little or no accountability.

Resources go unused.  Goals are not met. Red tape delays recovery. In the end, it seems Washington focuses solely on the price tag rather than the people we are trying to help. 

The current model assumes that politicians and bureaucrats in Washington are best suited to decide where, when, and how to allocate resources in an emergency. But common sense and decades of experience suggest otherwise.

It is the people on the ground -- local officials and emergency responders, of course, but also individuals, families, and voluntary organizations – who are best equipped to help communities respond and recover.

As I looked into these issues, it became clear to me that, even as the federal government distributed billions for recovery with the right hand, regulations and bureaucracy choked the recovery process with the left hand.

Our recovery policy needs to be both more flexible and more consistent. Flood victims on the east coast deal with the same issues as a flood victims in the Gulf, yet they are often faced with differing rules and requirements.  Federal policy should be clarified so that local officials and private citizens understand the process before a disaster occurs.

My amendment would create permanent, substantive regulatory reforms to assist victims of ALL disasters.  It would create no new federal program or taxpayer burden.  Instead, it would remove red tape and provide temporary – but immediate – regulatory relief for disaster victims and relief volunteers.

It would make it easier for a family to access savings to begin immediate recovery.  It would temporarily waive certain regulatory burdens for people providing essential services after a disaster.  It would expedite shipping to ensure we can get critical materials into the affected areas.

Most importantly, my amendment would make these reforms automatic so that communities could begin rebuilding immediately without waiting for Washington to act.

Mr. President, these are important and overdue reforms, and represent a good first step toward improving our approach to disaster relief.

I am pleased with the positive response this proposal has received, though I understand that some of my colleagues have concerns that a few of these substantive changes merit additional discussion.

I believe these reforms ought to be permanent fixtures of federal emergency response policy, and ideally part of a more comprehensive package to overhaul how we respond to federal disasters.

I have spoken with my good friend, Senator Hatch, Ranking Member of the Finance Committee, the committee in which many of these reforms will and should be debated, and he’s expressed an interest in working with me on these reforms in the new Congress.

I look forward to and encourage all of my colleagues to join me in a serious and meaningful dialogue about these critical issues.

With that, I withdraw my amendment because I am confident that a broader discussion will be good for the country and result in reforms that will eliminate waste, facilitate quicker recovery, and deliver assistance to Americans affected by natural disasters.

Senator Mike Lee: Thank you very much. I’d like to take a step back for a minute and step in a slightly different direction from the fiscal cliff and talk about the long term and medium term economic realities that we face.

Mr Zandi, in your written testimony to this committee you warned against kicking the can down the road indefinitely because of the adverse effect that might have on the economy, the medium and long term impact that might have, and I thought your analysis was definitely something we need to pay attention to on this point.

As you observed that any failure to make progress in this area now could signal that we’ve got bigger troubles ahead, and as you pointed out the Moody’s analytics model that you use breaks down in about 2028 and the reason it does that is because at that point the interest on our ballooning national debt will start to swamp and cripple our economy, thwarting our ability to fund everything from defense and entitlements and everything in between, and we’ll be left without much recourse. At that moment I’m not sure there’s a tax increase on the planet that can suddenly fix that. I’m not sure we can print money fast enough to fix that and if we did we would go the way of Argentina and other countries that have tried that and that doesn’t ever end except in blood and tears.

I tend to think of this medium and long-term risk as the fiscal avalanche. The cliff is something we can see now, we’re approaching where it is based on our current location, our direction and our velocity we know we’re going to hit the cliff if we’re going to hit it. But the avalanche is different. I come from a mountainous state where avalanches happen all the time. The only thing you know about avalanches – you know when the conditions are present, when they might occur.  You know when the snow pack has built up to the point where it could happen. You don’t know exactly when it’s going to happen, you just know it’s coming. And you try to deal with the risk of it, but once it hits you the avalanche becomes completely impossible to control. Do you agree with this characterization about the avalanche and could you sort of elaborate to us about that kind of threat?

Dr. Mark Zandi: Would you mind if I steal that from you? And I’ll give you credit…

Lee: That’d be great. It’s not copyrighted.

Zandi: … but I love that imagery and the metaphor – I think it’s right. I do think that that’s why what you’re doing now is so important. I really think this is a once in a generation opportunity for you to nail these things down, and we’re not that far apart. I really don’t think we are. So if you’re able to put us on a credible fiscal path to sustainable responsibility, roughly get to my 3 trillion dollars, do it in a roughly balanced way, I think we’re golden. I really do. And we’re going to avoid that avalanche. But if we don’t do that, if we kind of kick the can down the road, then ultimately I think we’re never really going to do it until we’re forced by that avalanche.

Lee: How soon would we need to do that in order to avoid the conditions that would lead to the avalanche? How soon would we need to get to balance?

Zandi: I don’t know the answer to that but I do know and that’s why I put it into the testimony – my model breaks down. Of course it’s going to happen long before that point.

Lee: Right. And we’re not going to get to that point. We’re not going to get anywhere close to 2028 without it happening. In fact, it could happen within the next 4, 5, 6 years, certainly the next 10 years, couldn’t it if yield rates start to jump.

Zandi: Certainly. Here’s the thing. The problem is that if we don’t address this and we kick the can, we’re going to be stuck in this slow growth netherworld going forward and most importantly, we’re going to get nailed by something. You know? I don’t know what it is, but something bad is going to happen, and when that bad thing happens that’s going to be the thing that sets off that avalanche, right?

Lee: You mean a credit downgrade … ?

Zandi: No, no no it’s going to be something that we’re not even contemplating that happens in the world to oil prices, to other geopolitical ?? even to our own economy you know it’s just … we don’t know what that will be but it will happen. And we will have set ourselves up for that avalanche because we didn’t get our fundamentals in the right place. That’s’ why it’s so important to get this right, right now.

Lee: What about a credit downgrade? If that were to happen, doesn’t that call into question all kinds of things like money market funds and other types of investment funds are chartered to invest only in a certain grade of funds and if all of a sudden U.S. treasuries were downgraded wouldn’t that have a pretty significant effect on where we are relative to the avalanche?

Zandi: If there is downgrade to treasury debt, this will likely trigger other downgrades. Anything that’s backstopped by the government will be downgraded. Fannie Mae/Freddie Mac debt. Federal home owned bank debt, too big to fail banks … they’re still implicitly backstopped – they’ll get downgraded. JP Morgan, Citi’s of the world. State and local government debt will get downgraded. And you’re right. Money managers have, in their relationships with their clients, agreements not to invest in bonds that have ratings below a certain grade, and they will divest themselves because of the downgrades, and this will cause problems in the credit markets.  The credit markets will ultimately adjust because the reality of what’s happened to the value of these bonds has not changed, the economics have not changed for Fannie Mae and Freddie Mac, so you’ll see hedge funds and private equity firms and other players come in, but that’s a process. And it’ll take time, and between now and then it’ll create a great deal of turmoil. The most important thing isn’t what the credit rating agencies do or say, it’s what this means. It means we do not have the political will to nail this thing down. And we won’t until we’re forced by that avalanche. And people will recognize that and we will go nowhere.

Lee: So what you’re saying is if we want to preserve entitlements, get us to balance. If you want to preserve our ability to fund national defense, get us to balance.

Zandi: Get us to sustainability.