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00:01: From New York Times, I'm Michael Bavaro.
00:04: This is Adelaide.
00:10: A few days ago, the Biden administration issued a report that documents how the federal
00:14: government itself encourages Americans to make bad decisions about living with climate change.
00:21: Today, White House reporter Jim Tancersley on why getting the government to encourage
00:27: the right decisions will be so hard.
00:36: It's Friday, March 24th.
00:46: Jim, I arrive very skeptical that an economic report from deep inside the West
00:53: of the White House can be interesting and sustained in episode, but I'm open-minded,
00:59: and I'm asking you to prove me wrong. So first off, I'm disappointed in you. I can't believe
01:06: that everyone else is not completely riveted by this report, but no, here, let me sell you on why
01:12: this is really important and interesting. Okay, please. So the economic report of the president
01:17: president is released every year. It's put together by the president's economic team and
01:23: it's hundreds of pages of charts and citations and deep detail about the way the economy
01:29: is behaving and the way that it's going to behave going forward.
01:33: Wait, wait, Jim, I just dozed off. Sorry, you're selling what to hear? Stick with me, Michael.
01:38: Go ahead.
01:40: I will concede that in the past, some of these reports have been more targeted toward
01:46: what we might call a deep nerd audience.
01:49: And niche audience.
01:50: And niche audience, people like me and professional economists
01:53: and policy wonks, whose job it is to really geek out about economic policy and projects.
02:00: But in this case, this year, there's
02:03: a chapter that I think has big, broad, important appeal to everybody.
02:09: It focuses on climate change and specifically
02:12: how we are going to adapt to a warming world.
02:16: And what that's gonna cost.
02:18: And it reflects a goal the Biden administration has had
02:22: over the last couple of years to better present the public
02:25: what those risks of climate change look like.
02:27: And not to put too fine a point on it, but it's basically a blueprint
02:31: for how that adaptation might completely upend how we think about almost everything the federal government does.
02:39: Wow, how it spends money,
02:40: how it encourages people to do things or not,
02:42: things, it's a really vividly detailed summary of all of the risks and costs of adapting
02:52: to climate change or not adapting to climate change.
03:00: All right, let's stipulate now that this does sound novel and important, but we're pretty
03:06: far along in a climate crisis. So simply acknowledging that it will affect the federal government
03:13: doesn't sound hugely groundbreaking to me. I mean, just a few days ago, a UN report came
03:18: out that said what so many of these reports ultimately say, which is we are in enormous
03:23: trouble. Yes. And the White House report acknowledges that. And it acknowledges that we are already
03:29: living with the effects of climate change. Americans are already making decisions that
03:35: are influenced by climate change. But what the report also lays out really starkly is just how
03:41: much government policies as they are right now are encouraging people to take more risk in the
03:48: face of climate change, to do riskier things, more expensive things that they probably shouldn't
03:55: be doing if the world's going to keep warming like this. So this report posits that our federal
04:01: government when it comes to climate changing, climate adaptation is kind of in its own way.
04:08: It's part of the problem. Yes, and gets in people's way. The places we live, the crops we plant,
04:14: where we choose to build homes, all are flying in the face of climate risk right now.
04:19: And I think there's a really easy way to understand why that is because we subsidize a lot of behaviors
04:26: through direct spending or regulations or the tax code.
04:30: We give people sort of a thumb on the scale
04:33: for stuff they should do with their lives.
04:36: And that thumb was in a world where the risks were not
04:40: nearly what they are from a changing climate.
04:43: And so if you just keep with those existing policies,
04:46: you create what economists call perverse incentives
04:49: or moral hazards, you're basically encouraging people to do the wrong things.
04:55: So walk us through how, according to this report, the government creates perverse incentives
05:01: and moral hazards when it comes to climate.
05:04: Sure thing.
05:05: First, and I think this is very easy
05:07: for people to understand the way we deal with natural disasters in this country,
05:12: the way the federal government tries to stop them
05:16: or guard against them or bail people out after they happen.
05:19: So let's take forest fires, for example.
05:22: The federal government fights fires all across the West
05:24: those fires are getting worse and more damaging. And the report says, hey, if we keep fighting
05:31: fires around, say, you know, gated subdivisions in parts of the West that are bone dry, that
05:37: will continue to encourage people to live in those places when maybe they should not be
05:42: taking the risks of living in places that are very prone to fire.
05:46: Right. The same is true with flooding. There's more flooding that's being linked to climate
05:51: change and the federal government basically backstops all flood insurance across the country.
05:56: And so it bears the costs of people living in flood zones.
06:01: And when they flood more often, the government's paying the money and people can sort of continue to choose the living there.
06:06: Right.
06:07: And of course, the federal government backstops flood insurance.
06:09: We've talked about this a lot on the show because private flood insurance that you could
06:14: buy in theory on the open market is so prohibitively expensive because it actually reflects the
06:19: the true cost of ensuring a house in a flood zone.
06:22: So the government kindly generously says,
06:25: we got this, we'll take care of it.
06:28: And you're saying that is incentivizing bad
06:31: decision making around living in flood zones.
06:33: Yeah, what the report says is that
06:35: so long as the federal government does that,
06:37: you're not going to see people correctly
06:40: accounting for the risks of where they live.
06:42: Exactly what you just said that they're not fully pricing in as economists call it.
06:48: the risks they're taking by where they're choosing to build their homes.
06:51: And the costs of that end up being born by taxpayers.
06:54: So people who don't live in risky areas end up subsidizing the people who do.
06:59: Right.
07:00: And we tend not to think of this as a subsidy.
07:03: We tend to think of it as a rescue.
07:05: It sounds like this report is starting to re-brand this as basically paying people to make bad decisions.
07:14: Yeah.
07:15: Effectively, yes.
07:17: So that's natural disasters.
07:19: What else does the government do, according to this report, that essentially encourages bad climate behavior?
07:25: So another way is not just ensuring homes, but also helping people to buy them.
07:32: So I think a lot of people know this, but some doubt the federal government plays a large role in the mortgage market.
07:39: It has these what are called government-sponsored entities, Fannie Mae and Freddie Mac, that essentially
07:46: take on mortgage risk from private lenders.
07:51: And there's all this evidence, the report sites, that lenders are quietly sending loans
07:57: they've made to houses in risky climate areas,
07:59: think like coastal communities, vulnerable to sea level rise.
08:03: They're sending those loans basically to the federal government.
08:07: If I'm a lender and I ride a mortgage for that,
08:10: I might be really worried that that house gets washed away as the sea level goes up.
08:14: But if I can just offload that mortgage to the government or to Freddie and Fannie,
08:18: well, then I don't worry about it as much
08:19: and I'm much more willing to write the loan.
08:22: And so that's what the report lays out
08:24: that by being able to offload those loans to the government,
08:27: private mortgage lenders are making riskier loans in the face of climate change.
08:32: But it's not just where we live.
08:34: It's also what we grow, agriculture.
08:37: You know, the federal government subsidizes insurance for big crops farmers grow.
08:42: If those crops fail for whatever reason, like there's a drought or a flood, then the insurance
08:47: pays out and the farmer isn't out a ton of money.
08:50: What the report says by subsidizing that insurance, you're again taking some of that risk away
08:56: from farmers and encouraging farmers to grow the wrong crops in the wrong places, essentially
09:04: risky behavior and piling the costs on the taxpayers.
09:07: Right.
09:08: lot like the way the federal government plays a role in home insurance and flood zones
09:14: sounds like it plays a similar role with crops being grown in climate vulnerable areas.
09:19: And I have to imagine this is especially problematic for farmers in the American West where there is so much drought these days.
09:28: Yes, but also across places like Texas where cotton crops have been under a lot of pressure
09:33: lately and across the Midwest, I mean, there's no part of the country that's immune from climate change.
09:39: Right. Okay, so I recognize this is the long list of things and that a lot of it is maybe
09:44: stuff that people don't associate with the federal government, but I'm going to give you one more
09:48: that is something everyone associates with the federal government. Medicare, one of the biggest
09:52: most popular programs in American history. And the report is very clear that climate change is
09:59: is going to affect healthcare spending, Medicare and Medicaid.
10:02: And how? Exactly.
10:04: Because climate change is a health risk, particularly for poor people who have a harder time moving
10:11: to get away from the effects of climate change.
10:15: So if you are, say, a senior citizen living in Arizona where temperatures are getting
10:20: higher every year and you are at a higher risk of heat stroke or of respiratory disease
10:25: from air pollution linked to climate change, then you're going to have higher healthcare
10:30: costs that get billed to the government.
10:33: So one way, very simple way to think about this is that the more people are at risk from
10:38: heatwaves and other climate-related events, that's more money that it's going to cost taxpayers
10:43: to take care of them and more strains on the healthcare system, which is a huge driver of the national debt going forward.
10:50: And the government might need to rethink how it spends that money and how it appores healthcare just to keep up.
10:56: I mean, one way or another, it feels like this report is essentially saying that the
11:00: federal government's policies are misaligned with or are misfiring in almost every corner
11:07: of American life when it comes to climate.
11:09: And yet Jim, just to play devil's advocate, I mean, how exactly is that such a problem?
11:16: Because the government's job is to help people as they experience new challenges in their
11:21: lives and climate's a new challenge and the government is going to have to use its existing systems to help them, right?
11:27: So what's the problem?
11:28: The Biden administration would absolutely agree and this report agrees that a big part
11:34: of the federal government's role in a warming world is to help people, particularly poor people, adapt to climate change.
11:41: But the report's all about making that adaptation less expensive.
11:45: There are smarter ways the report says to do all this.
11:49: And there are ways the government can help people make smarter decisions on their own.
11:57: But there's a problem with helping people make smarter decisions.
12:01: It often means telling people things they don't want to hear.
12:05: We'll be right back.
12:32: So Jim, how does this report from the White House propose getting people to make smarter
12:37: decisions and get the government out of its own way on climate, given the specific policies
12:44: that we have been talking about so far?
12:46: Well, there's basically two very broad ways that the report talks about that.
12:50: The first is you can help people make better decisions by giving them better information about the decisions they're making.
12:57: So if we don't really know what the risks are from climate change, it's hard for us as
13:02: consumers to know what to buy or where to live or what to plant.
13:06: And so the report suggests the government do more to actually quantify and specify what those risks are.
13:13: But the second thing, and the much bigger, more overarching part of the report, is the
13:18: government needs to stop paying you to make what the government already believes are very risky decisions.
13:25: And that is the big change it's proposing.
13:27: Sweeping changes to all sorts of government programs to pull some of that perverse incentive back.
13:34: Okay, how does that actually work in practice?
13:38: Making people stop making bad decisions?
13:41: Well, let's go back to some of those examples we were talking about earlier.
13:45: Like take forest fires.
13:47: The report sort of posits maybe the forest service needs to do less wildland firefighting.
13:54: Maybe you should just let some places burn is the implication because they're too risky.
13:59: I mean, that would be a very big change and it might mean telling somebody that their house is going to burn down.
14:07: Right.
14:07: Right, which nobody wants to hear that the government might let your house burn down.
14:12: But that would be the implication of letting people bear that risk more on their own.
14:18: Okay.
14:18: How else can the government change these incentives?
14:21: So I think another really big one, and it's contained in this kind of fun, shaded box
14:27: within the report, almost like a nerd Easter egg in the report, is about insurance markets.
14:34: Because sometimes the perverse incentive in the government is that insurers see the risks
14:40: of people living in certain areas and they just won't ensure them anymore and the government ends up footing the bill.
14:46: So what the report envisions is completely rethinking how insurance works so that it's
14:52: not the government stepping in with a big check at the end, but that actually we're spreading
14:57: the costs over an efficient market over time.
15:00: Now, here's how that would work.
15:01: Right now, you buy fire insurance or hurricane insurance or flood insurance, like as a separate one-off policy.
15:08: The report envisions, and I guess they do this in some countries like France and New Zealand,
15:12: a big national multi-parallel disaster insurance, basically just like everything in one policy.
15:20: And everybody has to buy it, everybody pays into it, and then spreads the risk when disaster
15:26: strike that fund pays out, you know, the benefits.
15:29: So you're essentially creating a much broader risk pool and keeping the government from having
15:35: to pay these huge costs that again could be perversely incentivizing people because
15:39: they know the government's going to step in if bad things happen.
15:42: Right, so this might not exactly stop people
15:45: from having a house or building a house in the wrong place,
15:48: but it's gonna prevent the federal government
15:49: from footing the bill when the cost of that decision comes due.
15:55: Right, the idea is that the people in those areas
15:57: will have at least some more skin in the game
16:00: because they'll be buying insurance of some kind,
16:02: even if a private insurer has pulled out of their market.
16:05: And what about the crop insurance subsidies that you had mentioned?
16:08: What does this report suggest doing differently
16:11: when it comes to something like that.
16:13: Well, the obvious implication from the report is
16:15: the government should subsidize crop insurance less
16:17: in particular for highly climate change exposed crops.
16:22: And if you reduce the subsidy,
16:23: there will be less of that planting.
16:25: So so far, the solutions seem kind of obvious,
16:30: which is if a government policy has perverse incentives, do less of that perverse incentivizing.
16:38: Yes, that's what a lot of this policy is.
16:41: But the report goes beyond that.
16:44: And I think this is a fascinating part of it.
16:46: It talks about the federal government trying to use its muscle
16:50: to try to change some of the incentives
16:54: that cities and states have right now
16:57: that leads them to allow building in risky places.
17:01: Okay, explain that, what are the local incentives?
17:03: Well, there's a lot.
17:04: So right now, if you're a community on the coast
17:06: or in the mountains and you green light more building
17:10: that is businesses or homes and that brings in property taxes.
17:14: Well, the local government reads the values of that.
17:18: But overall, that building might be really risky for the country.
17:21: And if fires rip through those new homes, the federal government ends up often paying the costs of the disaster relief.
17:28: Right.
17:29: So what the report suggests is, hey, let's condition federal dollars more on states and cities making better decisions.
17:37: We're going to give money to the places that don't build on flood plains, that don't build
17:42: in fire zones, that are more careful about what and where they build.
17:47: Interesting.
17:48: So in other words, the federal government knows that it can't tell a coastal community, you can't build houses there.
17:55: Even though ultimately, if federal government's going to bear a huge amount of the cost
17:57: of bailing out that community in a flood, but what it can do is say to the entire state,
18:03: Hey, you want something from us?
18:06: Then you need to behave differently.
18:07: And that might trickle down to that coastal community and affect decision making there.
18:11: Right, listen, we've got lots of money for infrastructure.
18:14: Perhaps you say even more so than the government already is,
18:17: we're not going to rebuild your bridge
18:19: that keeps getting washed out by floods.
18:21: We're going to rebuild a bridge
18:23: if you choose to build in a safer place.
18:25: Or we're not going to put broadband internet
18:28: into that new subdivision in a really high fire risk zone.
18:32: So a lot of the things we've already talked about are the federal government removing incentives.
18:37: This is the federal government exerting pressure.
18:40: It's using the power of its dollars
18:42: to make city and state leaders feel like
18:45: we need to rethink how we are developing our communities
18:50: if we want to be eligible for this federal funding.
18:53: Got it.
18:55: Doesn't that mean, Jim, if we're being honest, that many Republican-controlled communities and states,
19:05: whose leaders are openly skeptical of climate change,
19:08: are gonna be a lot less likely to therefore receive federal spending
19:13: given the strings that would be attached to it,
19:15: and more likely to be kind of punished under this kind of a system.
19:20: That's a complicated question,
19:22: and I think there's two answers to it.
19:23: The first is the report does note that places where people believe strongly in the science of climate change tend to be better at adaptation
19:32: and take less risk in the face of climate change.
19:35: So in that sense, they'll be less hard hit.
19:38: But in a second sense,
19:40: a lot of liberals live in the mountains and on the coast.
19:43: And often you see communities there really fighting back against any idea that the government's gonna tell them they can't have that second home
19:50: or they can't be where they wanna be.
19:53: Republicans certainly don't like
19:55: government telling them what to do. But a lot of Democrats don't either. And I think that's
20:01: one of the real political challenges for any climate adaptation strategy is the government
20:06: is going to explicitly or implicitly be telling people a lot of ways that they currently behave don't work anymore.
20:14: Hmm. So the politics of this you're saying are much more nuanced and complicated than
20:20: they might seem. Absolutely. Take my home state of Oregon, which is a fairly liberal state.
20:25: where people really believe in general in the science of climate change. But
20:30: when the state tried last year to publish a map showing fire risk for homeowners,
20:37: Oregonians just recoiled. There was a huge outcry. People were complaining that it was going to drive
20:43: up their insurance costs and it was going to drive down their property values and the state had to
20:48: withdraw the map and then go back to the drawing board on a new process for it this year. And
20:53: And I think that just sort of shows just how difficult
20:57: this is going to be trying to get people to adapt
21:00: to the risks of a changing climate,
21:02: because people want to live in their homes.
21:04: They don't want to be told that the existing world they live in
21:10: is suddenly more expensive or less valuable.
21:12: Right.
21:13: What's interesting about that example, Jim, is that,
21:15: first of all, it's pretty modest, right?
21:16: Just publishing a map that says you're at greater risk.
21:18: If you live here, but it's also exactly what this report
21:21: suggests the federal government needs to do,
21:23: just tell people the truth, give them lots of data about where their risks are greatest,
21:27: and then follow up with carrots and sticks that either reward or punish communities
21:33: based on whether or not they're adapting to climate change.
21:35: That's exactly what this is so hard.
21:37: If just publishing a map,
21:38: the just shows fire risk is this difficult.
21:42: Imagine how hard it's gonna be
21:43: when the federal government comes along and says,
21:45: hey, we're not gonna give you that grant because you just greenlit a subdivision
21:50: that we think is gonna flood in 10 years.
21:53: I mean, it's just generally true in American politics, probably just politics, that it's easier to give people carrots.
22:01: Hey, I'm going to incentivize you to do something that we think is right, then to punish them
22:06: for doing something you think is wrong.
22:08: And actually, we know this from the administration's approach to climate change in a variety of other ways.
22:14: They're subsidizing people buying electric vehicles because they think that's good.
22:18: They've chosen that path as opposed to making it more expensive to buy gasoline by putting
22:23: not a carbon tax. And so what's really interesting in this report is it invisions a world where
22:28: you're pulling away subsidies, where you are changing risk behavior in part by a lot more
22:34: punitive measures. Right. It's very clear that should this approach ever be adopted by the
22:40: federal government, because right now it's all very theoretical, there would be a ton of resistance.
22:43: So how likely is it, Jim, that what we're discussing with this report, invisions will ever become
22:52: reality that the forest service might not fight fires that would save a house.
22:57: And that the government might withhold money to a community for a bridge.
23:03: If that state doesn't get its climate act together, how realistic is that?
23:08: I think the political pressure against these sort of government changes to adapt
23:13: to climate change is going to be really high.
23:15: It's going to be hard for any future administration or this current one to start implementing a bunch of these things,
23:21: but I also think that adapting to climate change is gonna be hard.
23:25: And that is sort of the real tension driving the economics in this report.
23:30: You're probably not gonna have a choice in a lot of these communities
23:33: of just sticking with the life you had before the world started warming.
23:38: You're going to be dealing with more forest fires.
23:40: You're going to be dealing with more sea level rise.
23:43: You're going to be dealing with more flooding and natural disaster.
23:46: And the only question is who pays for that.
23:51: What we are seeing from this report, what we see from all of the climate warnings we're
23:57: getting now is that it's becoming more immediate.
23:59: This is not some abstract concept where we have a binary choice of, oh, do we want to deal with it or not?
24:05: You have to deal with it.
24:07: It's like paying your taxes.
24:09: You can put it off as long as you want, but at some point you have to sit down and deal with it one way or another.
24:15: I think what this report is trying to do is kind of make clear that there are less expensive
24:19: or more expensive ways to actually deal with it and hopefully steer people to the less painful, less expensive ways.
24:27: Right.
24:29: You're saying we have to add something to that list of death and taxes, death and taxes and the bill for climate change.
24:34: Those are the things that we have to deal with.
24:36: Death taxes, adapting to the horrible realities of a woman world, yes, exactly Michael.
24:43: Thank you very much.
24:44: Thank you so much for having me.
24:50: We'll be right back.
25:01: Here's what else you need to know today.
25:05: We do not trust TikTok will ever embrace American values.
25:09: Values for freedom, human rights, and innovation.
25:13: During a five-hour congressional hearing on Thursday, lawmakers from both parties berated
25:19: the chief executive of TikTok, claiming, frequently without evidence, that the hugely popular
25:25: platform is a tool of the Chinese government.
25:29: TikTok has repeatedly chosen the path for more control, more surveillance, and more manipulation.
25:36: Your platform should be banned.
25:38: TAC is owned by a company based in China, but in his testimony, its CEO, Shou Chiu, told lawmakers
25:46: that TAC is an independent company that is not influenced by China, and he assured them
25:53: that the company has carefully protected the data of its American users from any foreign
25:59: interference by making sure that that data never leaves the United States.
26:04: That's what we've been doing for the last two years.
26:07: Building what amounts to a firewall that seals off protected US user data from unauthorized foreign access.
26:15: The bottom line is this.
26:17: American data stored on American soil by an American company overseen by American personnel.
26:25: Today's episode was produced by Carlos Prieto and Michael Simon Johnson with help from Rob Zipco.
26:32: It was edited by Anita Botticell with help from Patricia Willens.
26:37: Contains original music by Dan Powell and Mary and Luzano, and was engineered by Chris Wood.
26:45: Our theme music is by Jim Brunberg and Ben Lanzfuck of Wonderland.
26:57: That's it for daily.
26:59: I'm Michael Babbaro.
27:01: See you on Monday.