The Hidden Price of the Changing Climate: A Growing Threat to Our Federal Budget

Two years ago, I testified before the U.S. Senate Committee on the Budget, a committee where I once served. My topic: the growing financial risk of extreme weather events and a changing climate. I often talk about the very real threat this poses to human health, but there is also an economic and budgetary threat.

We must recognize the national cost of the climate crisis in human suffering and taxpayer dollars. It's time to view this not just as a planetary concern, but as a direct threat to our federal budget and long-term economic outlook.

The Federal Budget is Already Bearing the Burden of a Changing Climate

In 2022, the U.S. experienced 18 climate-related disasters each costing over $1 billion. In 2023, this figure climbed even higher, with the United States experiencing a “record-breaking 28 ‘billion-dollar’ disasters.” And from 2017 to 2023, 137 such events have occurred, costing well over $1 trillion and killing 5,500+ people. In the last 10 years, federal wildfire suppression costs have increased by nearly 400 percent.

This is not a coincidence. According to researchers at The Nature Conservancy, “increased global temperatures and reduced moisture lead to drier conditions and extended fire seasons.” Yes, certain areas are experiencing fewer wildfires because of the changing climate; but it’s important to understand that the changing climate affects different areas differently. Some regions are experiencing increased rainfall. Others, like Southern California, are growing hotter and increasingly arid. This means that the conditions are becoming increasingly conducive not only to wildfires in general, but also to the extreme wildfires, which only occurred rarely in the past.

Higher temperatures and more frequent disasters understandably mean a greater burden on the federal budget.

In 2022, the Office of Management and Budget reported the expected budgetary consequence of the changing climate. “The fiscal risk of climate change,” the report stated, “is immense.” “Under current policy pathways,” the report continued, climate instability could cause the U.S. GDP to drop by 3 to 10 percent by 2100.

According to the report, federal expenditures across several budget categories are projected to increase significantly on an annual basis due to the climate crisis. Estimated increases include:

• Crop insurance subsidies: up by $2.1 billion annually

• Coastal disaster response: up by $94 billion annually

• Healthcare spending: up by $23 billion annually

These are long-term budget pressures the current system is poorly equipped to handle. The Congressional Budget Office (CBO) has warned that the climate crisis will worsen deficits, reduce productivity, and increase mandatory spending.

Projection Implications

• Crop Insurance Subsidies:

The 2022 OMB report stated: “federal expenditures on crop insurance premium subsidies are projected to increase 3.5 to 22 percent each year due to climate change-induced crop losses by the late-century.” This would correspond to annual increases of $330 million to $2.1 billion.

• Coastal Disaster Response:

The same OMB briefing projected that by the end of the century, we could see U.S. spending on coastal disaster response increase by between $22 and $94 billion annually. This would be cataclysmic. Over the recent years, FEMA’s baseline disaster spending has averaged $18 to 20 billion annually, a number that is already significantly higher than that of several decades ago. This 2022 projection aligned with earlier analyses (such as a 2016 Congressional Budget Office study) which concluded that hurricane-related costs will outpace economic growth causing federal disaster aid to rise as a share of GDP by 2075.

• Healthcare Spending:

Climate instability already influences Medicare and Medicaid spending. This is expected to get more drastic over time. A 2025 article published in the International Journal of Public Health reported the consequence of extreme temperature on Medicaid transfer payment. The data show that 10 additional extremely hot days (above 90°F) correspond to a 0.85% increase in Medicaid spending (or ~$11.78 per capita). To compare,10 extreme cold days (below 10°F) correspond to a 0.22% increase in Medicare spending (or ~$4.30 per capita). Understandably, both extremes are correlated with negative health outcomes; however, the data suggest that extreme heat leads to greater demand for healthcare, and consequently to increased stress on healthcare systems and the economy.

A 2024 Congressional Budget Report sheds more light on this interaction between climate and healthcare spending. It highlights the nuanced causal relationship between temperature and healthcare-patient interaction. According to the report, extreme heat increases emergency department visits and spending among Medicare beneficiaries. While the report projects that outpatient spending will decrease as temperatures rise due to expected behavioral changes, total healthcare demand and expenditure can be expected to rise, putting increased fiscal pressure on government programs (Medicare and Medicaid) that account for approximately a quarter of all federal spending. Cutting this spending significantly will not solve–indeed, it can be expected to exacerbate–the demand for healthcare, a demand the country has an obligation to address. Consequently, the wisest course of action is to tackle the root cause of this expected fiscal pressure: the changing climate.

Testifying before the U.S. Senate Committee on the Budget on the national cost of our changing climate, May 10, 2023.

Insurance Premiums are Rising due to Climate

Outside of federal spending, insurance premiums (specifically for hurricanes and wildfires) are rising in certain regions. The U.S. The Department of Treasury reported in 2025 that insurance premiums with nonrenewal rates are about 80% higher in zip codes with the highest climate risk as opposed to zip codes with low climate risk.This disparity may continue to grow. Between 2018 and 2024, the average FAIR Plan (a California fire insurance program) premium increased from $1,800 to $3,200. And the number of policies increased by 164% between 2019 and 2024.

Simultaneously, in Texas, the average price insurance premiums for homeowners increased by 43% in 2024. This is largely due to the projected rise in the number of natural disasters, primarily hurricanes.

Solutions Exist

Recent federal investments in the Inflation Reduction Act were targeted to mitigate and address elements of this crisis, although some of this funding is being reduced and cut back in the recent reconciliation and rescission packages.

As we look to solutions, we naturally turn to adaptation, mitigation, alternative fuel sources including nuclear, and exciting innovative technologies around carbon capture and battery advances. As a volunteer with The Nature Conservancy, I love to underscore the huge power of nature-based solutions, both in the US and around the world, which include wetlands:

• During Hurricane Sandy (the second costliest hurricane in history) wetlands reduced damages by $625 million. According to another source, wetlands “helped reduce the cost of damages [during Hurricane Sandy] by 22 percent.” There is perhaps no greater example of the relief provided by wetlands than urban New York. Although wetlands comprise just 2% of this land area, they are estimated to have saved $138 billion in damages from Hurricane Sandy.

• Coastal wetlands in Ocean County, NJ reduce property losses by 20%. By contrast, properties built on areas where wetlands previously existed face an above-average risk of damages.

A Call for Fiscally-Sound, Bipartisan Policy

Our federal budget processes must evolve to reflect the economic and security risks posed by inaction to address our changing climate. This was my message to the Congress when I testified, and it is my message today.

Bipartisan leadership and updated budget frameworks are essential to managing this growing and too often ignored risk. The policy decisions we make today will shape our fiscal health, public wellbeing, taxpayer liability, and national security for decades to come.

Read my full 2023 Budget testimony here.