Flood Insurance Follies

Darn. Wiped out. Let’s do it all over again and expect a different result. There’s a government subsidy for that. photo by Pam Andrade/Flickr

Imagine an insurance program that lost so much money in private hands that the government had to take it over, that the government forces people to buy (Really? Is that constitutional?) and that is $19 billion in debt with no hope of ever achieving solvency. If that sounds like the worst of socialist tendencies in the hands of big government, it is. Odd that it is not an issue in the campaign for the presidency, like Obamacare is. But wait. Health insurance benefits the sick and the poor. Flood insurance, on the other hand, restores vacation homes.

(Yes, yes, I know that lots of unfortunate middle-class families living on the East Coast have been devastated by Sandy and desperately need the help they may get from the National Flood Insurance Program [NFIP]. But studies have shown (here’s one by the Center for Policy Integrity) that in the absence of an overwhelming event such as Katrina or Sandy the beneficiaries of the program are disproportionately rich.)

We are told by the Relentless Right that a free market, unrestrained by regulation and untroubled by taxes, will always make the right decisions. About a half century ago, the free insurance market decided that if people were going to insist on building their homes at seaside or in frequently flooded lowlands, they would have to pay an appropriate premium for taking the high risk. So of course people refused to pay the premiums and built their homes anyway. Then, when they were washed out, disaster relief, unaided by insurance, was really expensive.

Hence, the NFIP, established after the first billion-dollar hurricane in history struck New Orleans back in 1968. The government overlords not only forced people who lived in high risk areas to buy the insurance, but made local governments set and enforce reasonable zoning regulations. Lord, when will you set my people free?

But by “reasonable,” in practice, the NFIP apparently meant let any idiot rebuild his castle on any sand dune or river bend as often as it gets flushed. By making the insurance available cheaply, and virtually everywhere, the NFIP subsidized — gasp! — the owners and developers of houses and condos and casinos on beaches, wetlands and river bottoms — and subsidized as well the consequent environmental degradation caused by removing these natural flood abatement features from the natural system.

Whoa. A government program that benefits the wealthy, the developers, and the destroyers of nature. Does it get any better than this? Any wonder there has not been a peep from the people who want to save us from wasting money on Medicaid? Any wonder that a recent small piece in TIME is the only mention, to my knowledge, of the problem in the lamestream media?

Katrina cost the NFIP $20 billion, an amount it still owes and has no hope of repaying.
Guesstimates of the cost of property losses from Sandy are in the same ball park. So where’s the NFIP going to get the money? Can you say Bailout? Can you imagine Paul Ryan objecting?


UPDATE 11/03: The Washington Post Editorial Board agrees. See “Federal flood insurance is underwater too.”



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