Just Months Ago Obama Expanded Flood Insurance Subsidies

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Written By:
Rob Port

Oct 29, 2012
4:14pm

Something interesting, in terms of federal policy, to keep in mind as Hurricane Sandy bears down on the east coast:

The law extended the National Flood Insurance Program for five years while also opening the program for the first time to multi-family properties like beachfront condominiums. The flood insurance provisions were part of a bill known as the Moving Ahead for Progress in the 21st Century Act that passed the House 373 to 52 on June 29 and the Senate by 74 to 19 the same day. President Obama signed it into law on July 6 with remarks that dwelled on the transportation spending and student loan-related language in the Act, but made no mention at all of the flood insurance.

The Left tends to look at hurricanes as examples of how government works well—the National Weather Service warns people, police and firefighters help with evacuations and rescue, and the Federal Emergency Management Agency helps clean up. Free-market types, by contrast, argue that hurricane casualties are partly the result of unintended consequences of government actions: without federal flood insurance, many fewer people would take the risk of living in low-lying areas vulnerable to storm surges.

It always frustrates me how little we talk about the impact this sort of policy has in terms of safety, lives and taxpayer dollars. Not only is it expensive for taxpayers to be eternally bailing out those who build their homes in risky areas, but just think of all the additional injuries and lives lost during emergencies when these people find themselves right in the path of big storms?

Not to mention when first responders and/or the military are forced to try and rescue people and property in those areas.

Subsidies for flood insurance create a moral hazard where by the risk of building along the coast, or along rivers/lakes that could flood, is born not by those who build or own the property as it should be but rather by the public at large.

If you want to build a home on the coast in a hurricane zone, then fine, but if nobody in the private sector wants to insure your property because of where you’ve chosen to build that shouldn’t mean you get a subsidy/bailout from the taxpayers.