Tag Archives: Einstein

The observation, usually attributed Albert
Einstein, that insanity is doing the same thing over and over
again and expecting different results is pretty good description of
the federal government’s National Flood Insurance program. The
New York Times today has a terrific op-ed, “End
Federal Flood Insurance,” by two economists explaining in
detail the costs and stupidity of subsidizing insurance that
encourages people to live in dangerous flood-prone areas. A
tidbit:

IT’S no surprise that it can be very expensive to live near the
ocean. But it may come as a surprise to American taxpayers that
they are on the hook for at least $527 billion of vulnerable assets
in the nation’s coastal flood plains. Those homes and businesses
are insured by the federal government’s National Flood Insurance
Program.
You read that right: $527 billion, which is just a portion of
the program’s overall liability of $1.25 trillion, second only to
Social Security in
the liabilities on the government’s ledgers last year, according to
government data.
The flood insurance program was created by Congress in 1968 to
fill a void: because of the risk, few carriers provided flood
insurance. Now, private insurers offer flood insurance in a
partnership with the government — but taxpayers shoulder all the
risk. It has turned out to be a bad bet. The program is $18 billion
in debt, a sum the government acknowledges probably will never be
paid back by premiums, and it is likely to need a new
multibillion-dollar infusion to pay claims from Hurricane Sandy.
It is long past time for the government to stop subsidizing home
and business owners who live and build in dangerous flood
zones.
Homeowners and businesses should be responsible for
purchasing their own flood insurance on the private market, if they
can find it. If they can’t, then the market is telling them that
where they live is too dangerous. [emphasis added] If they
choose to live in harm’s way, they should bear the cost of that
risk — not the taxpayers. Government’s primary role is ensuring the
safety of its citizens, so the government’s subsidizing of risky
behavior is completely backward.

Who else might have railed against this economically and
ecologically absurd program? Oh right, that would be
Reason. For example, see contributor James DeLong’s
depressingly insightful 1999 article, “All Wet,” in
which he observed:

People are now becoming so used to the idea that the federal
government will pay for disasters that they are not bothering to
buy even the subsidized flood insurance. In most places, less than
30 percent of the properties located in designated flood plains are
covered.
The response to such developments? The feds are now working with
communities, buying back properties, passing regulations, yada,
yada, yada. All to try to keep people from doing what government
payments make it profitable for them to do: build in flood zones.
Indeed, the feds seem anxious to consider anything except the one
solution–eliminating the insurance program–that might actually
change the situation.

Check out Reason’s extensive reading list of
hurricane and flood insurance related public policies.

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