Sunday, November 16, 2008

National Flood Insurance Program

I'm still thinking about some lawyer's call for fairness yesterday.

This morning I was reading from Thomas Sowell's book, Basic Economics. Sowell quotes John Stossel who bought a beautiful beach house a hundred feet from the Atlantic Ocean. His father told him not to build there because hurricane seasons made it too risky. But Stossel's architect said, "Why not? If the ocean destroys your house, the governemnt will pay for a new one."

Sure enough, "Four years later, the ocean surged in and wiped out Mr. Stossel's first floor--and the government replaced it." Then, ten years later after another storm, the government "paid for the entire house and it's contents."

Stossel described the payments for this government run "National Flood Insurance Program" as "dirt cheep." Sowell then comments that "this is not a program for low-income people. It covers mansions in Mlabu and vacation homes owned by wealthy families in Hyannis and Kennebunkport. The National Flood Insurance Program is in fact the largest insurer in the country."

Sowell says that "More than 25,000 properties have received flood insurance payments from the federal government on more than four different occasians. One property in Houston was flooded 16 times, requiring more than $800,000 worth of reparirs--several times the value of the property itself.

But as Sowell says, "There is an almost politically irrestible inclination to provide disaster relief to people struck by earthquakes, wildfires, tornadoes and other natural disasters. The tragic pictures on television over-ride any consideration of what the situation was when they decided to live where they did" (Sowell, 304-305)

Do you think it is fair that rich people get dirt cheap federal insurance that allows them to live risk-free in mansions with ocean front views, using the tax dollars of others who couldn't even afford a small bungalo on the beach?

The fact is that it is not fair. And yet, if we tried to eliminate or even modify it, politicians--especially Democrats--and the media would go berserk!

1 comment:

Kevin said...

I am in complete agreement. The federal government should not be in the business of insuring homes, we have a large private insurance industry that can handle these expenses and can price the insurance in accordance with the risk.

Furthermore, the federal government should not be in the business of providing significant disaster care for states. This is the job of the state and city governments. Keep the money close to the people, keep the responsibility close to the people, and you'll see increased accountability, quality of service, and overall benefit for the people.