Insuring Disaster
Florida, Texas, Louisiana, and California are lobbying the government for up to $80,000,000,000 [$80 billion] in loans to bolster their flood insurance programs.
Providing residents of these areas with flood insurance lowers their costs. This amounts to a federal subsidy for those living in hurricane zones.
Subsidies, like taxes are inducements to change behavior. You can think of a subsidy like a negative tax–or a rebate. A tax is a fee charged to someone for doing something. A subsidy is a payment made to someone for doing something.
Subsidizing flood insurance for those who live in hurricane zones makes it cheaper for people to live in those zones. This attracts more people to these areas then would naturally choose to live there.
When a hurricane inevitably destroys these areas again, the government will have to pay billions of dollars in insurance claims. Then they will spend more money redeveloping the area. Then they will again offer subsidized flood insurance to the residents of the area, lowering the cost of living, and thereby encouraging more people to move there. Then another hurricane will hit the area…
This has happened so many times before. It will likely happen again and again in the future.
While the money is being asked for in the form of loans, the terms of the loan proposals are explicitly clear that if there is a disaster, the federal government will have to pick up the tab.
The government should not subsidize people to live in disaster prone areas. Doing so does not make sense. It provides financial incentives for people to make a bad (or at least life threatening) decision. It forces the rest of society to pay for these bad decisions.
The government should get out of the private insurance business. It should let the market determine where people should live.
The Republican governors of two of the States, Louisiana and Texas have rejected some of the funds from the “stimulus” bill, but they have no problem in asking for larger handouts from the federal government.
Scientists believe that global warming will lead to an increase in the number and intensity of hurricanes. This makes subsidizing people for living in hurricane zones a much more reckless proposal.
Americanly Yours,
Phred Barnet
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