Insurance

Fear No Hurricane: Obama Quietly Approved Federal Subsidies to Houses in Floodplains in July

President Obama expanded a program offering subsidized insurance to ocean-front homeowners this summer.

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Four months before Hurricane Sandy hit the East Coast, President Obama quietly signed legislation expanding the federal program that offers taxpayer-subsidized flood insurance to ocean-front homeowners.

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.

Television reporter John Stossel, who once had an oceanfront house washed away by a storm, has called the flood insurance program an "outrage" and "dumb."

"The subsidized insurance goes to affluent homeowners on both coasts — from Malibu Beach, where movie stars live, to Kennebunkport where the Bush family has a vacation home, to Hyannisport, where the Kennedy family has a summer home, to the Hamptons, where I bought my house," he wrote.

In part to respond to criticism such as Mr. Stossel's, this summer's five-year extension and expansion of the flood-insurance program was described by its backers as "reform." The legislation is sometimes known as the Biggert-Waters Flood Insurance Reform Act of 2012, after its champions, two congresswomen—Judy Biggert, a Republican of Illinois, and Maxine Waters, a Democrat of California.

The federal flood insurance program shares several characteristics with the Medicare and ObamaCare programs that provide health insurance. Like Medicare, the federal flood insurance law was originally enacted under President Lyndon Johnson. And as is eventually predicted for Medicare, "current premiums are not enough to cover expected costs," and the flood insurance program wound up costing $18 billion.

As ObamaCare does, the flood insurance program operates through private insurance companies whose annual premium increases are limited by the government. And, as with ObamaCare, the flood insurance program features "community rating," which means the riskiest cases are not charged the highest rates.

This summer's extension of the flood insurance law was a textbook example of how the system in Washington works, or doesn't work. Though billions of dollars and hundreds of thousands of lives were at stake, the extension got virtually no mainstream press attention. It was covered extensively, however, in Insurance Journal, a trade publication that caters to the industry with headlines such as "Agents, Insurers Cheer Congress OK of Flood Insurance Reform Bill."

The 584-page congressional conference report that included the flood insurance provisions was filed on Thursday June 28; the House and Senate both voted on it on Friday, June 29, an apparent violation of Speaker Boehner's pledge that the text of bills would be posted online at least three days before a vote. A surprising number of congressmen and senators with reputations as conservatives voted for the law, including Paul Ryan and Jeb Hensarling, Jon Kyl and Mitch McConnell. Among the minority who opposed the bill were Marco Rubio, Pat Toomey, Jim DeMint, Ron and Rand Paul, Rob Portman, and John Cornyn.

The next week was interrupted by the Fourth of July holiday. When Mr. Obama signed the bill into law on July 6, he was almost apologetic, saying, "We wouldn't normally keep you this late on a Friday afternoon."

Mark your calendar for 2017, when the federal flood insurance program will come up again for renewal. Does it really have to take a 100-year storm to cause Congress to come around to the idea that subsidizing home-ownership in flood plains may not be something for which it is worth borrowing money from China?

NEXT: "Dodd-Frank Is a Gift to Big Banks"

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  1. “Moving Ahead for Progress in the 21st Century Act”

    How touching.

  2. “…the flood-insurance program was described by its backers as “reform.””
    And I’m sure they pitched it as ‘for the childrunz!’, too.

    1. I’m somebody’s childrunz!

      And I benefit from this. It’s not legal to get flood insurance another way.

      1. Pound. Head. On. Desk.| 10.29.12 @ 5:37PM |#
        …”And I benefit from this.”
        That’s what they told me when the state took over e’quake insurance in CA. Seems the state benefits more than I do.

  3. Though billions of dollars and hundreds of thousands of lives were at stake,

    Snark?

    1. No. By subsidizing flood zone development, we increase flood casualties. It’s not complicated.

  4. Does anyone else see the irony using tax dollars to prosecute and imprison a man like John Pozgai for using his own money to clean-up “wetlands” that had been used as a dump, while at the same time using tax dollars to subsidize building in flood plains? This is why I’m saddened when people won’t vote for libertarians because they think we need government to protect the environment.

    1. If you assume that progressives hate people, it all makes sense.

        1. Don’t fall for Lisa’s charms, she is teetering over the edge for Team Red verbal vomit.

  5. Its all about making money dude, thats all that matters.

    http://www.is-anon.tk

  6. “Without federal flood insurance, many fewer people would take the risk of living in low-lying areas vulnerable to storm surges”

    I agree that without federal flood insurance, oceanfront property would be less valuable. It remains to be seen whether this would actually result in less people living in these areas, or whether the people living there would be poor instead of rich.

    1. It doesn’t matter whether the residents are rich or poor. Property risks should not be subsidized by taxpayers.

      Ocean front property will not lose ass loads of value without flood insurance. Rich people desired ocean front property before flood insurance and will continue to do so. Flood insurance just makes people less likely to care about their shit getting flooded, or less likely to take measures that make ocean front living more storm tolerant.

      River flood plain type areas would become less valuable without flood insurance and the other subsidy in the form of flood control infrastructure. And it should lose value- there is no reason river flood plain land should be desirable for anything except agriculture and resource extraction.

    2. Come now, if the government would subsidize flood insurance for high risk areas, it would surely subsidize the poverty stricken that choose to live there.

  7. Of course the insurance companies cheer, just like health care. FEMA has recently been shaking down homeowners in what was traditionally non flood plain areas to pay for this crap. My parents own a home on a managed lake. FEMA came out and said if your home was below elevation 1071 in that area you had to buy flood insurance. The top of the dam on the lake is at elevation 1070. The lake is 39,000 square acres. If that flood event ever occured and the water somehow got to 1ft above the dam, the large city downstream would be destroyed by nearly 2 billion cubic feet of water rushing down stream. When several residants informed Fema of this fact they basically said tough shit.

    1. That’s a real blind spot. Haven’t read up on how the rules are changing for those at risk from dam and levee breaches. They should be rated as higher risk, too.
      You are so right that anyone living essentially behind the seawall, or below the dam should be charged for that risk.
      We were stunned in a class when a FEMA claims person told us that some areas behind levees in New Orleans affected by Katrina were not classified as high risk for flood, so many didn’t buy flood insurance. Duh!! Water will eventually flow to the lowest level, period. How hard is that to grasp? Pretty hard, until you actually live through it, for most, unfortunately. We do need for FEMA to get that fixed if it isn’t doing so now….

  8. Your article makes some good points and misses the mark elsewhere. As an insurance instructor, I had to weigh in here.
    First, I want to say that I am in complete sympathy with the suffering of those who are having losses and in danger from Superstorm Sandy. I would do not condemn them for being in trouble. I hope we can help. We do need to rethink what we are doing in future, though.
    I agree, in the long run we need to stop letting people think that living down by the river/ocean carries the same “rights” to be made whole as living up on the bluff. We should stop rewarding anyone who makes that choice, believing they are owed compensation time after time when floods occur. How we get there is another matter. We already have some incentives in place, but need more. Flood insurance is not and never has been as complete as homeowners and business insurance. It is very basic coverage, but that hasn’t stopped people from taking the risks, so more “pain” is needed.
    The article is just slightly screed like in it’s condemnation of the passage of the flood renewal act. What would you have done instead? Just condemn thousands of people to lose their homes? I see that Reason articles often mention that progress can be made if we apply ourselves and are willing to make necessary changes. It’s being done, check it out. One place: disastersafety.org
    Even if it annoys the daylights out of some folks, at least entertaining libertarian notions can help shake us out of our complacency.

  9. The law extended the National Flood Insurance Program for five years SohbetChat

  10. Just condemn thousands of people to lose their homes. SohbetSohbet Odalar?

  11. The flood insurance provisions were part of a bill known as the Moving Ahead for ProgressSohbet SiteleriChat Siteleri

  12. If that flood event ever occured and the water somehow got to 1ft above the damG?zel S?zler?ark? S?zleri

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