Hurricane Sandy was one of the worst natural disasters the East Coast has ever seen. Cleanup and recovery will take months, if not years and estimates run in the tens of billions of dollars. Parts of New York and New Jersey will never be the same. Entire seashore communities have been wiped out, but the determination to rebuild has been lauded as courageous and admirable. Yet as with all natural disasters, Sandy raises uncomfortable questions about the extent to which taxpayers should fund the cleanup and the extent to which government programs create moral hazards.
For example, FEMA and the National Flood Insurance Program (NFIP) are expected to pick up the tab for much of the flood damage caused by the hurricane. Of course, this will mean more federal debt and inflation for the rest of us, since the program only has about $4 billion to work with and is already $18 billion in debt from hurricanes Katrina and Rita. Many think there is a need for the government to provide flood insurance of this kind. After all, the market would never provide insurance in flood prone areas at an affordable price. But shouldn't that tell us something?
Shouldn't that tell us that it is a losing proposition to insure homes in coastal areas and flood plains often threatened by severe and destructive weather patterns? And if it's a losing proposition, should taxpayers subsidize the inevitable losses arising from federal flood insurance?
The NFIP disguises the real cost of flood insurance in flood prone areas, which influences homebuilding and sales in such areas. Recklessly taking unwise risks when risk is underpriced is known as moral hazard. When politicians decide that private insurance premiums are too high, as with houses built in flood plains, the solution is to under-price the risk through federal subsidies. The obvious and expected outcome is more danger to life and limb when disaster strikes.
Even NFIP has been forced to raise rates significantly in coastal areas, and is now dropping second homes from coverage altogether.
Chris Christie showed us he's a RINO and helped destroy Romney.
ReplyDelete42 percent of obama voters said chris christie was a factor in their vote.
Yes how terrible of Christie for actually working with the Pres. during a disaster. We all know that political races are more important than disaster recovery.
ReplyDeleteanonymous 10:20, great point.
ReplyDeleteThose that insist on building on the beach should pay to replace it themselves, not the taxpayers.
ReplyDeleteI used to think that way also 10:53 but I'm conflicted because these beach communities and resorts do contribute to bring revenue to the state and local govenments. Also jobs to an area. They have been proven tax bases and job creators, so do we cut them off federally? I think I would rather see this form of stimulus than obama's practice of giving money away to companies with no proven records of either a tax base or job creation.
ReplyDeleteNot enough minorities in the areas hit this time for any aide. We didn't ask thos po folks in LA not to rebuild there. Hell we did it for them. different folks different solution. Get used to it it is our future. We let it happen.
ReplyDeleteWow. Really folks?
ReplyDeleteChris Christie has a JOB to do. His JOB is to look out for the citizens of his state! That's EXACTLY what he's done and is doing! I would expect NOTHING LESS from my Governor!
You would rather him have turned his nose at the President and gotten nothing but headaches for his citizens? You would rather had another Katrina recovery?
Really?
This just proves that even with voters, it's not about the WE THE PEOPLE, it's about people you all like or don't like. It's all about you WINNING.
I hope you will step back and think about what you've said here and realize that Christie did the RIGHT thing for THE PEOPLE!
He also did the RIGHT thing in order to be able to run for President in 2016!
@ 10:53
ReplyDeleteI live in a high risk flood area and pay $2500 a year for flood insurance to cover the max amount available of $250,000 and I have a $5000 deductible. I do not have my contents covered because I can barely afford to pay the $2500. When I bought the property, First Horizon Bank in Salisbury gave me a certificate stating that I was not required to get flood insurance. I was new to the area and did not understand the whole flood zone thing. Later, when I went to refinance the house, I found out that I did require flood insurance and when I called the phone number on the flood certificate I got from First Horizon, it was no longer in service. If my home was destroyed by a flood, it would cost much, much more than $250,000 to replace it but the government will not and I would not expect them to give me the money to replace it. I am sorry for the people who lost their homes and livelyhoods but it is the risk you take when you live by the water.