Two years ago, Congress prudently passed legislation that would reform a government flood insurance program that was $24B in the red due to increased flood and disaster relief. As a fiscal conservative I applauded those efforts then, because it was one step toward eliminating wasteful government spending that encouraged building in flood prone areas and landscapes dominated with important water resources. But this past week, we saw a bi-partisan effort to rollback that legislation due to skyrocketing premiums and housing foreclosures that ensued from reform. This from a CBS report:
The House overwhelmingly passed a bill Tuesday night that would allow sellers to give their subsidized, below-market insurance rates to new buyers and lower the cap on how much flood insurance premiums can rise each year.
Rep. Michael Grimm, a New York Republican who co-sponsored the bill, said it would ensure that families across the country, including those still struggling to recover from Superstorm Sandy, can avoid “a wave of devastating premium hikes and foreclosures.”
The Senate could soon follow. Sen. Robert Menendez, D-N.J., says he supports the House measure, which mirrors a bill he sponsored and the Senate approved in January.
The House bill “will end the most egregious problems with the flood insurance program and bring some real relief to thousands of homeowners who desperately need our help,” Menendez said in a statement Tuesday night. “I’m encouraged by this progress and hope we can bring the bill over the finish line very, very soon.”
Salon had a story last Fall called the 1 percent flood insurance scam:
The National Flood Insurance Program, designed in 1968 to provide mandatory federal insurance to Americans living in coastal areas, has been hemorrhaging money after years of extreme weather. The NFIP, a division of the Federal Emergency Management Agency, is meant to be self-supporting through premiums, relieving the pressure on disaster relief funding. But the NFIP borrowed $19 billion from the Treasury in 2005, after damages from Hurricanes Katrina, Rita and Wilma. According to experts, its deficit after payouts from Superstorm Sandy approaches $28 billion.
What we witnessed this past week was not necessarily an irrational response to pre-election jitters, but rather a rational response to a very complicated issue, caused by well-intentioned but wasteful government subsidies. Tracy Mehan has offered his thoughts in “The Good Part of the Farm Bill” on the need to reform agricultural subsidies with unintended, but harmful environmental impacts. I empathize with those who were unable to sell their homes or lost them due to the rate-shock of reforming this colossal waste of tax-payer money. Reform is tough. Weaning ourselves off of government largesse is tough. But I’m hopeful that more leaders, regardless of political affiliation, will work together in the future to eliminate more wasteful government spending that make no sense from a fiscal perspective and encourages the destruction of environmentally sensitive lands. (See Heartland Institute reports here)