After the Flood: Hard choices for communities and citizens

Virginia Republican Eric Cantor, majority leader in the U.S. House of Representatives, caught a lot of grief for suggesting there should be budget cuts elsewhere to offset the extra federal dollars that FEMA needed to do its job as tornadoes, floods and winds assaulted the eastern U.S. But at least he was being consistent as a deficit hawk and fearless — if naive — in the face of some ugly truths.

The ugliest of them: We want a bunch of stuff we’re not willing to pay for. And because democracy allows us to vote our delusions, we don’t plan to stop wanting or to start paying anytime soon.

The “we” is not intended to be patronizing. The sense of entitlement is universal. It transcends demography and political disposition. And nowhere is that more apparent than in the territory in which Cantor ventured, disaster relief. Case in point: Getting real about insurance in high-risk coastal areas.

The National Flood Insurance Program (NFIP) was created in 1968 with the hope that some of the rising costs to taxpayers for dealing with disasters like Midwestern floods and Atlantic and Gulf hurricanes could be offset by selling insurance to folks in flood zones. Which would be a great idea if the premiums collected amounted to enough to pay the costs of flood damage. The trouble is, the gap between NFIP income and outlay is growing. The insurance industry — which, admittedly, has a vested interest in getting the federal government out of the low cost insurance business — figures NFIP premiums underestimate true risks by an average of 50 percent. Which may be one reason why the NFIP is now $18 billion in the red. After the current hurricane season, the deficit will probably deepen.

Under Water: Will this handy idiom for lost housing value soon take on a more literal meaning?

Congress has held hearings and investigations aplenty. There are a zillion white papers. And by now, just about everybody knows what has to happen to reduce the subsidy taxpayers fork over to their fellow citizens living in flood-prone areas, especially in coastal hurricane zones. There has to be some combination of banning development in the riskiest areas, bolstering building codes, and letting premiums rise to more closely reflect actuarial data.

Hopeful folks in coastal areas argue for some sort of all-hazards insurance program that pulls in premiums from policies in lower-risk areas with policies in high-risk zones. But it would take a substantial expansion of the pool to offset repeat payouts in areas where storms are more frequent. Despite arguments that mud slides, earthquakes, tornadoes, tsunamis and inland flooding put just about everyone at some kind of risk, hurricanes account for the biggest losses, often in the same high-risk areas. The insurance industry estimates that repetitive loss properties account for 25 to 30 percent of the claims under the NFIP even though they represent only one percent of the policies in the program. What’s more, despite the low, heavily subsidized costs of flood insurance under the program, property owners often opt against buying it unless they’re required under mortgage agreements, and communities fight federal flood maps that establish risks.

Reauthorization of the NFIP expired in 2008, and the program has been limping along with temporary extensions while Congress studies the issues more. Private insurers, meanwhile, have backed away from coastal zone coverage in general, leaving some states fiddling with risk pool coverage that essentially bets against anything bad happening until states can build a big enough treasure chest to cover big payouts. Everybody’s watching Florida to see if the bet works or the whole state defaults after a Katrina-like storm or a string of smaller ones in heavily populated areas.

If we know how to fix this, and smart guys like Eric Cantor, bless his heart, are willing to point out the problem, how come we’re stalled? It’s because a lot of folks — a lot of affluent, voting folks — live in areas likely to experience flooding “events” due to storms. And they have made it very clear to the people they elect and to the people who build houses and who sell houses that they think they’re already paying enough of a premium for living where they live. And before we start getting too snippy about “those” folks, let’s consider the size of the group we’re talking about.

According to the National Oceanic and Atmospheric Administration (NOAA), about half the U.S. population lives in coastal counties, even though coastal counties comprise only 17 percent of the nation’s land area. Can you visualize an initiative to move a bunch of businesses and residents out of some of those areas and raising insurance and housing costs on everybody else?

I didn’t think so.

So here we have a specific example of the more general problem facing not only Eric Cantor and his fellow true believers, but all the rest of us, as well. Many of us live in a subsidized dream world where we can wish away our troubles and our accountability for addressing them. And when someone waves an invoice in front of us, we’re peeved at being bothered. We wring our hands over the mounting debt load, but hold onto our sense of entitlement.

What makes paying for disaster events different from most of the other bills coming due is that, when the wind blows and the waters rise, it’s a lot harder to turn over and drift back to dream land.

–Ben Brown

Comments

  1. Sadly this has been happening for years. Take the fire canyons of California. For five decades now the politically affluent have been building in high-risk areas and expecting the state to bail them out when the inevitable fires come.

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