Disastrous Policy (Taxpayers Get Soaked by Government's Flood Insurance)

Sept. 19— As you watch those pictures of houses under assault from Hurricane Isabel, doesn't it make you wonder: Why do people build their homes so close to the water? They must have known a hurricane might do this. Why would they take such a foolish risk?

Well, people take the risk, because our government encourages us to take it. I know all about this, because I did it myself.

In 1980, I bought some beachfront property on Long Island, N.Y., and built a house there. It was a big investment for me. The down payment took just about all of my savings, and I knew what can happen to people who build on the edges of oceans. But I took the risk because the government made me a promise.

The promise was national flood insurance. It made my house and my neighbors' homes possible. After all, no bank will give you a mortgage unless you have insurance.

Private insurance companies were reluctant to sell insurance to those of us who build on the edges of oceans, and were they to offer it, they'd charge an arm and a leg to cover the risk. But this wasn't a problem for me, because you offered to insure my house. I know you didn't do it personally, but you, as a taxpayer, are the guarantee behind federal flood insurance. Should a big storm wipe out half the coast, you'll cover our losses — up to a quarter-million dollars. Thanks — we appreciate it — but what a dumb policy.

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.

The insurance premiums were a bargain. The most I ever paid was a few hundred dollars. Federal actuaries say if the insurance were realistically priced, it would cost thousands of dollars. Why should the government guarantee water's-edge insurance? Why should the government be in this business at all?

A decade ago I spoke with James Lee Witt, who ran FEMA, the Federal Emergency Management Agency, for President Clinton. FEMA's current director is busy with this week's hurricane, but his agency's policy hasn't changed much, so let's look again at the discussion I had with Witt.

Witt told me he thinks the flood insurance saves federal tax dollars. "If this insurance wasn't there, OK, then people would be building in those areas anyway, OK? Then it would cost the American taxpayers more dollars if a disaster hit that community and destroyed it," he said.

That's government logic for you. Since we always spent huge amounts of taxpayer money bailing out people with disaster relief, politicians 35 years ago said, why don't we try to recover some of that money by selling flood insurance?

As so often happens, the program had unintended consequences. The cheap insurance encouraged more people to build on the beach, so the insurance risk is now huge. Today, $645 billion in property is guaranteed by Uncle Sam.

Geologist Orrin Pilkey at Duke University says this policy is simply "stupid." Pilkey has been one of the most persistent critics of the government's policies. He says both disaster relief and federal flood insurance just encourage people to stay in harm's way.

"We've got to get around this 'sympathy at all costs' for people who are suffering from natural disasters," Pilkey said.

Witt disagreed. He said, "Should we just walk away and say, 'We're not going to help you'?"

If I were a drunk driver who kept wrecking my car, should there be federal car insurance to make sure I have cheap car insurance?

Witt pointed out that the government did require me to put my house on stilts. That was a good thing because 16 years ago, most of my beach just washed away. It wasn't even a hurricane, just three days of big surf and suddenly I didn't have waterfront property. I was over the water. Still, the house survived because of the stilts, and what a view I had then.

Uncle Sam didn't even raise my insurance premiums. In fact, he spent millions more of your tax dollars to rebuild my beach. Up and down the coast, the Army Corps of Engineers dumped sand on hundreds of beaches.

This seems like a dumb policy too, since a study of replenishment projects found the new sand usually washes away within five years. But the government does it anyway —, and you pay for it.

I asked Professor Pilkey what he thought of people like me who build houses on beaches? "I think you're a vandal and extremely costly to our society," he said.

A few years ago, I got a call from a friend. 'Happy New Year,' he said, 'your house is gone.' And it was. During a fairly ordinary storm, the ocean just dug up the sand under the pilings and took the whole house away.

There it was the next day on the front page of the newspaper. I'd always wanted to make front page news, but not like this. It was an upsetting loss for me, but financially, I made out fine. National flood insurance paid for the house and its contents. I could rebuild my house, and the government would insure me again — and again. I didn't rebuild. I'd learned my lesson; I sold what was left of my land. But the outrage is that federal flood insurance exists at all. There is a quarter-million-dollar limit on each payment, and as long as I build my house in accordance with zoning laws and ordinances, there is no limit on how many times the government will pay if a house keeps washing away.

I have always been outraged by this. If you are wealthy enough to have a house on the beach, you are wealthy enough to absorb the cost should disaster strike.

I have no sympathy for the Mudslide Millionaires either.

They take what little we have and give it to the wealthy.

I have been beating this drum for years. One reason every hurricane sets new records for property damage is this incredibly regressive transfer payment subsidizes people already wealthy enough to afford a vacation home and encourages building in high risk venues.

One point you missed though. We ran into this last year in San Angelo. The feds declared an area behind my bar to be a flood zone, so now all those folks have their lenders (and God forbid you try to sell a house there) barking at them to sign on to the federal flood insurance. Now the last time this neighborhood had a flood, Noah and his zoo were floating over them, this is this Fed's last grasp is to force people at no risk whatsoever to join the ill-conceived program and pray their risk free premiums at least make the books look better if not get them in the black.

I would never back the kind of restrictions that would tell a beach property owner he could not build on his own property, (unless it inherently threatened another owner's existing building) but I'm damned if I care to subsidize that building. You pays yo' money and you takes yo' chanches. Put the insurance back on the open market, actuarilly driven prices, and you won't NEED legal restrictions, only people with that kind of money to throw away will build.

The National Flood Insurance is but one bag of the swag that is stolen from us citizens. The other bags are the multi-billion dollar beach renewal or replenishment projects, and the multi-multi-billion dollar beach and barrier island road and bridge projects.

At the state level some of these expenses are justfied for the return in tourism revenue. At the national level? Sorry -- it's just another un-Constutionally abuse of authority and a breach of fiduciary duty by office holders, Constitution or not.

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