Ron Paul: Federal Flood Insurance – A Moral Hazard We Can’t Afford

by Ron Paul

Hurricane Sandy was one of the worst natural disasters the east coast has ever seen.  Clean-up 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,

Many assume it is compassionate to entrust government central planners with disaster recovery.  However, the greatest compassion brings results, not just good intentions.  And we’ve seen how bureaucratic organizations like FEMA mismanaged recovery and relief in the wake of hurricanes Katrina and Ike.  Organizations such as the Red Cross and private companies like Home Depot and Duracell have already stepped in admirably to help those in need, and we can only hope FEMA has learned this time not to impede and frustrate private efforts as they have in the past.

Above all, my thoughts and prayers are with the victims of Hurricane Sandy in this tremendously difficult time and hope they can get their lives put back together as quickly and seamlessly as possible.


  • Gary Johnson

  • Dear Big Gubmint,
    Last night I spent my unemployment check getting drunk and having unprotected sex with a prostitute. Well, I wrecked my car and got an STD. So, I demand a check to compensate me for my poor decisions. Thanks, Big Gubmint!

  • Lol he pressed a number while talking

    “An idea whose time has come cannot be stopped by ANY army or ANY government!”

    Spread the message !!

  • You’re both idiots
    Live free : Vote to force private companies to label a certain way

  • If each vote counts, then it’s never wasted, it’s only wasted if you compromise your principles and vote for the candidate that you don’t truly support in order to join “We the Sheeple” vs Live Free for one moment in time, when it’s your time at the ballot, be part of “We the People”, and Vote Gary Johnson.

  • You’re both idiots:
    As if your vote counts in the first place.

  • once all the old people die the liberty minded people will be the majority

    • scabiesandrabies: Heh. Define old? I would beg to differ with your “analysis” and rather disagree with any notion that “old” people don’t know something about freedom. I was rioting for freedom on the collage campus long before you had your first diaper dump.
      Most of the ‘young’ people I observe are not only arrogant (for no particular reason) but they have no balls nor any sense of what true freedom is. They are enslaved by their television sets, text away on their silly little iPads thinking they’re being ‘high tech’, and don’t have a clue about much of anything but their own sniveling bullshit.

  • A vote for Gary Johnson is a vote for Zionism:

    “I support the right of Israel to exist as a sovereign country and believe that the United States should protect that right militarily if needed” ~ Gary Johnson

    He’s just another stooge of Israel, folks; don’t be fooled.

  • Exactly.

  • And a Zionist stooge, too: “I support the right of Israel to exist as a sovereign country and believe that the United States should protect that right militarily if needed” ~ Gary Johnson
    You’ll notice that Dr Paul has pointedly NOT endorsed Johnson. No wonder.

  • Be reassured: the Founding Fathers frequently felt the same way and the First American Revolution was no picnic, either. Hang in there and keep organising against the State. Remember: YOU are the most powerful force in history.
    The Soviet Union looked invulnerable too, but its empire was overthrown by a shipyard electrician (Lech Walesa) and a handful of priests. The Warsaw Pact is now just a bad memory.
    Hang in there.

  • sure. its basically the right and left hand of the same asshole authoritarian control freak.

  • North-east storm will be moving into that area by Tuesday evening.
    Just what those people need at this time.Prayers go out to them.


  • can someone tell me why how hard we try and fight for liberty it’s still fells like a loss cause please reassure me that i;m not the only one who is felling so depressed and unsure in our fight I hate to even say that i’m doubting the cause of liberty, its just the establishment is too big for our fight, to overcome this adversity just fells so tiresome, and i’m as mush as all is physically and emotionally tired, so please reasure me… for liberty my friends

  • It would not be so bad if a Volunteer walked around the flood zone and paid out some help to real victimns– I said “not so bad”. In truth a comittee will hire another 2000 and then get consulted from a buch. Then another committee will access and design some forms amd when all and all is done 1/10 of every dollar spent MIGHT end up in the hands of someone who should of built on higher ground. And the Pudding is that all of the “assistance” will be owed with interest. Audit the FED.

  • Is Ron Paul still running?

  • Whether Dr.Paul wants me to or not, I am writing him in.

  • Gary Johnson is a pandering Very-pro-federal-reserve-fraction-of-the-GOP puppet.