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.

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129 Comments:

  1. Those rich people must be jews. They don’t believe in jesus.

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  2. VOTE GARY JOHNSON — or see our Nation END 2012!

    Just Say NO to Rmoney — VOTE for ANYONE but Mormon Mitt!

    Keep Mitt’s mittens off of the White House — or face An American Tragedy!

    The Mormons stripped the richest man in the world, Howard Hughes, not only of his life, but his entire fortune (that is how the Mormons got financial power to jump start their cult)!

    Now another Mormon wants to do the same to our entire Nation!
    And his 5 Mormon Sons are waiting in line of a Rmoney Dynasty to finish US off!

    *Vote FOR Gary Johnson* — Do NOT vote for Mormon Mitt (or Barack Hussein) the lesser of two evils!

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  3. This has nothing to do with god, The problem is man made, and praying isn’t enough. We need to open our eye’s and look around and see what is really going on, and save ourselves before it is too late.

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  4. This has nothing to do with god, The problem is man made, and praying isn’t enough. We need to open our eye’s and look around and see what is really going on, and save ourselves before it is too late.

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  5. This has nothing to do with god, The problem is man made, and praying isn’t enough. We need to open our eye’s and look around and see what is really going on, and save ourselves before it is too late.

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  6. My interpretation to whats happening is God punishment and it seems people are not able to see it.

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  7. My interpretation to whats happening is God punishment and it seems people are not able to see it.

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  8. My interpretation to whats happening is God punishment and it seems people are not able to see it.

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  9. My interpretation to whats happening is God punishment and it seems people are not able to see it.

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    Like or Dislike: Thumb up 1 Thumb down 3

  10. My interpretation to whats happening is God punishment and it seems people are not able to see it.

    Report this comment

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  11. Just Say NO to Rmoney — VOTE for ANYONE but Mormon Mitt!

    Keep Mitt’s mittens off of the White House — or face An American Tragedy!

    The Mormons stripped the richest man in the world, Howard Hughes, not only of his life, but his entire fortune (that is how the Mormons got financial power to jump start their cult)!

    Now another Mormon wants to do the same to our entire Nation!
    And his 5 Mormon Sons are waiting in line to finish US off!

    *Vote FOR Gary Johnson* — Do NOT vote for Mormon Mitt (or Barack Hussein) the lesser of two evils!!!

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  12. Oh I agree! I think in a disasterous situation, the government should be able to step in and help the people. And I think if we weren’t in the mess we are in right now, we would have a surplus to do so comfortably without reaching into the pockets of the taxpayers. It really is a simple enough solution. They just make it complicated.

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  13. Clarene Rodriguez

    I do not believe that the government should subsidize homeowners that build on flood plains. However, this becomes a more complicated when city commisioners approve these homes being built even though they are on floodplains. Buyer beware. I live along a creek in Medford , Oregon which the state has now declared it to be a protected area.

    After two floods during the seventies the city annexed the land across the creek which used to be pasture land where it was low enough to have have flood water flow onto it. They have since built asubdivision on the creek which is above the elevation level of my home. So if the creekfloods it will flood onto my property. The city insisted that they enlarged culverts topresvent any flooding but are nowrequiring new owners on my side of the creek to purchase expensive flood insurance,

    When citizens met with the city to show that the new subdivision on the 100 yr flood plain should not be built the city commissions and the planning department still went ahead with the building project to bring more revenue for the city of Medford and to also benefit the builders. I didn’t know anything about flood plains when my husband and I purchased the property in 1972. We were assured that the property would not be developed–so much for empty words,

    This may be different from living along a coast line but it just goes to show that cities and planning departments do not always have the interest of their constituents in mind and it is more about building a larger tax base which results for more money for the city and state.

    These properties that were buildt along the cloastline had approval from their cities and so called experts on land use.

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    • Years ago I bought a small house. It was my first house and it had a large canal running next to it. I thought it prudent to get me some flood insurance but I was denied because unknown to me, I was in a flood plane area. Funny how some can get flood insurance living on the coast and others cannot. My house got flooded in one of those 100 year floods. I lost most of my possessions. Don’t know if its the same situation today but if you are near a possible flood area and can get flood insurance, please do.

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    • The city should not be able to require you to purchase flood insurance. Just end exclusionary zoning so we are free to place any home we choose on any residential lot that we can afford to buy. That way someone could have a motor home that could be driven away in advance of a flood. A travel trailer could also be towed away. A singlewide mobile home could be replaced as easily and cheaply as a car. In other words you should be able to self insure and just take your chances. I’d rather have to pay the same property taxes as an expensive site built home and not have to actually buy an expensive site built home. When I was living in a mobile home park my lot rent was $3,720/yr while the $175,000 home across the street had property taxes of $2,400/yr.

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  14. Held High hopes we see RON PAUL in the White House! But it is quite obvious USA isnt ready for an Honest man with integrity!
    A man who is 100% behind the Constıtution?
    USA would much prefer to re-insate the Usurper & imposter back into office!
    So what do we get More Fast & Furious and benghazi,s on our hands and lets not ignore Open Bankster Fraud that continues these parrasites should be Jailed not bailed.
    Well that should really improve things eh!
    If nothing else Barry,s Golf game must improve eh?

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  15. Dr. Paul made it clear he is not a candidate. In his absence, Governor Gary Johnson is our best choice to continue promoting the libertarian principles Dr. Paul worked so hard to teach, and move us towards restoration of our constitutional republic. The poll on this site suggests that the write-in movement for Dr. Paul is sucking more than half the potential votes from Gov. Johnson. Feeling good or following strict principles by voting for Dr. Paul is like shooting yourself in the foot in this selection.

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  16. very true. Thought we still have the ability of Nullification, albeit not used enough, the income tax and the claim the government has on a person’s labor is slavery as is forcing us to use counterfeit fiat money.

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  17. very true. Thought we still have the ability of Nullification, albeit not used enough, the income tax and the claim the government has on a person’s labor is slavery as is forcing us to use counterfeit fiat money.

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  18. and I agree, I think you made my point… Yes we have a government, but we have gone down the road of ‘entitlements” of all forms that we now have a game of who’s entitlement is more deserving then the other. THEY are all “blood suckers” imo. including governments over reaching arm into our private lives. Shrinking the government by more then 1/2 is a good starting point for me… But it does sound as if were on the same page, I only wish the majority seen clearly how important our freedoms are

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  19. Ann Wilson Kingsley

    While I have always been an admirer of Ron Paul’s views, like so many others I was swayed from voting for him or really getting involved in the Conservative Movement, until after the 2008 election. When I started intensive study and research on issues after the 2008 election, I realized what a truly great man and unsurpassed statesman Ron Paul actually is. The Lincoln Memorial should be changed to the Ron Paul Memorial in Ron Paul’s honor someday. Lincoln produced a war that destroyed half the country, and Ron Paul has done everything he possibly could to save America, and restore our country to the greatness we once looked upon with pride. Thank you Ron Paul!

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    Highly rated. What do you think? Thumb up 16 Thumb down 0

  20. So much sense, America is so stupid. I voted for Gary Johnson.

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