Congress Should Develop Smart, Cost-Effective Natural Catastrophe Policy

Congress Should Develop Smart, Cost-Effective Natural Catastrophe Policy

August 22, 2008

Although it’s cold comfort to Florida residents dealing with the
massive flooding that has resulted from Tropical Storm Fay, the slow
moving storm could have done much worse. With higher wind speeds,
Fay—which will probably make four landfalls in Florida—could have
turned into a Katrina-sized $300 billion disaster.

This
matters because major storms impact everyone—even those who live miles
inland. A new report provides the best evidence yet, revealing that
given one more hurricane season like that of Katrina and Rita, American
taxpayers will be looking at billion dollar burdens if pending “natural
catastrophe” legislation is enacted. The report’s authors—former
Clinton appointee Robert Shapiro and American Enterprise Institute
research fellow Aparna Mathur—have some mind-boggling figures about the
national costs of a bad storm season: the bills could hit $19 billion
for Californians, $11 billion for New Yorkers, and $6 billion for
Pennsylvania residents. The study shows that proposed legislation to
provide state reinsurance loans, create a federal “backstop” to cover
state losses, or expand the National Flood Insurance Program (NFIP) to
cover wind damage would probably impose massive new taxpayer
liabilities without doing much to help the country.

That
said, the problems are real and members of Congress from both parties
have offered plenty of measures intended to make the country safer.
Some make sense: Members ideologically as diverse as Banking Committee
Chair Sen. Christopher Dodd (D-CT), Homeland Security Committee Chair
Rep. Bennie Thompson (D-MS) and Sen. Roger Wicker (R-MS) have proposed
bills that would help homeowners make their properties more storm
resistant. Other worthwhile ideas include preserving wetlands and
barrier islands (nature’s buffers against hurricane-induced flooding),
improving standards and reinforcing infrastructure, and eliminating
subsidies for hurricane-prone development.

But bad ideas
also abound. The House, for example, has passed legislation that would
add wind coverage to the struggling National Flood Insurance Program.
This would impose massive potential costs on the Treasury (NFIP already
owes almost $18 billion), and would likely encourage even more unwise
development. House-passed proposals to sell government-backed
reinsurance to states, likewise, would make things even worse.

As Congress moves towards a conference on NFIP
reforms, members need to keep not only costs in mind, but public
safety, fairness, budgetary priorities and sound environmental
stewardship as well. Government has a role in making the country more
storm resistant but, the new cost figures should remind Congress that
it shouldn’t mortgage the country to provide subsidies for coastal
residents.

David Conrad is a Senior Water Resources
Specialist at the National Wildlife Federation. Eli Lehrer is a Senior
Fellow at the Competitive Enterprise Institute. Both organizations are
members of Americans for Smart Natural Catastrophe Policy. www.smartnatcat.org